Testing of Capital Asset Pricing Model and its modified version on the Czech capital market for a selected period
| Authors | |
|---|---|
| Year of publication | 2012 |
| Type | Article in Proceedings |
| MU Faculty or unit | |
| Citation | |
| Web | http://www.wbiconpro.com/ |
| Field | Economy |
| Keywords | Return, risk, beta, CAPM, conditional CAPM, risk-free asset |
| Description | In our paper we will investigate the equilibrium model in capital markets - Capital Asset Pricing Model (CAPM). Modern portfolio theory would not exist in its present form without the existence of this model. CAPM explains market behavior and identifies the suitability of investment in individual securities. Since its inception, it has undergone several modifications and despite the numerous criticisms it remains widely used in practice. In our paper we apply the original test of CAPM and its modified version according to Pettengill et al. (1995) to the capital market in the Czech Republic. We test the validity of both versions of the model using data from 2005 – 2012. In the first test it is not possible to confirm the validity of the CAPM. In the second test the model is partially accepted. |