Comparison Study Between Money and Capit

Comparison Study between Money and Capital Market
Comparison Study between

Money and Capital Market
Graduation Project submitted to Faculty of Management, Modern University for Technology &
Information in partial fulfillment for the degree of Bachelor of Financial institution
Mohamed Mohie Eldin Abd Elrahman Mahdy
Super visor
Dr. Osama Wagdi

Financial Institution Department
Faculty of Management
Modern University for Technology & Information
Cairo
Fall 2015
1
Abstract
The present research aims a comparison study between money and
capital markets; the population of the study is the Egyptian
financial Market; the period from 2005 to 2012; According to Law
No. 88 of 2003 of the "Central Bank, Banking Sector and
Monetary System" entrusts the Central Bank of Egypt (CBE) with
the formulation and implementation of monetary policy;
According to Capital Market Law No. 95 of 1992 Egyptian
exchange (EGX) is a major market for Capital Market, Finally, the
study found relationship between money and capital market’s
return and risk.
Keywords
Financial Market, Money Market, Capital Market, Risk, Return, Central Bank of Egypt (CBE);
Egyptian Exchange (EGX)
2
Content
Chapter1
Research Methodologies
 Introduction
 literature review
 Research problem
 Research Hypothesis
 Research objectives
 Research Methodology
 Research Structure
Chapter 2
Theoretical study
 Introduction
 Financial Institutions and financial market
3
 Definition of money market
 Structure of money market
 Definition of capital market
 The Structure of capital market
 Pricing models
A. The Capital Market Line [CML]
B. The Capital Asset Pricing Model [CAPM]
 Form Risk
A. systematic risk
B. Unsystematic risk
 Comparison Between Money and Capital

Market
Chapter 3
Field Study
 Introduction
4
 Return of Capital Market in Egypt
 Return of Money Market in Egypt
 Test Hypothesis No. 1
 Test Hypothesis No. 2
Chapter4
Results and Recommendation
 Theoretical Results
 Field Results
 Recommendation
References
 Books
 Periodicals
 Work paper
5
Appendices
Appendix A
the hold return of Egyptian money & capital market
Appendix B
Statistical Package for the Social Sciences Output
Appendix C
Statistics
6
Figure (1-1)
The relationship between risk and return
Figure (2-1)
Financial Institutions and financial market
Figure (2-2)
Explores the capital market line (CML)
Figure (2-3)
Explores the capital asset pricing model (CAPM)
Figure (3-1)
The EGX 30 performance from 1998 to 2015
Figure (3-2)
The Hold Return OF EGX 30 from 2005 to 2012
Figure (3-3)
The Egyptian inflation rate from 1998 to 2015
Figure (3-4)
The interest rate from 2005 to 2012
7
Table no. 2-1

Comparison between Money & Capital Market
Table no. 3-1
Pearson Correlation Test between returns of Money & Capital
Market
Table no. 3-2
Test of Homogeneity of Variances between Money & Capital
Market returns
8
Chapter 1
9
Chapter1
 Introduction
Any investment decision is a balance between risk and return, so when we
going international, we are asked about the impact of international market on
the relation between risk and return, or what are impact of international
diversification on risk?, we can see this impact in next graphs :
Figure (1-1)
The relationship between risk and return
Expected Return
Investments
Standard deviation of return
From this chart, we find two relationships between risk and return, the
investment on international capital market is effective, becomes in the
international investment we have a higher return in the same level of risk in
investment.
10
 literature review
o Scott E. Mayfield(1999)
This research provides a methodology for estimating the risk premium of the
market that based on the underlying process governing the level of volatility
of the market. This model provides a test for a structural shift in the
historical risk premium and an unbiased estimate of its value. In the
volatility process, it provides assurance of a structural shift following the
1930s that implies an upward bias in ex post realized returns during the
subsequent period. The estimation of the market risk premium -controlling
for this bias- for the period after 1940 is 5.9% over the yield on T-bills. this
model also provides a lower-bound on forward-looking estimates of the
current risk premium of 4.2% over the yield on T-bills.
o Strebulaev (2002)
This research tests the premium hypothesis of illiquidity by using
U.S. Treasury securities intraday interdealer data. In contrast to the existing
literature where notes are matched with bills in terms of maturity date, this
research compare notes with other notes maturing on the same day. One
reason for comparing notes with notes rather than notes with bills is that
differences in tax treatment across bills and notes could confront an
experiment to measure the effect of illiquidity. This research found that
notes are quoted at essentially identical prices despite substantial differences
in their liquidity. The result of previous studies (Amihud and Mendelson,
1991) is in sharp contrast to the rejection of the hypothesis. Therefore the
evidence that reconsidered based on matched bills and notes. This research
identify cross-sectional variation in bill-note pricing differences that cannot
11
be supported by the premium hypothesis of illiquidity. The pricing

difference is smaller for matches with on the run bills, although the
difference in liquidity between these bills and notes is significantly larger.
o Dimson et. al., (2006)

This research use a new long-run stock, bond, bill, inflation, and currency
returns of database, to estimate the equity premium of risk for 17 countries
and a world index over a 106-year interval. Taking U.S. T-bills (government
bonds) as the risk-free asset, the world index was 4.7% (4.0%) of the
annualized equity premium. This research include a report of the historical
equity premium for each market in local currency and US dollars, and
decompose the premium into dividend growth, multiple expansion, the
dividend yield, and changes in the real exchange rate. Investors expect a
premium on the world index of around 3-3 1/2% on a geometric mean basis,
or approximately 4 1/2-5% on an arithmetic basis.
o McCown & Zimmerman (2006)
The characteristics of a zero-beta asset was showed by Gold. It has

approximately the same mean return as a T-bill and bears no market risk.
Silver also bears no market risk but has returns inferior to T-Bills. Both gold
and silver show evidence of inflation-hedging ability, with the case that gold
is much stronger. The prices of both metals are cointegrated with consumer
prices, showing additional evidence of hedging ability.
12
o Dimson et. al., (2011)

This research updates the global evidence on the long-term equity realized
risk premium, relative to both bonds and bills, This reaearch covering 19
different countries. The research runs from 1900 to the start of 2011. While
there is considerable variation across countries, the equity realized risk
premium was substantial everywhere. The research found that the equity
premium relative to Treasury bills was an annualized 4.5%; the expected
equity premium is lower, around 3% to 3½% on an annualized basis, the
equity premium relative to long-term government bonds was an annualized
3.8%, the last geometric mean real returns were an annualized 5.5%.
o Sandip Mukherji (2011)

The risk-free rate is an important input in one of the most widely used
finance models: the Capital Asset Pricing Model. Practitioners and
academics tend to use either long-term Treasury bonds or short-term T-bills
as the risk-free security without empirical justification. This research
investigates the market and inflation risks of Treasury securities with
different maturity dates over different investment horizons. The results show
that mean real returns, volatility, and market and inflation risks,
of Treasury securities increase according to the maturity period. Only T-
bills do not have any market risk for 1- and 5-year periods, and they have the
lowest risk of market over 10 years. Although Treasury securities of all
maturities have significant inflation risk, T-bills have the lowest risk of
inflation over all horizons. Further, the systematic risk of inflation and
inflation explanatory power for real T-bill returns decline with the
investment horizon. Over 10 years, inflation and market risks explain only
13
13% of variations in real T-bill returns, compared to 20% of intermediate

government bond returns, and 23% of government bond returns. These
findings indicate that T-bills are better proxies for the risk-free rate than
longer-term Treasury securities regardless of the investment horizon.
 Research problem
From the literature review, the researchers found overlapping relationships
between Money and Capital Market, so we have next questions:
A. Is there a relationship between Money and Capital Market return?

B. Is there a relationship between Money and Capital Market risk?
 Research Hypothesis
Hypothesis No.1
There is no a relationship between Money and Capital

Market returns.
Hypothesis No.2
There is no a relationship between Money and Capital

Market risk.
 Research objectives
The main objective of the research is analyzing of risk and return Money and
Capital Market.
14
 Research Methodology.
The study used the survey method to describe and analyze the risk and return
Money and Capital Market.
 Research Population
The research population is Egypt case.
 Research Structure
The Research include
Chapter 1
Chapter2
Theoretical study
Chapter3
Field Study
Chapter4
References
Appendices
15
Chapter2
Theoretical study
16
Chapter2
Theoretical study
Introduction
A financial market is a market that brings buyers and sellers together to trade in
financial assets; the purpose of a financial market is to transfer liquidity and
distribution risk. Although there are many components to a financial market,
two of the most commonly used are money markets and capital markets.
In this chapter we introduce the elements that we will talk about which are
money & capital market defined, Structure of money and capital market, and
explain some of the pricing models.
Financial institutions are intermediaries that channel the savings of individuals,

businesses, and governments into loans or investments; The difference in the
money needs is a leads to the emergence of variation in financing needs and is
something which has led to the emergence of money and capital market, the
first regard to fill the short-term financing gap and the second regard to bridge
the long-term financing gap.
17
Fig.2-1
Source: Madura J.,2008.
Definition of money market:

The money market has traditionally been defined as the market for marketable
short term securities. It has deep historical roots. Today, it is not an illuminating
definition. The genesis of interest rates does not originate in market for
marketable short-term securities which is the quintessence of monetary policy
implementation. It is found in the non-marketable interbank debt market.
Money creation is firmly in the province on the money market that is new bank
lending and its corollary bank deposit creation. As a result of these, we offer an
alternative definition of the money market; it is an understatement to show that
18
the money market is a significant part of the financial system. It is the essence
of the financial system. It is the market where short-term lending and borrowing
meet each other, in which the central bank implements monetary policy, where
interest rates have their genesis, and where the new money creation is done.
(Jevons 1875 p.1)
Structure of money market:
The structure of money market includes:
( Bodie, Kane & Marcus 2001 p.28; Frank J.Fabozzi 2002 p.89))
A. Treasury bills: (T-bills, or just bills, for short) are the most marketable of
all instruments of money market. T-bills represent the borrowing simplest
form: The government raises money by selling bills to the public.
B. A certificate of deposit: or CD, is a time deposit with a bank. Time deposits
may not be withdrawn on demand. The depositor is being paid interest and
principal from the bank only at the end of the fixed term of the CD
.negotiable CDs are CDs that are issued in denominations with greater than
$100,000. However; that they can be sold to another investor if the owner
needs to cash in the certificate before its date of maturity. Short-term CDs
are highly marketable, although the market significantly thins out for three
months or more maturities.
C. The Commercial Paper: companies that are largely well-known often issue
their own unsecured short-term debt notes rather than borrowing directly
from banks. These notes are called commercial paper. Very often,
commercial paper is backed by a bank line of credit, in which the borrower
19
can access to cash that can be used (if needed) to pay off the paper at
maturity.
D. A banker’s acceptance: starts as an order to a bank by a bank’s customer to
pay a sum of money at a future date, typically within six months. At this
stage, it is similar to a postdated check. When the bank endorses the order
for payment as “accepted,” it assumes ultimate payment responsibility to the
holder of the acceptance.
E. Eurodollars: are dollar-denominated deposits at foreign banks or foreign
branches of American banks. By locating outside the United States, these
escape regulation of banks by the Federal Reserve Board. Despite the tag
“Euro,” these accounts need not be in European banks, although that the
accepting dollar-denominated deposits practice outside the United States
began.
Definition of capital market :
The capital market is designed to finance long term investments by businesses,

households, and governments. Trading of funds in the capital market makes the
construction of factories, highways, schools, and homes possible. capital market
Financial instruments have original maturities of more than one year and range in
size from small loans to multimillion dollar credits; the demanders and principal
suppliers of funds in the capital market are more varied than in the money market.
Families and individuals, for example, tap the capital market when they borrow to
finance a new home. Governments rely on the capital market for funds to build
schools, highways, and provide the public with essential services. The most
important borrowers in the capital markets are businesses of all size that issue long
term IOUs to cover the equipment purchase and the construction of new facilities.
20
Ranged against these many borrowers in the capital market are financial
institutions, such as insurance companies, mutual funds, security dealers, and
pension funds that the bulk of capital market funds are supplied with. ( peter
S.Rose p.12)
The Structure of capital market:

The capital market is divided into several sectors, each having special
characteristics. For example, one of the largest capital market segments is
devoted to commercial mortgage and residential loans to support the building of
homes and business structures, such as shopping centers and factories. State and
local governments sell their tax exempt (municipal) bonds in another sector of
the capital market in the USA. Households (families and individuals around the
world) another segment loan in yet, using loans of consumer to make purchases
range from auto to home appliances. In Eurobonds, Euro notes the large
corporations make a borrowing from an international capital market. Probably
the capital market best known segment is the market for corporate stock
represented by the major exchanges, such as the London stock exchange, the
New York stock exchange (NYSE) and the Tokyo exchange. ( peter S.Rose
p.13)
Pricing models
The capital market line [CML] and the capital asset pricing model [CAPM]
stipulates a positive relation between conditional stock market returns and risk.
21
A. The Capital Market Line [CML]

An article by Markowitz, The publication in 1952 "Portfolio
Selection" in The Journal of Finance, without doubt, the beginning of
the classic theory of portfolios. This work is the first time to analyzes
the relationship between return and risk in a financial model (S. Cruz
Rambaud et al.,2005) (Zvi Bodie Et. Al.,2012).
In this model, Markowitz established that the risk of a portfolio is

lower than the average of the risks of each asset taken individually
and gave quantitative evidence of the contribution of diversification.
Fig.2-2
Explores the capital market line (CML)
Source: Osama Wagdi, 2014,P.3.
B. The Capital Asset Pricing Model [CAPM]
The capital asset pricing model (CAPM) was developed by Sharpe,

Lintner and Mossin ; Each one individually , The CAPM is one of the
fundamental and most influential concepts in modern finance, it is a
single-facto linear model (security market line) that relates the
22
expected returns of an asset and a market portfolio, in which the slope,

called asset beta, serves as a measure of asset non-diversifiable
(systematic) risk(M. Zabarankin et al. 2013) (Bodie Et. Al.,2012)
Fig.2-3
Explores the capital asset pricing model (CAPM)
Source: Osama Wagdi, 2014,P.3.
Form Risk:
The types of common stock risk are: (Reilly and Brown, 2003) (Gitman &
Zutter 2011)
A. systematic risk:
The variability of returns that is due to factors that affect all risky
assets; because it affects all risky assets, it cannot be eliminated by
diversification; systematic risk sources such as:
23
- Purchasing power risk
- Interest rate Risk
- Taxes Risk
- Exchange rate Risk
- International Risk
B. Unsystematic risk:
Risk that is affect unique to an asset, derived from its particular
characteristics. It can be eliminated in a diversified portfolio;
unsystematic risk sources such as:
- Operation Risk
- Financial Risk
- Business Risk
- Management Risk
- Marketability Risk
- Events Risk
Through pricing models, we find there is a positive relationship between return

level and risk level, with the classification of risk & markets, the Money markets,
don't unsystematic risk
Comparison Between Money and Capital Market
Comparisons can be summarized in the following table
24
Table no. 2-1

Comparison between Money & Capital Market
Comparison Money Market Capital Market
Mobilization of savings
Increases liquidity of funds
Function in the economy.
& resource allocation in
the economy.
A segment of the financial A section of financial

market where lending and market where long term
Meaning borrowing of short term securities are issued and
securities are done. traded.
- Shares
- Debentures
- Treasury Bills - Bonds
- Commercial Papers - Asset
Financial assets - Certificate of Securitization
Deposit - Options
- Trade Credit etc. - Swaps
- futures
- forward contracts
Comparatively High
Comparatively Low
Risk level (systematic risk only )
(systematic &
unsystematic risk)
Time Horizon Within a year More than a year
Return level Comparatively Low Comparatively High
25
Chapter 3
Field Study
26
Chapter 3
Field Study
Introduction
In this chapter, the researcher analyzing of risk and return Money and Capital
Market for Egypt case.
Return of Capital Market in Egypt
The Egyptian Exchange is one of the oldest stock markets established in the
Middle East. The Egyptian Exchange traces its origins to 1883 when the
Alexandria Stock Exchange was established, followed by the Cairo Stock
Exchange in 1903.
Major index of Egyptian exchange (EGX) is EGX 30 index (previously named

CASE 30 Index) is designed and calculated by EGX. EGX started disseminating its
index on 2 February 2003 via data vendors, its publications, web site, newspapers
etc. The start date of the index was on 2/1/1998 with a base value of 1000 points;
this index includes the top 30 companies in terms of liquidity and activity,
The 12039 points is a top of EGX 30 at 22-4-2008, next figure the study show the
EGX30 performance from 1998 to 2015.
27
Figure 3-1
The EGX 30 performance from 1998 to 2015
Source: The Egyptian Exchange
In Next Figure; The Study Show The Hold Return of EGX 30 From 2005 To 2012.
Figure 3-2
The Hold Return OF EGX 30 from 2005 to 2012
300
250
200
150
100
50
0
2012 2011 2010 2009 2008 2007 2006 2005
-50
Source: researchers
28
The higher return for EGX30 Index in year 2005 that is equal (253.9%)
and the lower return in year 2012 that is equal (-12.36%)
Return of money Market in Egypt
Law No. 88 of 2003 of the "Central Bank, Banking Sector and Monetary System"
entrusts the Central Bank of Egypt (CBE) with the formulation and implementation
of monetary policy, with price stability being the primary and overriding objective.
The CBE is committed to achieving, over the medium term, low rates of inflation
which it believes are essential for maintaining confidence and for sustaining high
rates of investment and economic growth. The Government’s commitment to fiscal
discipline is important to achieve this objective.
The CBE intends to adopt a full-fledged inflation targeting regime once the
fundamental prerequisites are met. In Next Figure; The Study Show inflation rate
at Egypt.
Figure 3-3
The Egyptian inflation rate from 1998 to 2015
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Source: Central Agency for Public Mobilization and Statistics
29
In 2006, the 18.32% is a higher inflation rate in Egypt from 1998 to 2015; next
figure the study show short term interest rate.
Figure 3-4
The interest rate from 2005 to 2012
16
14
12
10
0
2012 2011 2010 2009 2008 2007 2006 2005
Source: Central Bank of Egypt
The higher interest rate in year 2005 that is equal (13.39 %) and the
lower interest rate in year 2011 that is equal (10.34 %).
Test Hypothesis No. 1:
To measure the significant relationship between return of money market
& return of capital market, the researchers uses Pearson Correlation Test.
30
Table No. 3-1

Pearson Correlation Test between returns of Money & Capital Market
Correlati ons
CM MM
Pearson CM 1.000 .712*
Correlation MM .712* 1.000
Sig. CM . .048
(2-tailed) MM .048 .
N CM 8 8
MM 8 8
*. Correlation is signif icant at the 0.05 lev el
(2-tailed).
Source: Statistical Package for the Social Sciences Output
According to Pearson Correlation Test in table (3-1), the correlation is

positive relationship between returns money and capital market, these is
71.2% and significant at level (5%).
So the researchers reject (H0) and accept (H1), it's "There is a
relationship between Money and Capital Market returns."
Test Hypothesis No. 2:
To measure the significant relationship between money market & capital
market risk, the researchers uses Test of Homogeneity of Variances.
Table No. 3-2
Test of Homogeneity of Variances between Money & Capital Market returns
Test of Homogeneity of Variances
Lev ene
St at ist ic df 1 df 2 Sig.
RETURN 6.052 1 14 .028
Source: Statistical Package for the Social Sciences Output
31
According to Test of Homogeneity of Variances in table (3-2), the

Levene Statistic is (6.052) and this is a significant at level (5%).
So the researchers reject (H0) and accept (H1), it's "There is a
relationship between Money and Capital Market Risk."
32
Chapter4
33
Chapter4

After the completion of theoretical formwork review and Field study, this chapter
presents the results that have been reached through statistical analysis and
hypothesis testing.
Theoretical Results:
1. The purpose of a financial market is to transfer liquidity and distribution
risk.
2. Financial institutions are intermediaries that channel the savings of
individuals, businesses, and governments into loans or investments.
3. The difference in the money needs is a leads to the emergence of variation in
financing needs and is something which has led to the emergence of money
and capital market, the first regard to fill the short-term financing gap and
the second regard to bridge the long-term financing gap.
4. Financial markets can be classified into two main groups; it is money and
capital market.
5. The Function of Money Market is increasing liquidity of funds in the
economy.
6. The Money Market Financial assets include Treasury Bills; Commercial
Papers; Certificate of Deposit &Trade Credit.
7. The Money Market has a risk level comparatively low & return level
comparatively low.
34
8. The Function of Capital Market is Mobilization of Savings & Resource

allocation in the economy.
9. The Capital Market Financial assets include Shares, Debentures, Bonds,
Asset Securitization, Options, Swaps, futures & forward contracts.
10. The Capital Market has a risk level comparatively high & return level
comparatively high
Field Results:
1. Law No. 88 of 2003 of the "Central Bank, Banking Sector and Monetary
System" entrusts the Central Bank of Egypt (CBE) with the formulation and
implementation of monetary policy.
2. The Central Bank of Egypt (CBE) is money market regulator in Egypt.
3. The Egyptian capital market include activities of stock Exchange, Insurance,
Mortgage Finance, Financial Leasing, Micro Finance, Pension Funds,
Governmental insurance funds & Factoring1.
4. The Egyptian Exchange is the major activities in The Egyptian capital
market.
5. The Egyptian Exchange is one of the oldest stock markets established in the
Middle East. The Egyptian Exchange traces its origins to 1883.
6. Major index of Egyptian exchange (EGX) is EGX 30 index (previously
named CASE 30 Index) is designed and calculated by EGX. EGX started
disseminating its index on 2 February 2003 via data vendors, its
publications, web site, newspapers etc. The start date of the index was on
1
Factoring is set of integrated services that include querying the potential buyer (debtor) and evaluating his financial
and business conditions as well as managing future accounts and collecting outstanding balances on time or
speeding up its payment. It is a contract between the company and vendor under which the company buys the rights
of short-term cash from the seller without returning to him once more that is in case of the debtor bankruptcy
35
2/1/1998 with a base value of 1000 points; this index includes the top 30
companies in terms of liquidity and activity.
7. There is a relationship between Money and Capital Market returns, it is a
positive relationship & significant at level (5%), this is in line with the
capital market line [CML] and the capital asset pricing model [CAPM].
8. There is a relationship between Money and Capital Market Risk, it is a
significant at level (5%), this is in line with the capital market line [CML]
and the capital asset pricing model [CAPM].
Recommendation
1. The development of the Egyptian money market for provides liquidity
needed for government , institutions & individuals to meet short-term
funding gap
2. The development of the Egyptian capital market to Maximization
Mobilization of savings & resource allocation in the economy.
3. The development of the role of the Central Bank of Egypt through a flexible
interest rate determine the pattern with the business cycle (recession -
recovery)
4. The development of the role of the Central Bank of Egypt through a flexible
interest rate on T-bill to determine free risk return.
36
References
 Books:
 Frank J. Fabozzi (2002)," Fixed Income Securities", Second Edition, USA:

JOHN WILEY & SONS.
 Lawrence J. Gitman & Chad J. Zutter (2011)," Principles of Managerial

Finance", Prentice Hall.
 Madura J. (2008)," Financial Institutions and Markets", Eight Edition,

Ohio : Thomson
 Reilly, F. and K. Brown (2003),"Investment analysis and portfolio

management", 7th Edition, South-Western College Pub.
 Zvi Bodie, Alex Kane, Alan J. Marcus (2011)," Investments " , USA:
McGraw−Hill Primis.
 Zvi Bodie, Alex Kane, Alan J. Marcus (2012)," Essentials of

Investments", 9th edition , McGraw-Hill/Irwin.
 PERIODICALS:
 Michael Zabarankin , Konstantin Pavlikov & Stan Uryasev (2013)," Capital

Asset Pricing Model (CAPM)with drawdown measure", European Journal
of Operational Research, Vol.234 ,No.2, pp.508-517.
37
 Mukherji, Sandip, (2011)" The Capital Asset Pricing Model’s Risk-Free

Rate" The International Journal of Business and Finance Research, Vol.
5, No. 2, PP. 75-83.
 Osama Wagdi ," Relationship Between Risk and Common Stock Return in
CML and CAPM", Scientific Journal of Economic and Commerce, Ain
Shams University, No. 2, April 2014,PP.1-16.
 S. Cruz Rambaud et al., (2005). Theory of portfolios: New considerations on

classic models and the Capital Market Line", European Journal of
Operational Research, vol.163 p.p. 276–283
 Work paper
 Dimson, Elroy and Marsh, Paul and Staunton, Mike, (October 7, 2011)
"Equity Premia around the World", Work paper, Available at
SSRN:1940165
 Mayfield, Scott E., (October 1999)" Estimating the Market Risk Premium ",
Work paper, EFA 0170, Available at, SSRN: 195569 .
 Strebulaev, Ilya A., "(March 2002)" Many Faces of Liquidity and Asset
Pricing: Evidence from the U.S. Treasury Securities Market," Work paper,
AFA 2003 Washington, DC Meetings. Available at SSRN: 275843
 Dimson, Elroy and Marsh, Paul and Staunton, Mike, (April 7, 2006)," the
Worldwide Equity Premium: A Smaller Puzzle", Work paper, EFA 2006
Zurich Meetings Paper; AFA 2008 New Orleans Meetings Paper. Available
at SSRN: 891620
38
 McCown, James Ross and Zimmerman, John R., (July 24, 2006)" Is Gold a
Zero-Beta Asset? Analysis of the Investment Potential of Precious Metals",
Work paper, Available at SSRN: 920496
39
Appendices
40
Appendix A
The Hold Return OF Egyptian money &
capital market
41
years
The Hold Return OF Egyptian
capital market (%)
2005 253.09
2006 -1.16
2007 63.49
2008 25.94
2009 41.96
2010 5.79
2011 -10.94
2012 -12.36
42
years
The Hold Return OF Egyptian
money market (%)
2005
13.39
2006
12.71
2007
12.64
2008
12.22
2009
12.39
2010
12.35
2011
10.84
2012
11.63
43
Appendix B
Statistical Package for the Social
Sciences Output
44
Descriptives
Descriptive Statistics
N Mean St d. Variance Skewness Kurt osis

St at ist ic St at ist ic Dev
St atiation
ist ic St at ist ic St at ist ic St d. Error St at ist ic St d. Error
CAPI TAL 8 45.7263 87.9117 7728.465 2.346 .752 5.882 1.481
MONEY 8 12.2713 .7618 .580 -.715 .752 1.195 1.481
Valid N
8
(listwise)
Graph
300
200
100
0
CAPITAL
-100
10.5 11.0 11.5 12.0 12.5 13.0 13.5
MONEY
45
Test Hypothesis No. 1
Correlations
Correlati ons
CM MM
Pearson CM 1.000 .712*
Correlation MM .712* 1.000
Sig. CM . .048
(2-tailed) MM .048 .
N CM 8 8
MM 8 8
*. Correlation is signif icant at the 0.05 lev el
(2-tailed).
46
Test Hypothesis No. 2
One way
Test of Homogeneity of Variances
Lev ene
St at ist ic df 1 df 2 Sig.
RETURN 6.052 1 14 .028
ANOVA
Sum of Mean
Squares df Square F Sig.
RETURN Between
4476.948 1 4476.948 1.158 .300
Groups
Within
54103.319 14 3864.523
Groups
Total 58580.268 15
47
Appendix C
Statistics
48

Comparison Study Between Money and Capit

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Comparison Study Between Money and Capit

Uploaded by

Copyright:

Available Formats

Comparison Study between Money and Capital Market

Comparison Study between

Mohamed Mohie Eldin Abd Elrahman Mahdy

Dr. Osama Wagdi

 Financial Institutions and financial market

 Definition of money market

 Structure of money market

 Definition of capital market

 The Structure of capital market

B. The Capital Asset Pricing Model [CAPM]

 Comparison Between Money and Capital

 Return of Capital Market in Egypt

 Return of Money Market in Egypt

 Test Hypothesis No. 1

 Test Hypothesis No. 2

Table no. 2-1

Standard deviation of return

be supported by the premium hypothesis of illiquidity. The pricing

o Dimson et. al., (2006)

o McCown & Zimmerman (2006)

The characteristics of a zero-beta asset was showed by Gold. It has

o Dimson et. al., (2011)

o Sandip Mukherji (2011)

13% of variations in real T-bill returns, compared to 20% of intermediate

A. Is there a relationship between Money and Capital Market return?

There is no a relationship between Money and Capital

There is no a relationship between Money and Capital

Financial Institutions and financial market

Financial institutions are intermediaries that channel the savings of individuals,

Financial Institutions and financial market

Source: Madura J.,2008.

Definition of money market:

Structure of money market:

The structure of money market includes:

Definition of capital market :

The capital market is designed to finance long term investments by businesses,

The Structure of capital market:

A. The Capital Market Line [CML]

In this model, Markowitz established that the risk of a portfolio is

Explores the capital market line (CML)

Source: Osama Wagdi, 2014,P.3.

B. The Capital Asset Pricing Model [CAPM]

The capital asset pricing model (CAPM) was developed by Sharpe,

expected returns of an asset and a market portfolio, in which the slope,

Explores the capital asset pricing model (CAPM)

Source: Osama Wagdi, 2014,P.3.

- Purchasing power risk

- Interest rate Risk

- Exchange rate Risk

Through pricing models, we find there is a positive relationship between return

Comparison Between Money and Capital Market

Comparisons can be summarized in the following table

Table no. 2-1

Comparison Money Market Capital Market

A segment of the financial A section of financial

Return level Comparatively Low Comparatively High

Return of Capital Market in Egypt

Major index of Egyptian exchange (EGX) is EGX 30 index (previously named

The EGX 30 performance from 1998 to 2015

Source: The Egyptian Exchange

The Hold Return OF EGX 30 from 2005 to 2012

Source: Central Agency for Public Mobilization and Statistics