Sensitivity Analysis of CAPM Estimates: Data Frequency and Time Frame

Shahzad, Syed Jawad Hussain and Zakaria, Muhammad and Raza, Naveed (2014): Sensitivity Analysis of CAPM Estimates: Data Frequency and Time Frame.

Abstract

This study is based on positivism research philosophy and utilizes deductive approach using quantitative data analysis of 117 firms listed at KSE-100 Index from 2005 to 2012. Objective of study is to analyze the predictability of Capital Asset Pricing Model (CAPM) under different data frequencies, time frames and indices. It is found that there is no difference between value weighted and equally weighted index. Six months of daily data, as opposed to recommended five years monthly data provides the best estimates. However, the performance of model can be regarded as poor with 5.3% power to explain difference in returns.

• Item Type: MPRA Paper
• Language: English
• Keywords: Beta; CAPM; Markowitz Mean-Variance Framework; Pakistan
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity

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