Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Testing the Conditional Capm with the Inclusion of Human Capital

Author(s): Elmo Tambosi Filho, Almir Martins Vieira, Fabio Gallo Garcia

Asset pricing models, such as the Capital Asset Pricing Model (CAPM), are still widely discussed in the finance area, including the scientific community as well. These models are used theoretically and practically in the area of investments and financial markets to predict the risk and return of securities and portfolios, as well as in corporate finance, to analyze the viability of investments. For the application of this model in the Brazilian market, 40 stocks with the highest liquidity index of the Brazilian market were selected, divided into 5 (five) portfolios, each portfolio containing 8 shares, during the period from 2008 to 2016. The results show the R2 value of 48% is very close to that found in the static CAPM of 43% and the estimated value for the variable Cpib.mer, after correcting the errors, became significantly different from zero, facts that can be explained by the non-inclusion of market GDP. Thus, the conditional model seems to be more effective in explaining the average cross-sectional variation of returns in the Brazilian market than the non-conditional CAPM, consistent with the tests performed by Jagannathan and Wang model for the American market. The results obtained by these authors, considering the conditional CAPM without Human Capital, the t-value for Cibov is 3.28 and the R2 of the regression is 29.32%. When the size variable is introduced in the model, the values change, being for Csize a t-value of -1.93 and for R2 of 61.66%.

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