Estimation of risks in stock markets (securities considered are KQ shares, KCB shares and Barclays bank shares)

Abstract

Whenever one thinks of an investment, the term risk loudly or silently comes into ones mind. Attempts have been prompted to define and estimate risks both in capital assets and stocks. The pillar to which all these have been resting on is the historical data available. Some of the models have been advanced include The Harry Markowitz (1952). Portfolio theory; Capital Asset Pricing Model (CAPM) whose critics have argued its limitation in application though thought to be the best model available and Stephen Ross (1976). - The Arbitrage Pricing Models; - which attempts to capture the limitations of CAPM& recognises the stocks sensitivities to a number of factors that influences their return? This study therefore attempts to engage elements of APT (factor analysis) to generate variance, co variances, returns andthe expected returns on KCB shares, KQ shares & BBK shares over a period of31 weeks (weekly statistics considered).