An analysis of CAPM efficiency: The case of the DFM market in Dubai

Angelo Corelli; Siham Achcar; Anna Chekanova; Rim Ghalayini; Nazli Orazalyyeva

doi:10.1504/IJBCRM.2021.119940

An analysis of CAPM efficiency: The case of the DFM market in Dubai

Angelo Corelli^*, Siham Achcar, Anna Chekanova, Rim Ghalayini, Nazli Orazalyyeva

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

The project analyses the DFM market in terms of efficiency, by applying portfolio theory to the construction of the efficient frontier and the security market line (SML). Moreover, a SML analysis is performed in order to obtain 'buy' or 'sell' recommendations. The dataset includes 35 companies that are currently listed and showing reliable data evolution over time. The constrained minimisation, not allowing for short selling so to mimic the regulatory environment on DFM, shows that all stocks are below the capital market line. Unconstrained optimisation is not possible due to the variance-covariance matrix not being positive-definite. The SML analysis shows that signals are contradictory and equally split between 'buy' and 'sell', resulting in uncertainty about the future trend of the market.

Original language	English
Pages (from-to)	367-378
Number of pages	12
Journal	International Journal of Business Continuity and Risk Management
Volume	11
Issue number	4
DOIs	https://doi.org/10.1504/IJBCRM.2021.119940
Publication status	Published - 1 Jan 2021
Externally published	Yes

Keywords

Capital market line
CML
Efficiency
Frontier
Optimisation
Portfolio
Security market line
SML

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10.1504/IJBCRM.2021.119940

Cite this

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abstract = "The project analyses the DFM market in terms of efficiency, by applying portfolio theory to the construction of the efficient frontier and the security market line (SML). Moreover, a SML analysis is performed in order to obtain 'buy' or 'sell' recommendations. The dataset includes 35 companies that are currently listed and showing reliable data evolution over time. The constrained minimisation, not allowing for short selling so to mimic the regulatory environment on DFM, shows that all stocks are below the capital market line. Unconstrained optimisation is not possible due to the variance-covariance matrix not being positive-definite. The SML analysis shows that signals are contradictory and equally split between 'buy' and 'sell', resulting in uncertainty about the future trend of the market.",

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An analysis of CAPM efficiency: The case of the DFM market in Dubai

Abstract

Keywords

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