The Capital Asset Pricing Model (CAPM) Theoretical Frameworks and Empirical Evidence
Article Sidebar
THIS IS AN OPEN ACCESS ARTICLE UNDER THE CC BY LICENSE
Main Article Content
Abstract
The research aims to identify the capital asset pricing model (CAPM), expressed in the one-factor model represented by the beta coefficient. Which is concerned with systemic risks, and which has a distinguished position in the stock market. As it is one of the analysis tools that take the relationship between return and risk in securities into consideration, and although among the criticisms directed at him is that the model enjoys ease, simplicity and speed. These features have kept the model in use today and in wide fields by most economists and financiers. In addition, the developed models for the Capital Asset Pricing Model (CAPM) will be presented.
Downloads
Article Details
References
Chan, Louis K C & Lakonishok, Josef, 1993, Are the reports of beta's death premature?" Journal of Portfolio Management; summer, 19, 4; ABI, Inform Global.
Firozjaee, Majid Rahmani & Jelodar Zeinab Salmani, 2010, Tests of The Fama & French Three Factor Model in Iran, Iranian Economic Review, Vol.15, No.27, Isfahan University, https://ier.ut.ac.ir /article32 709_770c6125cd31344f61d315ace1cd036e.
Abdou Rabab Khamis Mahmoud,2019, Determinants of Stock Prices in the Egyptian Stock Market: Traditional Asset Pricing Models versus Behavioural Asset Pricing Models. PhD thesis, Faculty of Business & Law, University of the West of England, UK.
Haruna Glory Ojone, 2017, CAPM: Theoretical formulation, Empirical evidence & Interpretation. Master's thesis published, Masaryk University.
Limkriangkrai Manapon, 2015, An Empirical Analysis of Asset Pricing Models in Australia, Published PhD thesis, Auckland University of Technology. Mohsin Sadaqat,2018, Asset pricing anomalies: the role of liquidity, volatility, & investor sentiment - evidence from Pakistan stock exchange (PSX), Published PhD thesis, Sciences & Technology University.
Raza Hassan,2019, Cost of equity dynamics: a comparison across emerging & developed markets, published PhD thesis, Sciences & Technology University.
Halov, Nikolay & Heider Florian,2011,Capital Structure, Risk & Asymmetric Information, the Quarterly Journal of Finance, Vol.1, No.4,767-809, doi.org/10.1142/S2010139211000171.
Lee Stefan Colza & Junior William Eid,2018, Portfolio construction & risk management: theory versus practice, RAUSP Management Journal, Vol. 53, No. 3, 345-365, doi 10.1108/ RAUSP-04-2018-009.
Chau Wan Li, Yue Wu & Ojiako U.,2012, Using portfolio optimization models to enhance decision making & prediction, Journal of Modelling in Management, Vol.9, No.1,36- 57. doi:10.1108/JM2-11-2011-0057.
Jorda Oscar, Knoll Katharina, Kuvshinov Dmitry, Schularick Moritz, & Taylor Alan M.,2019, The Rate of Return on Everything, 1870–2015, Quarterly Journal of Economics, Vol.134, No.3,1225–1298. doi.org/10.1093/qje/qjz012.
Gale William G. & Orszag Peter R.,2019, Budget Deficits, National Saving, & Interest Rates, Journal Article, Vol. 2004, No, 2,101-187. https://www.jstor.org/stable/3805107.
Gambrah Priscilla, Serwaa Nkyira & Traian Adrian Pirvu, 2014, Risk measures & portfolio optimization, Journal of Risk & Financial Management, Vol.7, No.3, 113–129. doi.org/10.3390/jrfm. 7030113.
Chen Jiaqin & Yuan Ming, 2017, Efficient Portfolio Selection in A Large Market, Journal of Financial Econometrics, Vol.14, No.3, 496–524. doi.org/10.1093/jjfinec/nbw003.
Bergmann Daniel Reed, Savoia Jose Roberto Ferreira, Angelo Claudio Felisoni de, Contani Eduardo Augusto do Rosário & Silva Fabiana Lopes da, 2018, Portfolio management with tail dependence, Journal of Empirical Finance, Vol. 50, No.51, 5510–5520. doi:10. 1080/00036846.2018.1487000.
Delpini Danilo, Battiston Stefano, Caldarelli Guido & Riccaboni Massimo, 2019, Systemic risk from investment similarities, Journal of Empirical Finance, Vol.14, No.5,1-15.doi.org/10.1371/journal.pone. 0217141.
Mollik Abu T. & Bepari M. Khokan, 2015, Risk-Return Trade-off in Emerging Markets: Evidence from Dhaka Stock Exchange Bangladesh. Australasian Accounting, Business & Finance Journal. Vol. 9, No.1, 7l-88. doi.org/10.14453/aabfj. v9i1.6.
Grundl Helmut, Jens Gal & Dong MingIvy,2016, The evolution of insurer portfolio investment strategies for long-term investing, OECD Journal: Financial Market Trends, Vol.2016, No.1,1-55. doi.org/10. 1787/19952872.
Picasso Andrea, Merello Simone, Ma Yukun, Oneto Luca & Cambria Erik,2019, Technical analysis & sentiment embeddings for market trend prediction. Expert Systems with Applications, Vol.135, No.30, 60–70. doi: 10.1016/j.eswa.2019.06.014.
Diaz Raymundo, SolaresEfrain, de-León-Gómez Victor & Salas Francisco G.,2022, Stock Portfolio Management in the Presence of Downtrends Using Computational Intelligence. Applied Sciences, Vol.12, No.4067, 1-20.doi.org/10.3390/app12084067.
Salehi Mahdi & Alkhyyoon Hussein,2020, The relationship between managerial entrenchment, social responsibility, & firm’s risk-taking & shareholders’ activity, Social Responsibility Journal ahead-of-print(ahead-of-print), 1-25.doi:10.1108/SRJ-10-2019-0339.doi.org /1 0.24148/wp2017-25.
Hasanah Shofia Mauizotun & Maspupah Ima.2017. Shariah Compliant Asset Pricing Model (SCAPM) The Formula of Risk & Return Modification in Islamic Finance. Jurnal Ekonomi dan Bisnis Islam, Vol.2, No.2, 177-187. doi.org/ 10.3390/app12084067
Latunde Tolulope, Akinola Lukman Shina & Dare Damilola Deborah.2020. Analysis of capital asset pricing model on Deutsche bank energy commodity. Journal in Green Finance, Vol.2, No.1,20–34. doi.org/ 10.3390/app12084067.
Pastpipatkul Pathairat, Maneejuk Paravee & Sriboonchitta Songsak ,2017, Markov switching regression with interval data: application to financial risk via CAPM. Journal of Computational & Theoretical Nanoscience. Vol. 23, No.11.10794–10798. doi: 10.1016/j.econmod. 2019.09.016.
Phadkantha Rungrapee, Yamaka Woraphon & Tansuchat Roengchai, 2018. Analysis of risk, rate of return & dependency of REITs in ASIA with capital asset pricing model. International conference of the Thail& econometrics society. 536–548. doi.org/10.24148/wp2017-25.
Sharpe & William F.,1964. Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, Vol.19, No.3, 425-442. doi:10.1016/j.econmod. 2019.09.016.
Elbannan, Mona. 2015. The Capital Asset Pricing Model: An Overview of the Theory. International Journal of Economics & Finance, Vol.7, No.1, 216-228. doi:10.1002/ 9781119424444. ch19.
Chen Ming-Hsiang, 2003, Risk & return: CAPM & CCAPM. The Quarterly Review of Economics & Finance. 43. 369–393. doi:10.110 8/IJOEM-01-2020-0110.
Alshomaly, Ibrahim & Masa'deh Ra'Ed.2018. The Capital Asset Pricing Model & Arbitrage Pricing Theory: Properties & Applications in Jordan. Model Applied Science. Vol.12, No.11.330-337. doi.org/ 10.24148/wp2017-25.
Yezhou Sha & Gao Ran,2019, Which is the best: A comparison of asset pricing factor models in Chinese mutual fund industry, Economic Modelling,Vol.83, No.3, 8-16. doi:10.1016/j.econmod. 2019.09.016.
Shaheen, Sadia & Malik, Qaisar Ali, 2012, The Impact of Capital Intensity, Size of Firm & Profitability on Debt Financing in Textile Industry of Pakistan, Interdisciplinary Journal of Contemporary Research in Business, Vol.,3, No.,10.1061-1066.
31.Gonzalez-Sánchez Mariano, 2021, Term Structure of Risk Factor Premiums Used for Pricing Asset: Emerging vs. Developed Markets, Emerging Markets Finance & Trade, Vol., 58, No., 5, 1339-1358. doi.org/10.1080/1540496X.2021.1873128.
Tobin, James, 1958, Liquidity Preference as Behavior Towards Risk, Review of Economic Studies, Vol.25, No.2,65–86.
Sharpe, William F.,1964. Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk, Journal of Finance, Vol.19, No.3, 425-442
32.Matthias, Hanauer X. & Lauterbach Jochim G.,2019, The cross-section of emerging market stock returns, Emerging Markets Review,Vol.,38, No.1,265-286. doi: 10.1016/j.ememar.2018.11.009.
33.Yang, Quan, Li, Liuling, Zhu, Qingyu, & Mizrach, Bruce. 2017. Analysis of US Sector of Services with a New Fama & French 5-Factor Model. Applied Mathematics, Vol.,8 No.,9, 1307-1319. doi:10.4236 /am.2017.89096.
Engle Robert F.,2016, Dynamic Conditional Beta, Journal of Financial Econometrics, Vol.14, No.4, 643-667. doi.org/10.1093 /jjfinec/nbw006.
Blanco Belen, 2012, The use of CAPM & Fama & French Three Factor Model: portfolios selection, Journal of Public & MunicipalFinance, Vol.1, No.2.61-70. https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/4288/pmf_2012_02_Blanco.pdf
Yesuf Abdurahman J. & Aassouli Dalal,2020. Exploring synergies & performance evaluation between Islamic funds & socially responsible investment (SRIs) in light of the Sustainable Development Goals (SDGs). Heliyon,Vol.6,No8,1-17.doi.org/10.1016/j.heliyon.2020.e0 4562.
Rizwanullah Muhammad , Liang Lizhi, Yu Xiuyuan & Zhou Jinan, 2020, Exploring the Cointegration Relation among Top Eight Asian Stock Markets, Open Journal of Business & Management,Vol.8, No.3,1076-1088. doi:10.4236/ojbm.2020.83068.
Bahraini Syintia, Endri Santoso Sugeng, Hartati4leni & Pramudena Sri Marti, 2021, Determinants of Firm Value: A Case Study of The Food & Beverage Sector of Indonesia, Journal of Asian Finance, Economics & Business, Vol.8, No.6, 839-847.doi: 10.13106/Jafeb.2021.Vol8.No6.0839.
Reilly, Frank K. & Brown Keith C., 2012, Analysis of Investment & Management of Portfolios, 10th ed., International Edition, Canada: Southwestern.
Sharpe, W. Mutual Fund Performance J. Bus. 1966, 9, 119-138.
Brigham Eugene. & Houston, joel F.,2015, Fundamentals of Financial Management, South-Western Cengage Learning.
Philips Christonpher B. Walker David J. & Kinniry Francis M., 2012, Dynamic correlations: The implications for Portfolio construction,Vanguard research-Vanguard.com.
Garrett Stephen J.,2013, An Introduction to the Mathematics of Finance A Deterministic Approach, 2nd.ed, Butterworth-Heinemann.
Huang Jinqiao, Tong Jianwen, Wang Peini & Zheng Xilin,2022, Application & Comparison of NPV & IRR Methods in the Company Investment Decision, Advances in Economics, Business & Management Research,Vol.648,71-78. doi.org/10.2991/ aebmr.k.220307.012
Zhang Tianyang & Lence Sergio H., 2022, Liquidity & asset pricing: Evidence from the Chinese stock markets, The North American Journal of Economics & Finance, Vol.59, January 2022, 101-557, doi.org/10.1016/ j.najef. 2021.101557.
Adam Zaremba, Andreas Karathanasopoulos, Alina Maydybura, Anna Czapkiewicz & Noushin Bagheri,2018, Dissecting anomalies in Islamic stocks: Integrated or segmented pricing? Pacific-Basin Finance Journal, Vol.6, No.2, 1-21. doi.org/10.1016/j.pacfin.2018. 05.006.
Shaikh Salman Ahmed, Ismail Mohd Adib, Ismail Abdul Ghafar, Shahimi Shahida & Shafiai Muhammad Hakimi Mohd,2019, Cross Section of Stock Returns on Shari’ah-Compliant Stocks: Evidence from Pakistan. International Journal of Islamic & Middle Eastern Finance & Management,Vol.12,No.2,282-302.doi.org/10.1108/ IMEFM04-2017-0100.
Oseni Ezekiel & Olanrewaju Razak Olawale,2017, A Capital Asset Pricing Model’s (CAPM’s) Beta Estimation in the Presence of Normality & Non-normality Assumptions, International Journal of Finance & Banking Research, Vol.3, No.3,44-52. doi:10.11648 /j.ijfbr.20170303.12.
Swati Nagpal,2013, Capital Asset Pricing Model (CAPM), Elixir International Journal, Vol.58, 14982-14984.doi: 10.1016/j.econmod.20 19.09.016.
Markowitz, Harry. 1952, Portfolio Selection, The Journal of Finance, Vol.7, No.1, 77-91.
Markowitz, Harry, 1959, Portfolio Selection: Efficient Diversification of Investments, Cowles Foundation Monograph No. 16. New York: John Wiley & Sons, Inc.
Ayub Usman, Kausar Samaila , Noreen Umara, Zakaria Muhammad & Jadoon Imran Abbas,2020, Downside Risk-Based Six-Factor Capital Asset Pricing Model (CAPM): A New Paradigm in Asset Pricing, Journals Sustainability, Vol.12, No.17,1-16. doi.org/10.3390 /su12176756.
Erzurumlu Yaman O., Yildiz Mehmet Emin & Kurtulus Bora, 2020, Comparative Analyses of Mean-Variance & Mean-Semivariance Approaches on Global & Local Single Factor Market Model for Developed & Emerging Markets, International Journal of Emerging Markets ahead-of-print(ahead-of-print),1-26.doi:10.1108/IJOEM-01-2020-0110.