An Empirical Analysis of Higher Moment Capital Asset Pricing Model for Karachi Stock Exchange (KSE)

Lal, Irfan and Mubeen, Muhammad and Hussain, Adnan and Zubair, Mohammad (2016): An Empirical Analysis of Higher Moment Capital Asset Pricing Model for Karachi Stock Exchange (KSE). Published in: Open Journal of Social Sciences No. 4 (9 June 2016): pp. 53-60.

Abstract

The purpose behind this study is to explore the relationship between expected return and risk of portfolios. It is observed that standard CAPM is inappropriate, so we introduce higher moment in model. For this purpose, the study takes data of 60 listed companies of Karachi Stock Exchange 100 index. The data are inspected for the period of 1st January 2007 to 31st December 2013. From the empirical analysis, it is observed that the intercept term and higher moments coefficients (skewness and kurtosis) are highly significant and different from zero. When higher moment is introduced in the model, the adjusted R square is increased. The higher moment CAPM performs cooperatively perform well.

• Item Type: MPRA Paper
• Language: English
• Keywords: Capital Assets Price Model, Higher Moment
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions

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