Abstract

RUIZ BARREZUETA, Juan Calos; ALTAMIRANO FLORES, Jorge Enrique  and  TONON ORDONEZ, Luis Bernardo. CAPM Application in Emerging Markets: A theoretical review. Podium [online]. 2021, n.39, pp.53-70.  Epub June 28, 2021. ISSN 2588-0969.  https://doi.org/10.31095/podium.2021.39.4.

The objective of this paper is to theoretically investigate the applicability of the capital asset pricing model in emerging markets. The model measures risk by beta, which follows from an equilibrium, in which the CAPM model assumes that equilibrium conditions do not change. However, the use of the CAPM model in emerging markets has proved challenging and even controversial. Using a theoretical and systematic review, this study acknowledges contributions published from 1964 to 2021 in databases such as Scopus, JSTOR, Redalyc and Dialnet. In addition, this study analytically and chronologically explores those contributions highlighting the literature in favor of the model and the literature against the model, which allowed to conclude that there are several formulas with different variables proposed by authors who have tried to accommodate the model to the conditions of emerging markets, however, it is clear that there is no a universal formula.

Keywords : CAPM; Emerging Markets; Risk-Free Rate; Beta; Country Risk; Systematic Risk; Asset Valuation.

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