Prediction of Stock Prices Using Capital Asset Pricing Model in Nigerian Stock Market

Abstract

The main intention of this study is to use the accounting data using CAPM to determine the stock prices/returns for the Nigerian capital market. In this study, the independent variable is the prediction of the stock prices and the dependent variable is stock prices in the market. The proxy that is used in this study to measure the dependent variable is CAPM in Nigerian Market. The most important and interesting phenomenon to investors is the analysis from financial market pertaining to stock returns. The research method employed is quantitative which is unlike qualitative as a way of assessing the stock price. The study mainly aims at assessing the correlation of beta factors and the predictability of stock returns from Nigerian firms listed on the stock exchange. In order to boost the beta estimates and mitigate statistical problems resulted from incorrect measurement, the securities were combined into portfolios. In conclusion the study employs ordinary least squares (OLS) regression technique and obtained beta value which is positive and found conclusive evidence for using CAPM and is thus consistent with Nigerian stock market prices. The CAPM has implications for asset pricing since it shows how to calculate the requisite rate of return to assess the value of the stock prices with any given amount of systematic risk (beta) and since the beta is positive hence the policy makers and investors in the Nigerian stock market would make better informed decisions.