Non-standardized form of CAPM and stock returns
Emerging markets like Pakistan confront with the problem to validate the CAPM in its original form. Since standard form of this model has unrealistic assumptions, different non-standardized forms have been introduced by different researchers. This paper also introduces a non-standardized form of CAPM to validate whether it is applicable in Pakistan. The data of 20 companies of different sectors, covering the period of 2007 to 2008 were collected. One year KIBOR is taken in replacement of T-bill rates. Beta 3 is calculated using an equation to show the negative relationship between interest rate and market returns. The results of regression analysis reveal mixed results. For instance, mean return of companies in cement and chemical sector is linearly related to its beta risk while other sectors have volatile results.
|Date of creation:||Jan 2012|
|Publication status:||Published in International Journal of Business and Social Science 2.3(2012): pp. 193-201|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
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- Lamoureux, Christopher G & Lastrapes, William D, 1990. " Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects," Journal of Finance, American Finance Association, vol. 45(1), pages 221-229, March.
- Lau, Sheila C & Quay, Stuart R & Ramsey, Carl M, 1974. "The Tokyo Stock Exchange and the Capital Asset Pricing Model," Journal of Finance, American Finance Association, vol. 29(2), pages 507-514, May.
- Bengt Holmström, 2001. "LAPM: A Liquidity-Based Asset Pricing Model," Journal of Finance, American Finance Association, vol. 56(5), pages 1837-1867, October.
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