Market risk and returns: Evidence from the Nigerian capital market

Abstract

The relationship between markets returns proxied by 'betas' and security returns is well established in the relevant extant literature. The objective of this paper is to provide evidence that this relationship holds in the Nigerian Capital Market. The study specifically examines market risk as defined in the Capital Asset Pricing Model (CAPM) as an explanatory variable for security returns in the Nigerian Capital Market. The model was tested with quarterly data for the period 2001 to 2005, using the most capitalized firms in the Nigerian Capital market. The findings confirm a positive linear relationship between market betas and security returns for the sampled Nigerian firms.