DOES THE CAPITAL ASSET PRICING MODEL REALLY WORK?

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Nissim Ben-David
Evyatar Ben David

Abstract

In this paper, we calculated the average daily return and the Betas of Israeli stocks for the period April 1st 2009 – April 1st 2010. The correlation coefficient between return and Beta is 0.47. Although we find that the econometric relation between return and Beta is statistically significant, it seems that higher Beta in many cases does not represent higher expected return.

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References

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