International tests of the suitability of the Capital Asset Pricing Model (CAPM) found that the minimum\r\nreturn required by investors implied by the model exceeded the risk-free proxy yield. In contrast, similar\r\ntests in South Africa found that the minimum required return was not significantly different from the\r\nrisk-free proxy return. This study sought to resolve this apparent anomaly by employing direct and\r\nindirect approaches to estimate the minimum return required by investors. It found that, in keeping with\r\ninternational evidence, the minimum required rate of return exceeded that of the risk-free rate proxy;\r\nwhilst the minimum-variance zero-beta portfolio return closely approximated the minimum required\r\nreturn. The implications of these findings for researchers and practitioners using the CAPM are\r\ndiscussed.
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