Risk and Return Analysis for Assessing Performance of Some Private Companies Listed on The Ghana Stock Exchange through an Asset Pricing Model

Abstract

In the presence of risk and uncertainty, investors still want good returns and maximal profits on their investments. For investors in stocks, to minimize loss, it is important to assess the risk and return inherent in the stocks, before investing in them. In this work, risk and return for some assets and portfolios of some companies quoted on the Ghana stock exchange (GSE) from January 2015 - February 2020 were assessed. The assets are representative of four major sectors of the economy. The systematic risk and performance of the portfolios were measured, by calculating alpha and Beta using the regression equation of the Capital asset pricing model. It was found that assets from the banking sector were more volatile, the asset of the food company was less risky, and that of the oil company seemed to mirror the market. Since private companies are investment drivers and economy boosters for growth; stability and performance analysis of some private sector companies namely CAL, GCB, MTN, GOIL, UNIL, FML,and TOTAL, was done. The price of the asset of one of the companies, were predicted for the next three months, using the model. The theoretical values were very close to the empirical values. Then, model performed well for risk and return assessment, and can be used to predict prices of assets on the GSE.