Study of CAPM on Finnish stock market
Doan, Tuan (2017)
Doan, Tuan
Jyväskylän ammattikorkeakoulu
2017
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2017112017415
https://urn.fi/URN:NBN:fi:amk-2017112017415
Tiivistelmä
Capital asset pricing model (CAPM) is one of the most important pillars in finance. It has been widely studied and applied for its powerful implication in risk return trade-off and performance analysis of stocks. The objectives of the study are (a) to do an analysis of Finnish stocks according to CAPM (b) to examine the relationship between return and risk measure derived from the model.
A quantitative approach is chosen in order to answer research questions. Secondary data on stock prices is collected. In total, there are 90 stocks listed on Helsinki stock exchange
included in this study. Time horizon of the study is from 2012 to 2016. The method of analysis is called second pass regression which was introduced by Lintner. The first pass
regression is time series regression run on each stock to estimates parameters of CAPM. Then, second pass regression is done to examine the causal relationship between risk and return.
The research results indicate that there are more over-performing stocks than under-performing stocks given the level of risk. The degree of deviation from CAPM is moderate. Portfolio including 90 stocks is less volatile than the market index. In addition, market risk increases from 2013 to 2014 and stay stable throughout the period. Both two types of risk are found to affect rate of return positively.
A quantitative approach is chosen in order to answer research questions. Secondary data on stock prices is collected. In total, there are 90 stocks listed on Helsinki stock exchange
included in this study. Time horizon of the study is from 2012 to 2016. The method of analysis is called second pass regression which was introduced by Lintner. The first pass
regression is time series regression run on each stock to estimates parameters of CAPM. Then, second pass regression is done to examine the causal relationship between risk and return.
The research results indicate that there are more over-performing stocks than under-performing stocks given the level of risk. The degree of deviation from CAPM is moderate. Portfolio including 90 stocks is less volatile than the market index. In addition, market risk increases from 2013 to 2014 and stay stable throughout the period. Both two types of risk are found to affect rate of return positively.