DOES THE CAPITAL ASSET PRICING MODEL REALLY WORK?

Article Sidebar

Requires Subscription or Fee PDF (GBP 25)
Published: Dec 19, 2012
DOI: https://doi.org/10.5750/jpm.v5i1.484
Keywords:
Daily Return Beta

Main Article Content

Nissim Ben-David
Max Stern Academic College of Emek Yezreel
Evyatar Ben David
Department of Economics and Finance, Emek Yezreel Academy.

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.

Article Details

Issue
Vol. 5 No. 1 (2011)
Section
Articles

References

Campbell, J., Vuolteenaho, T.: Bad Beta, Good Beta. The American Economic Review vol. 94, 1249-1275, (2004).

Chan, L.,Hamao, Y., and Lakonishok, J.: Fundamentals and Stock Returns in Japan. The Journal of Finance, vol. 46, 1739-1764, (1991).

Fama, E.and French, K.: The Capital Asset Pricing Model: Theory and evidence. The Journal of Economic Perspectives, vol. 18, 25-46, (2004).

Fama, E.and French, K.: The Cross-Section of Expected Stock Returns. The Journal of Finance, vol. 47, 427-65, (1992).

Sharpe, W.: Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance, vol. 19 ,425-442, (1964).