Validity of capital asset pricing model: evidence from Karachi stock exchange

Syed ali, Raza and Syed tehseen, jawaid and Imtiaz, arif and Fahim, qazi (2011): Validity of capital asset pricing model: evidence from Karachi stock exchange.

Abstract

This study investigates the validity of Capital Asset Pricing (CAP) Model in Karachi stock exchange (KSE). The data of 387 companies of 30 different sectors on monthly, quarterly and semiannual basis are used. The Paired sample t- test is applied to find the difference between actual and expected returns. Results show that capital asset pricing model (CAPM) predict more accurately the expected return on a short term investment as compare to long term investment. It is recommended that the investors should more focus on CAPM results for short term as compare to long term investments in KSE.

• Item Type: MPRA Paper
• Language: English
• Keywords: Portfolio choice, Investment Decisions, Capital Assets Pricing Model, Risk
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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