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Testing A Multi Factor Capital Asset Pricing Model In The Jordanian Stock Market
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Book Synopsis Testing a Multi-Factor Capital Asset Pricing Model in the Jordanian Stock Market by : Dr. Mohammad Elshqirat
Download or read book Testing a Multi-Factor Capital Asset Pricing Model in the Jordanian Stock Market written by Dr. Mohammad Elshqirat and published by . This book was released on 2019 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: A valid and accurate capital asset pricing model (CAPM) may help investors and mutual funds managers in determining expected returns which may lead to increase their profits and community resources. The problem is that the traditional CAPM does not accurately predict the expected rate of return. A more accurate model is needed to help investors in determining the intrinsic price of the financial asset they want to sell or buy. The purpose of this study was to examine the validity of the single-factor CAPM and then develop and test a multifactor CAPM in the Jordanian stock market. The study was informed by the modern portfolio theory and specifically by the single-factor CAPM developed by Sharpe, Lintner, and Mossin. The research questions for the study examined the factors that may explain the variation in the expected rate of return on stocks in the Jordanian stock market and the relationship between the expected rate of return and factors of market return, company size, financial leverage, and operating leverage. A causal-comparative quantitative research design was employed to achieve the purpose of the study by testing the listed companies on the Amman stock exchange (ASE) for the period from 2000 to 2015. Data were collected from the ASE database and analyzed using the multiple regression model and t test. The results revealed that market return, company size, and financial leverage are not predictors of the expected rate of return while operating leverage is a predictor.
Book Synopsis An Empirical and Theoretical Analysis of Capital Asset Pricing Model by : Mohammad Sharifzadeh
Download or read book An Empirical and Theoretical Analysis of Capital Asset Pricing Model written by Mohammad Sharifzadeh and published by Universal-Publishers. This book was released on 2010-11-18 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: The problem addressed in this dissertation research was the inability of the single-factor capital asset pricing model (CAPM) to identify relevant risk factors that investors consider in forming their return expectations for investing in individual stocks. Identifying the appropriate risk factors is important for investment decision making and is pertinent to the formation of stocks' prices in the stock market. Therefore, the purpose of this study was to examine theoretical and empirical validity of the CAPM and to develop and test a multifactor model to address and resolve the empirical shortcomings of the single-factor CAPM. To verify the empirical validity of the standard CAPM and of the multifactor model, five hypotheses were developed and tested against historical monthly data for U.S. public companies. Testing the CAPM hypothesis revealed that the explanatory power of the overall stock market rate of return in explaining individual stock's expected rates of return is very weak, suggesting the existence of other risk factors. Testing of the other hypotheses verified that the implied volatility of the overall market as a systematic risk factor and the companies' size and financial leverage as nonsystematic risk factors are important in determining stock's expected returns and investors should consider these factors in their investment decisions. The findings of this research have important implications for social change. The outcome of this study can change the way individual and institutional investors as well as corporations make investment decisions and thus change the equilibrium prices in the stock market. These changes in turn could lead to significant changes in the resource allocation in the economy, in the economy's production capacity and production composition, and in the employment structure of the society.
Book Synopsis A New Model of Capital Asset Prices by : James W. Kolari
Download or read book A New Model of Capital Asset Prices written by James W. Kolari and published by Springer Nature. This book was released on 2021-03-01 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.
Book Synopsis Application of Capital Asset Pricing (CAPM) and Arbitrage Pricing Theory (APT) Models in Athens Exchange Stock Market by : Eleftherios Giovanis
Download or read book Application of Capital Asset Pricing (CAPM) and Arbitrage Pricing Theory (APT) Models in Athens Exchange Stock Market written by Eleftherios Giovanis and published by GRIN Verlag. This book was released on 2010-03-26 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2007 in the subject Business economics - Investment and Finance, grade: 90.0%, , language: English, abstract: This paper examines the estimating and forecasting performance of the different and various Generalized Autoregressive Conditional Heteroscedasticity-GARCH’s models in relation to Capital Asste Pricing Model (CAPM) model. We apply the CAPM model with ordinary least squares (OLS) method to investigate if an ARCH (Autoregressive Conditional Heteroscedasticity) is presented and we are trying to decide and to analyze which GARCH model is the most appropriate and the best fitted for the financial time series that we have chosen. We apply CAPM model in the financial time series of the share prices of Technology-Software Sector in Athens Exchange stock market for the period January 1st of 2002 to October 30th of 2007 for the enterprises “Unibrain” “MLS Informatics” and “Dionic” respectively , from April 2nd of 2002 to 30th October of 2007 for the enterprise “Compucon”, from August 2nd of 2002 to 30th October of 2007 for the enterprise “Centric”, and finally from February 2nd of 2004 to 30th October of 2007 for the enterprise “Ilyda”. Additionally, we apply roiling regressions, where the full programming routines in EVIEWS and MATLAB are described detailed. We conclude that the slope β coefficient of CAPM model is not constant through the time period of rolling regressions we apply. In the final part we examine a simple Arbitrage Pricing Theory (APT) model.
Book Synopsis An Empirical Test of the "Capital Asset Pricing Modell" (CAPM) on Current Stock Data by : Lucas Ammelung
Download or read book An Empirical Test of the "Capital Asset Pricing Modell" (CAPM) on Current Stock Data written by Lucas Ammelung and published by . This book was released on 2020-12-30 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2020 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, Munich University of Applied Sciences, language: English, abstract: The goal of this study is thus to determine the best available asset pricing model in Germany and whether the use of pre-existing datasets, with the factors already calculated, brings results as accurate as a custom dataset. This is relevant in Germany as the CAPM is still the most commonly used way to compute the cost of equity with 34% of companies using it. Another 16% of companies are using asset pricing models with additional risk factors. To determine the answer to this, this study will look into the aforementioned three most commonly used models: the CAPM, the Fama and French three-factor model and the Carhart four-factor model. After explaining the background and functioning of the CAPM, this study will show the flaws within the model and how these flaws led to extensions of the CAPM. Each model will then be statistically analyzed with three distinct sets of data. Two of these are publicly available, while the last has been calculated for this study. Lastly, to understand how the difference in data used can influence the results from asset pricing models, the runtime and underlying factor of datasets will be modified, re-analyzed and compared to the initial results.
Book Synopsis Limitations of the Capital Asset Pricing Model (CAPM) by : Manuel Kürschner
Download or read book Limitations of the Capital Asset Pricing Model (CAPM) written by Manuel Kürschner and published by GRIN Verlag. This book was released on 2008-07 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (undergraduate) from the year 2008 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, University of Cooperative Education, 31 entries in the bibliography, language: English, abstract: The objective of this paper is to give an overview of the most important movements of the complex area of asset pricing. This will be tried by logically structuring and building up the topic from its origins, the Capital Asset Pricing Model, and then over its main points of critique, in order to arrive at the different options developed by financial science that try to resolve those problematic aspects. Due to the complexity of this subject and the limited scope of this paper, obviously it will not be possible to discuss each model or movement in depth. Coherently, the aim is to point out the main thoughts of each aspect discussed. For further information, especially concerning the deeper mathematical backgrounds and derivations of the models, the author would like to refer the reader to the books mentioned in this paper. Many of those works, finance journal publications and the literature on asset pricing in general, set their focus on different parts of this paper, which again underlines the complexity in terms of scientific scope and intellectual and mathematical intricacy of this topic.
Book Synopsis Multifactor Assets Pricing Model by : Khushboo Sagar
Download or read book Multifactor Assets Pricing Model written by Khushboo Sagar and published by . This book was released on 2020 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Generous consideration has been pursued to the empirical testing of multi factor assets pricing models. However, literature provides mixed kind of evidences in the support of multi factor assets pricing model. This study reviews 20 research articles based on multi factor assets pricing model and examines 25 research papers based on the empirically testing of multi factor assets pricing model published during 2001 and 2018 to study the multi factor assets pricing model in the Indian context as well as foreign context. CAPM is a popular normative model used by researchers to explain the relationship between risk and expected return of a risky asset which was developed by Sharpe (1964) and Lintner (1965). This model takes only one risk factor which is the excess market portfolio return (Market premium). Because of poor performance of CAPM in explaining realized returns, the Fama and French three factor asset pricing model (1993) was developed. Fama and French (1993) documented the size effect and the value effect that were not included in the CAPM, generally known as CAPM anomalies. Mark M. Carhart (1997) developed the Carhart four factor model. It is an extension of the FF three factor model with one another factor i.e. momentum factor effect for asset pricing of stocks. In view of the limitations of the earlier three-factor model, Fama and French five-factor asset pricing model (2014) was developed. Fama and French (2014) came with profitability pattern and investment pattern in average stock return along with the market premium, size premium and value premium. This paper may be an expedient source of information to the academics, financial analyst and researchers to understand the asset pricing model.
Book Synopsis Testing the Linear Relationship of the Capital Asset Pricing Model by : Jad Zouheir Nohra
Download or read book Testing the Linear Relationship of the Capital Asset Pricing Model written by Jad Zouheir Nohra and published by . This book was released on 2007 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main purpose of the project is to relate the risk of assets to their expecte d returns (mainly assets that are traded on a handful of developed markets, incl uding US, Japanese, French, and German exchanges). In order to do so, we refer t o the Capital Asset Pricing Model (CAPM) which consists of relating the risk of an asset to its expected return by comparing it to the overall stock market. Thi s model is based on the existence of a linear relationship between the expected return of a given asset, and the market rate of return. Consequently, any return that is not explained by this linear relationship (abnormal return) will lead u s to reject the theoretical linear relationship stated and formulated in the CAP M. The first chapter will introduce the topic. The second chapter consists of prese nting the CAPM, its critiques and extensions. In the third chapter, a literature review will be conducted. Then, in the fourth chapter I will undertake time ser ies/cross-sectional analyses of the aforementioned equity markets in order to te st the CAPM model itself. The same stocks will be tested using the international version of the model. Finally, in the fifth chapter I will conclude with the im plications of my findings for asset pricing and investment.
Book Synopsis The Capital Asset Pricing Model, Tests of Portfolios Selected from Stocks with Poor Past Performance and an Investigation of the Acility [sic] of Discriminant Analysis to Differentiate Performance by : Wayne Alan Fairburn
Download or read book The Capital Asset Pricing Model, Tests of Portfolios Selected from Stocks with Poor Past Performance and an Investigation of the Acility [sic] of Discriminant Analysis to Differentiate Performance written by Wayne Alan Fairburn and published by . This book was released on 1975 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Surprising Development by : James Kurt Dew
Download or read book A Surprising Development written by James Kurt Dew and published by . This book was released on 2001 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper performs two tests of the efficient market hypothesis in the markets for Turkish securities using GARCH-M methods. The first test is a joint test of the Efficient Market Hypothesis and a Multifactor Capital Asset Pricing Model. We wondered if a Capital Asset Pricing Model with inter-temporal variation of risks would shed any light on the reason for surprisingly low estimates of beta in the Classical Capital Asset Pricing Model for Turkey and other Emerging Markets. We also wondered whether, because of the newness and high volatility of Turkey's financial markets, we could find market inefficiencies. We find that we cannot reject the null hypothesis that the CAPM applies and Turkish securities markets are efficient. The first test analysis also provides an estimate of the cost of capital in Turkey and gives us an estimated value of the beta of Turkey's common stock with the World stock portfolio of about one. The second test develops a forecasting model for returns to a specific portfolio, long the ISE Dollar Index and short the Samp;P 500 composite. We sought once again evidence of market inefficiency by asking whether returns to this portfolio were greater than or were commensurate with its systematic risks. We find that simply buying and holding the portfolio produced a low ratio of return to risk, suggesting that the portfolio is not on the efficient frontier of the Capital Market line. But we found that an active trading rule generates very high returns. Normally this is evidence of weak form inefficiency. But because portfolio risks also vary over time we still cannot reject the efficient market hypothesis. A surprising development.
Book Synopsis The Test of the Capital Asset Pricing by : Wai-Kam David Kar
Download or read book The Test of the Capital Asset Pricing written by Wai-Kam David Kar and published by . This book was released on 2017-01-26 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Multifactor Consumption Based Asset Pricing Models Using the US Stock Market as a Reference by : John Hunter
Download or read book Multifactor Consumption Based Asset Pricing Models Using the US Stock Market as a Reference written by John Hunter and published by . This book was released on 2014 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we extend the time series analysis to the panel frame-work to test the C-CAPM driven by wealth references for developed countries. Speciጿically, we focus on a linearised form of the Consumption-based CAPM in a pooled cross section panel model with two-way error components. The empirical fiijndings of this two-factor model with various speciጿications all indicate that there is signiጿicant unobserved heterogeneity captured by cross-country ጿixed effects when consumption growth is treated as a common factor, of which the average risk aversion coefficient is 4.285. However, the cross-sectional impact of home consumption growth varies dramatically over the countries, where unobserved heterogeneity of risk aversion can also be addressed by random effects.
Book Synopsis Capital Asset Pricing Model by : Ali Jahankhani
Download or read book Capital Asset Pricing Model written by Ali Jahankhani and published by . This book was released on 1978 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our research indicated that there is a linear relationship between risk and return and higher risk is associated with higher average return. These results are consistent with the implications of both Sharpe-Lintner version and Black version of the CAPM. Furthermore, our results did not reject the hypotheses that E(Y0)=Rf and E(Y1)=Rm-Rf. therefore, the empirical results of this study supported all the implications of the Sharpe-Lintner CAPM.
Book Synopsis Test of Multi-moment Capital Asset Pricing Model by : Attiya Y. Javid
Download or read book Test of Multi-moment Capital Asset Pricing Model written by Attiya Y. Javid and published by . This book was released on 2008 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Best Asset Pricing Model for Estimating Cost of Equity by : Sami Ben Naceur
Download or read book The Best Asset Pricing Model for Estimating Cost of Equity written by Sami Ben Naceur and published by . This book was released on 2007 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Capital Asset Pricing Model (CAPM) has dominated finance theory for over thirty years; it suggests that the market beta alone is sufficient to explain security returns. However evidence shows that the cross-section of stock returns cannot be described solely by the one-factor CAPM. Therefore, the idea is to add other factors in order to complete the beta in explaining the price movements in the stock exchange. The Arbitrage Pricing Theory (APT) has been proposed as the first multifactor successor to the CAPM without being a real success. Later, researchers (Banz, 1981; Rosenberg et al., 1985; Jegadeesh and Titman, 1993) support that average stock returns are related to some fundamental factors such as size, book-to-market equity and momentum. Alternative studies come as a response to the poor performance of the standard CAPM. They argue that investors choose their portfolio by using not only the first two moments but also the skewness and kurtosis. The main contribution of this paper is to choose between the CAPM, the Famaamp;French asset pricing model (TPFM) and the Four Factor Pricing Model (FFPM) adding the third and fourth moments to estimate the cost of equity of Tunisian listed firms. The selection of the best model is based on Information Criteria: the Akaike Information Criteria (AIC) and the Schwartz Information Criteria (SIC). The simple FFPM of Cahart turned out to be the selected model. Therefore, we used the random coefficient model of Swamy to account for inter-individual heterogeneity and to estimate the coefficients on the FFPM factors. The final results show that costs of equity estimated by the simple FFPM differ by more than 4 percent across the six industries, ranging between 4.33 percent for agro-alimentary sector and 8.55 percent for insurance companies.
Book Synopsis Evaluation of the Capital Asset Pricing Model by : Bassam Labib Nassar
Download or read book Evaluation of the Capital Asset Pricing Model written by Bassam Labib Nassar and published by . This book was released on 2003 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Multifactor Capital Asset Pricing Model Under Alternative Distributional Specification by : Diganta Mukherjee
Download or read book Multifactor Capital Asset Pricing Model Under Alternative Distributional Specification written by Diganta Mukherjee and published by . This book was released on 2005 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arbitrage Pricing Model (APM) assumes the residual to be normally distributed. We empirically checked this assumption in APM. In this paper, an Arbitrage Pricing Model is built on returns from shares in National Stock Exchange (NSE). The APM of returns from shares has four explanatory variables; Market Trend (Market Index), Sector Specific trend in the Market (IT Index), Size of the company (Daily Turnover) and Location factor of the company (Index of Industrial Production). The normal distribution is compared with lognormal and exponential distribution. It has been observed that the exponential distribution performs better than lognormal and normal distributions. Univariate kernel smoothing method is also undertaken for univariate model based on returns dependent on IT Index. It has been observed that Exponential distribution performs better than Kernel smoothing and Normal distributions in Univariate model.
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