Test of CAPM: A Study of India and US

2016 ◽  
Vol 6 (2) ◽  
Author(s):  
Pankaj Chaudhary
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing ◽  
Regression Equations ◽  
Long Distance ◽  
Cross Sectional ◽  
Risk Return ◽  
Research Areas ◽  
Asset Pricing Models ◽  
Using Data ◽  
Capm Model

Asset pricing is one of the most important research areas in the field of finance. The simple CAPM model (capital asset pricing model) relates the return of the stocks and portfolios to the market factor captured by beta. Since the formulation of CAPM in 1960s, asset pricing has covered a long distance. We conduct the test of CAPM for India and US by using data from January 2001 to December 2015. We run 84 second pass cross-sectional regression equations to test the applicability of CAPM. The results of our test find that CAPM is not able to capture the cross section of average returns both in India and US and we should consider the alternative asset pricing models to establish the risk-return relationship.

Test of CAPM: A Study of India and US

GIS Business ◽  
2016 ◽  
Vol 11 (5) ◽  
pp. 51-58
Author(s):  
Pankaj Chaudhary
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing ◽  
Regression Equations ◽  
Long Distance ◽  
Cross Sectional ◽  
Risk Return ◽  
Research Areas ◽  
Asset Pricing Models ◽  
Using Data ◽  
Capm Model

Asset pricing is one of the most important research areas in the field of finance. The simple CAPM model (capital asset pricing model) relates the return of the stocks and portfolios to the market factor captured by beta. Since the formulation of CAPM in 1960s, asset pricing has covered a long distance. We conduct the test of CAPM for India and US by using data from January 2001 to December 2015. We run 84 second pass cross-sectional regression equations to test the applicability of CAPM. The results of our test find that CAPM is not able to capture the cross section of average returns both in India and US and we should consider the alternative asset pricing models to establish the risk-return relationship.

scholarly journals Comparing Entropy and Beta as Measures of Risk in Asset Pricing

2017 ◽  
Vol 65 (6) ◽  
pp. 1889-1894 ◽  
Author(s):  
Galina Deeva
Keyword(s):  
Asset Pricing ◽  
Shannon Entropy ◽  
Explanatory Power ◽  
Kernel Density ◽  
Parametric Estimation ◽  
Capital Asset Pricing ◽  
Risk Premiums ◽  
Risk Return ◽  
Asset Pricing Models ◽  
Non Parametric Estimation

The paper establishes entropy as a measure of risk in asset pricing models by comparing its explanatory power with that of classic capital asset pricing model’s beta to describe the diversity in expected risk premiums. Three different non‑parametric estimation procedures are considered to evaluate financial entropy, namely kernel density estimated Shannon entropy, kernel density estimated Rényi entropy and maximum likelihood Miller‑Madow estimated Shannon entropy. The comparison is provided based on the European stock market data, for which the basic risk‑return trade‑off is generally negative. Kernel density estimated Shannon entropy provides the most efficient results not dependent on the choice of the market benchmark and without imposing any prior model restrictions.

scholarly journals Asset Attribution Stability And Portfolio Construction: An Educational Example

2014 ◽  
Vol 7 (2) ◽  
pp. 115-120
Author(s):  
James T. Chong ◽  
William P. Jennings ◽  
G. Michael Phillips
Keyword(s):  
Asset Pricing ◽  
Portfolio Construction ◽  
Arbitrage Pricing ◽  
Pricing Models ◽  
Portfolio Returns ◽  
Asset Pricing Models ◽  
Using Data ◽  
Capm Model ◽  
Separation Test

This paper illustrates how a third statistic from asset pricing models, the R-squared statistic, may have information that can help in portfolio construction. Using a traditional CAPM model in comparison to an 18-factor Arbitrage Pricing Style Model, a portfolio separation test is conducted. Portfolio returns and risk metrics are compared using data from the Dow Jones 30 stocks over the period January 2007 through October 2013. Various teaching points are discussed and illustrated.

Freedom Indices and Capital Asset Pricing Model: Some Malaysian Evidence

2020 ◽  
Vol 1 (1) ◽  
pp. 1-21
Author(s):  
Ying Tay Lee ◽  
Devinaga Rasiah ◽  
Ming Ming Lai
Keyword(s):  
Human Rights ◽  
Asset Pricing ◽  
Stock Returns ◽  
Firm Size ◽  
Explanatory Power ◽  
Least Square ◽  
Press Freedom ◽  
Capital Asset Pricing ◽  
Capital Asset ◽  
Cross Sectional

Human rights and fundamental freedoms such as economic, political, and press freedoms vary widely from country to country. It creates opportunity and risk in investment decisions. Thus, this study is carried out to examine if the explanatory power of the model for capital asset pricing could be improved when these human rights movement indices are included in the model. The sample for this study comprises of 495 stocks listed in Bursa Malaysia, covering the sampling period from 2003 to 2013. The model applied in this study employed the pooled ordinary least square regression estimation. In addition, the robustness of the model is tested by using firm size as a controlled variable. The findings show that market beta as well as the economic and press freedom indices could explain the cross-sectional stock returns of the Malaysian stock market. By controlling the firm size, it adds marginally to the explanation of the extended CAP model which incorporated economic, political, and press freedom indices.

scholarly journals Continuous Equilibrium in Affine and Information-Based Capital Asset Pricing Models

2012 ◽  
Author(s):  
Ulrich Horst ◽  
Michael Kupper ◽  
Andrea Macrina ◽  
Christoph Mainberger
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing ◽  
Capital Asset ◽  
Pricing Models ◽  
Asset Pricing Models

Capital Asset Pricing Models

2021 ◽  
pp. 25-52
Author(s):  
James W. Kolari ◽  
Wei Liu ◽  
Jianhua Z. Huang
Keyword(s):  
Asset Pricing ◽  
Capital Asset Pricing ◽  
Capital Asset ◽  
Pricing Models ◽  
Asset Pricing Models
Sign in / Sign up

Export Citation Format

Share Document