A validity test of capital asset pricing model for Dhaka Stock Exchange

Md Zobaer Hasan, Anton Abdulbasah Kamil, Adli Mustafa, Md Azizul Baten

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8 Citations (Scopus)

Abstract

Capital Asset Pricing Model (CAPM) was a revolution in financial theoiy. CAPM postulates an equilibrium linear association between expected return and risk of an asset. This study investigates a risk-retum relationship within the CAPM framework in Dhaka Stock Exchange (DSE) using monthly stock returns from 80 non-financial companies for the period of January 2005 to December 2009. From the CAPM empirical analysis, it is observed that intercept term is significantly different from zero and insignificant but there exists a positive relationship between beta and share return. The results of the study refute the CAPM hypothesis and offer evidence against the CAPM in DSE market. However, there exists linearity in the securities market line. The unique risk and the interaction are insignificant during the period.

Original languageEnglish
Pages (from-to)3490-3496
Number of pages7
JournalJournal of Applied Sciences
Volume11
Issue number20
DOIs
Publication statusPublished - 2011
Externally publishedYes

Keywords

  • Beta
  • Capital asset pricing model
  • Dhaka stock exchange
  • Portfolio returns
  • Unique risk

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