scholarly journals The Analysis of the Validity of Capital Asset Pricing Model: Evidence from Pakistan Stock Exchange

2016 ◽  
Vol 2 (2) ◽  
pp. 57-68
Author(s):  
Adeel Akhtar ◽  
Muhammad Shaukat Malik ◽  
Imran Nusrat ◽  
Allah Bakhsh
Keyword(s):  
Asset Pricing ◽  
Financial Crisis ◽  
Stock Exchange ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
Narrow Scope ◽  
High Flexibility

The aim of this study was to find evidence for the implementation of capital asset pricing model (CAPM) on companies listed at Pakistan StockExchange before, during and after financial crisis. The data of 50 companies were collected ranging from various sectors of Pakistan stockexchange. Data were divided into 3 different groups: year 2005-2007, 2008-2010 and 2011-2013. Regression analysis was conducted for testingthe hypotheses by taking Pakistan stock exchange 100 index as independent variable and individual stocks return as dependent variable.Three different levels of significance have been used: significance at 1%, significance at 5%, and significance at 10%. The results suggested that inPakistan different business organizations due to narrow scope of business are relatively less diversified and have relatively high flexibility ofresponding unexpected and uncertain events, influencing overall market performance. Similarly, large number of companies, specifically duringperiod of financial crisis, are affected and influenced by numerous risk factors. It was concluded that fair prices of stock cannot be determinedwith the help of CAPM in Pakistan.

scholarly journals Investment decision by using Capital Asset Method Pricing Model (CAPM) (Case studies on five automotive companies listed in stock exchange)

2021 ◽  
Vol 1 (2) ◽  
pp. 165-175
Author(s):  
Ahmad Musodik ◽  
Arrum Sari ◽  
Ida Nur Fitriani
Keyword(s):  
Asset Pricing ◽  
Automotive Industry ◽  
Stock Exchange ◽  
Investment Decision ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Expected Return ◽  
Asset Pricing Model

Investment is a tool for investors to get more profit than what has been invested. Investors must be able to predict the possibilities that occur when investing. Capital Asset Pricing Model is a tool to predict the development of investment in a particular company used to calculate and determine the Expected Return in minimizing risk investments. The authors conducted research using a sample of 5 companies in the automotive industry, namely PT Astra International Tbk, PT Indokordsa Tbk, PT Indomobil Sukses Internasional Tbk, PT Astra Otoparts Tbk, and PT Gajah Tunggal Tbk. This study uses a descriptive quantitative approach with Microsoft Excel 2016 analysis tools. This study aims to determine Portfolio Analysis with the Capital Asset Pricing Model (CAPM) approach which is used as the basis for making stock investment decisions in automotive industry sector companies listed on the Indonesia Stock Exchange. Use from the results of the analysis of the results by comparing the value of E(Ri) has a directly proportional relationship, meaning that the higher the value of, then the stock return (E(Ri)) will be high as well. Of the 5 companies, there are 2 companies that are in the Undervalued category and 3 companies that are in the overvalued category. This means that investors who will invest in companies engaged in the automotive industry can decide to buy shares of the companies PT Indomobil Sukses Internasional Tbk and PT Gajah Tunggal Tbk, because they are classified as undervalued. Meanwhile, investors who want to invest in shares are not advised to buy company shares that are in the overvalued category, but are advised to sell them to investors who already have shares in the company.

scholarly journals The Relationship between Systematic Risk and Stock Returns in Tehran Stock Exchange Using the Capital Asset Pricing Model (CAPM)

2014 ◽  
Vol 21 ◽  
pp. 26-35
Author(s):  
Mohsen Mehrara ◽  
Zabihallah Falahati ◽  
Nazi Heydari Zahiri
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
The Relationship

One of the most important issues in the capital market is awareness of the level Risk of Companies, especially “systemic risk (unavoidable risk)” that could affect stock returns, and can play a significant role in decision-making. The present study examines the relationship between stock returns and systematic risk based on capital asset pricing model (CAPM) in Tehran Stock Exchange. The sample search includes panel data for 50 top companies of Tehran Stock Exchange over a five year period from 1387 to 1392. The results show that the relationship between systematic risk and stock returns are statistically significant. Moreover, the nonlinear (quadratic) function outperforms the linear one explaining the relationship between systematic risk and stock returns. It means that the assumption of linearity between systematic risk and stock returns is rejected in the Tehran Stock Exchange. So we can say that the capital asset pricing model in the sample is rejected and doesn’t exist linear relationship between systematic risk and stock returns in the sample.

An Empirical Test of Capital Asset-pricing Model and Three-factor Model of Fama in Indian Stock Exchange

2018 ◽  
Vol 43 (4) ◽  
pp. 294-307
Author(s):  
Nenavath Sreenu
Keyword(s):  
Asset Pricing ◽  
Factor Model ◽  
Stock Exchange ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Expected Return ◽  
Asset Pricing Model ◽  
Three Factor

This article aims to test the capital asset-pricing model (CAPM) and three-factor model of Fama in Indian Stock Exchange, and it has focused on the recent growth of capital markets in India and the need of practitioners in these markets to determine a stable price for securities, and achieving expected returns has brought into consideration the theories predicting price securities Among different models the CAPM of Sharp. The study uses a sample of daily data and annual average for 54 companies listed on the National Stock Exchange, during the period from 2010 to 2016. The research article’s intention is to find whether the relationship between expected return and risk is linear, if beta is a complete measure of the risk and if a higher risk is compensated by a higher expected return. The results confirm that the intercept is statistically insignificant, upholding theory, for both individual assets and portfolios. The tests do not essentially provide validation against CAPM and Fama; however, other simulations can be built, more close to reality, by improving the model and offering an alternative which also takes into account the specific conditions of the Indian capital market and the global financial crisis consequences.

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