Risk on The Johannesburg Stock Exchange

Abstract

The Capital Asset Pricing Model (CAPM) provides a parsimonious method for estimating security returns. However, the strong influence of mining shares on the Johannesburg Stock Exchange (JSE) has complicated the use of the CAPM in South Africa and some researchers have suggested that broad sectoral indices should be used as market proxies in place of the JSE Actuaries All Share Index. This calls for the use of more complex, multi-parameter models, such as those derived from Arbitrage Pricing Theory (APT).