Capital Asset Pricing Model (CAPM) provides an equilibrium linear relationship between expected return and risk of an asset. The purpose of this paper is to investigate a risk-return relationship within the CAPM framework. The study also aims at exploring whether CAPM is a good indicator of asset pricing in Bangladesh. For this study, a period 19992003 have been considered. Fama-French [1992] m...

Recent literature (McNulty, Yeh, Schulze, & Lubatkin, 2002) states that the assumptions behind the capital asset pricing model, in particular the irrelevance of time horizon, do not correspond to the characteristics of firms that prefer long-term investment horizons. I show that family firms display a longer time horizon than most of their nonfamily counterparts, since (1) family firms display ...

We investigate the properties of mean-variance efficient portfolios when the number of assets is large. We show analytically and empirically that the proportion of assets held short converges to 50% as the number of assets grows, and the investment proportions are extreme, with several assets held in large positions. The cost of the no-shortselling constraint increases dramatically with the num...

In this paper we propose a new approach to estimating the systematic risk (the beta of an asset) in a capital asset pricing model (CAPM). The proposed method is based on a wavelet multiscaling approach that decomposes a given time series on a scale-by-scale basis. At each scale, the wavelet variance of the market return and the wavelet covariance between the market return and a portfolio are ca...

Based on a general specification of the asset specific pricing kernel, we develop a pricing model using an information process with stochastic volatility. We derive analytical asset and option pricing formulas. The asset prices in this rational expectations model exhibit crash-like, strong downward movements. The resulting option pricing formula is consistent with the strong negative skewness a...

This appendix contains tables and figures that supplement the analysis in the paper. Section A presents the asset pricing test results with equity issuance cost shocks constructed using alternative definitions of equity issuance. Section B presents the asset pricing test results with equity issuance cost shocks constructed by taking averages of portfolio-level equity issuance shocks across port...

The concept of arbitrage has acquired a precise, technical meaning in quantitative finance (see Arbitrage Pricing Theory; Arbitrage Strategy; Arbitrage Bounds). In theoretical pricing of derivative securities, an arbitrage is a riskless trading strategy that generates a positive profit with no net investment of funds. This definition can be loosened to allow the positive profit to be nonnegativ...

The process of predicting the stock return is considered main challenge confronting financial analyst and investment decision-maker in particular. objective study aims at testing ability both CAPM model APT theory return. investigated a sample 10 banks listed Iraq Stock Exchange for period (2012-2021). A variety appropriate statistical means tools were employed. results many conclusions includi...