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Marknadskapitalisering i förhållande till BNP & dess effekt på faktormodeller: En jämförande analys av OMX Helsinki & Bolsa de Valores de Colombia 2014–2019

Wallin, Edvin LU and Klosterborg, Rikard (2021) NEKH03 20202
Department of Economics
Abstract
This thesis has investigated the relationship between market capitalization to GDP ratio relative to the Capital asset pricing model (CAPM) and Fama French three-factor model (FF3M). More specifically, the applicability and significance of market capitalization to GDP ratio to describe the relationship between excess return and risk. The study was conducted on OMX Helsinki and Bolsa de Valores de Colombia (BVC) separately, then analyzed the differences between the two markets. Finland and Colombia are both representative countries for emerged and emerging markets, with different market capitalization to GDP ratio. For data selection, we included all active companies during and listed before the research period 2014-2019 in the sample due... (More)
This thesis has investigated the relationship between market capitalization to GDP ratio relative to the Capital asset pricing model (CAPM) and Fama French three-factor model (FF3M). More specifically, the applicability and significance of market capitalization to GDP ratio to describe the relationship between excess return and risk. The study was conducted on OMX Helsinki and Bolsa de Valores de Colombia (BVC) separately, then analyzed the differences between the two markets. Finland and Colombia are both representative countries for emerged and emerging markets, with different market capitalization to GDP ratio. For data selection, we included all active companies during and listed before the research period 2014-2019 in the sample due to the limited market size. Six portfolios were constructed in accordance with Fama and French (1993) for each country, and time series regression models were conducted on CAPM and FF3M. In addition to these two models, a hybrid model was created (HYB). The hybrid model includes market capitalization to GDP ratio as a variable based on the monthly percentage change. In previous studies, market capitalization to GDP ratio has shown to have a significant meaning for describing stock market development, stock market liquidity and development of financial intermediaries. The study concludes that market capitalization to GDP ratio as a variable in the time series regression has non-additional power to explain the systemic risk. In addition to the former statement, this paper concludes that CAPM and FF3M explains the systemic risk and excess return better for OMX Helsinki, Finland, with a higher market capitalization to GDP ratio than Colombia. (Less)
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author
Wallin, Edvin LU and Klosterborg, Rikard
supervisor
organization
course
NEKH03 20202
year
type
M2 - Bachelor Degree
subject
keywords
CAPM, Fama French three-factor model, Stock Market capitalization to GDP, OMX Helsinki, Colombia stock exchange
language
Swedish
id
9040392
date added to LUP
2021-03-11 12:11:10
date last changed
2021-03-11 12:11:10
@misc{9040392,
  abstract     = {{This thesis has investigated the relationship between market capitalization to GDP ratio relative to the Capital asset pricing model (CAPM) and Fama French three-factor model (FF3M). More specifically, the applicability and significance of market capitalization to GDP ratio to describe the relationship between excess return and risk. The study was conducted on OMX Helsinki and Bolsa de Valores de Colombia (BVC) separately, then analyzed the differences between the two markets. Finland and Colombia are both representative countries for emerged and emerging markets, with different market capitalization to GDP ratio. For data selection, we included all active companies during and listed before the research period 2014-2019 in the sample due to the limited market size. Six portfolios were constructed in accordance with Fama and French (1993) for each country, and time series regression models were conducted on CAPM and FF3M. In addition to these two models, a hybrid model was created (HYB). The hybrid model includes market capitalization to GDP ratio as a variable based on the monthly percentage change. In previous studies, market capitalization to GDP ratio has shown to have a significant meaning for describing stock market development, stock market liquidity and development of financial intermediaries. The study concludes that market capitalization to GDP ratio as a variable in the time series regression has non-additional power to explain the systemic risk. In addition to the former statement, this paper concludes that CAPM and FF3M explains the systemic risk and excess return better for OMX Helsinki, Finland, with a higher market capitalization to GDP ratio than Colombia.}},
  author       = {{Wallin, Edvin and Klosterborg, Rikard}},
  language     = {{swe}},
  note         = {{Student Paper}},
  title        = {{Marknadskapitalisering i förhållande till BNP & dess effekt på faktormodeller: En jämförande analys av OMX Helsinki & Bolsa de Valores de Colombia 2014–2019}},
  year         = {{2021}},
}