Testing the Validity of CAPM on Bucharest Stock Exchange
Abstract
In this paper, we test the validity of CAPM hypothesis during COVID-19 period. Using 10 high-liquid securities traded on Bucharest Stock Exchange during February 2020 to April 2020, we estimate the baseline CAPM alongside two additional extensions controlling for COVID-19 related news and foreign stock exchange evolution. With only one exception, for all the securities included in the analysis, the CAPM is valid regardless of the model specification, suggesting that during COVID-19 financial turmoil, the investors trading on Bucharest Stock Exchange had a rational behavior.
© 2024 Florin Blaga, Dănuț-Georgian Mihai, Ludovic-Cosmin Trifu, Antonela Bichir-Ghelase, published by The Bucharest University of Economic Studies
This work is licensed under the Creative Commons Attribution 4.0 License.