The first empirical applications of the CAPM, among which the classic Black, Jensen and Scholes (1972) and Fama and MacBeth (1973), gave results rather favorable to the model, securities with higher beta appear- ing to have higher profitability than the others.
The capital asset pricing model (CAPM) is an ex ante concept, whereas so-called 'tests' of the CAPM are conducted ex post.The CAPM is a partial equilibrium model in which agents view the risk-free return (Rf) and the probability distribution of the future return on risky assets (Rj) as exogenous. Dempsey (2013).
An empirical test (Cohen 2001)6to study the ability of CAPM to explain value and growth stocks’ prices results in the suggestion that mispricing relative to CAPM is not important factor in determining the prices of value and growth stocks. Fama and French (2003)7view that the CAPM has never been an empirical success.
Empirical Tests of the CCAPM 233 individual's optimal marginal utility of consumption at a given date t is equal to a scalar, ak, times a monotonically decreasing function of aggregate consumption, g (Ct,t), which is identical for all individuals.
This master’s thesis tests the capital asset pricing model (CAPM) and the Fama-French 3-factor model (FF3FM) for the U.S. high-tech industry. For a total sample of 120 U.S. high-tech companies we run OLS time-series regressions for both models by using return and accounting data from 2002 to 2016. It is found that on average, the CAPM is not sufficient in explaining average excess returns.
Here in this paper we will critically examine some literatures on CAPM testing. We will begin with understanding the model. We will briefly outline some mathematics required to understand the underlying assumptions of the model. Then we will focus on the single and multi-factor CAPM models to analyze the model assumptions and restrictions required to hold these models to be true.
Journal of Comprehensive Research An empirical investigation, page 2 INTRODUCTION The Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) have emerged as two models that have tried to scientifically measure the potential for assets to generate a return or a loss. Both of them are based on the efficient market hypothesis, and are part of the modern portfolio theory. The.
TESTING CAPITAL ASSET PRICING MODEL FOR ROMANIAN CAPITAL MARKET Alina Lucia Trifan 1 ABSTRACT: The purpose of this article is the empirical testing of Capital Asset Pricing Model (CAPM) for the Romanian capital market, both for individual assets and for portfolios, using a sample of daily data for 24 companies listed on Bucharest Stock Exchange, during the period 06.01.2003 - 31.07.2009.