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Alternative Capital Asset Pricing Models: A Review of Theory and Evidence

  • Attiya Y. Javed

    (Pakistan Institute of Development Economics (PIDE) Islamabad.)

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    The main objective of this study is the review of the conceptual framework of asset pricing models and discusses their implications for security analysis. The study includes the theoretical derivation of equilibrium model, usually referred to as capital asset pricing model (CAPM). This model was developed almost simultaneously by Sharpe (1964), Treynor (1961), while Lintner (1965) and Mossin (1966) and Black 1972) have extended and clarified it further. The variation through time in expected returns is common in securities and in related in plausible ways to business conditions. Therefore modified version of the asset-pricing model, known as conditional capital asset pricing model (CCAPM) is derived from static CAPM. An alternative equilibrium asset-pricing model, called the arbitrage asset pricing theory (APT) was developed by Ross (1976). The fundamental principles underlying the arbitrage prong theory are also discussed the empirical literature is reviewed and the critical analysis of empirical and theoretical model are provided.

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    File URL: http://www.pide.org.pk/Research/Report179.pdf
    File Function: First Version, 2000
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    Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2000:179.

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    Length: 36 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:pid:wpaper:2000:179
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