Empirical Tests of Asset Pricing Models in European
|Author:||Bc. Petra Vokatá|
|Year:||2009 - summer|
|Work type:|| Bachelors
|Awards and prizes:||B.A. with distinction from the Dean of the Faculty of Social Sciences for an extraordinarily good bachelors diploma thesis.|
|Abstract:||The Capital Asset Pricing Model (CAPM) developed by Sharpe (1964) and Lintner (1965) has been widely used to estimate the cost of capital. However, the empirical validity of the model has not been proved.
This thesis analyzes the issues related to pricing of equity in Polish capital market. A test of three asset pricing models had been performed: unconditional CAPM using individual stock βi, unconditional CAPM using portfolio βp and conditional CAPM.
The empirical evidence from the Warsaw Stock Exchange indicates that conditional CAPM performs well in explaining stock returns. It has been found that portfolio beta is not able to explain the returns. The cross-sectional stock returns are positively related to β of individual stock, but the relation is very weak.
|Downloadable:|| Bachelor Thesis of Vokatá