Evaluating the Capital Asset Pricing Model for the Moroccan Stock Exchange

This paper examines the validity of the Capital Asset Pricing Model (CAPM) in the Moroccan stock exchange to determine whether the CAPM is an effective decision support tool for traders on the trading floors. Many tests of CAPM have been undertaken on various stock markets worldwide. A direct verification of this model consists of testing the linear relationship between the expected return of each stock and its systematic risk. In general, empirical studies used stock indices to represent portfolio markets. In this paper the Moroccan Most Active Shares Index (Moroccan index) was used testing the validity of the CAPM on the Casablanca Stock Exchange, using econometric tests on monthly data covering the years from 2014 to 2023. We found that CAPM model, in its original form, is not perfectly suited for capturing the complexities of the Moroccan stock market. While the model provides a general framework for understanding the relationship between risk and return, it appears that additional factors need to be considered to accurately predict asset prices in this particular market.