The co-integration of excess return and intellectual capital

Abstract

For decades, the Capital Asset Pricing model was considered to be one of the most famous asset pricing models, despite of all of its criticism. The intellectual capital became an essential part of the firm’s performance evaluation process. This study examines the relationship between the excess return and intellectual capital components of the firms listed in the Egyptian stock market index (EGX100). The main aim of the researcher is to test whether the intellectual capital components are useful in forecasting the excess return of an investment or not. In order to assess the relationship, the quarterly panel data of 64 firms, from the 100 listed companies in the EGX100, for the period from December 2013 and September 2018. were used to conduct the test. To evaluate the relationship, econometric tests such as panel unit root test, Johansen Fisher Panel Co-integration Test are used. The results of the study indicate that the intellectual capital components are useful in forecasting the excess return, as all of the dependent variables are co-integrated with the independent variables.