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Capital Asset Pricing Model, Theory and Practice: Evidence from USA (2009-2016)

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  • Mohammad Al-Afeef

Abstract

This study discussed the Capital Assets Pricing model (CAPM) and its ability to measure the required return, the researcher tested this model on Amazon Company listed in S&P 500 during the period (2009-2016), to measure the impact of beta stock and market index return on the required return. Multiple regression model was used to test the effect of independent variables (Beta stock, Market Index Return) on the dependent variable (Required return), it should be noted that there is a statistically significant impact of the US stock market Return (S&P500) and Amazon stock Beta factor on Amazon stock required return, and the study model explanatory was 20% , this means that 20% of the changes in the required return are due to beta and market return, and 80% of the changes due to other factors, also find that CAPM can be applied on efficiency markets and huge companies.The researcher recommends applying the variables of the study on a group of large companies in the S&P 500 index, and looking for other factors that may affect the required return.

Suggested Citation

  • Mohammad Al-Afeef, 2017. "Capital Asset Pricing Model, Theory and Practice: Evidence from USA (2009-2016)," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(8), pages 182-182, July.
    • Handle: RePEc:ibn:ijbmjn:v:12:y:2017:i:8:p:182
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    References listed on IDEAS

    as
    1. Mahnoor Sattar, 2017. "CAPM Vs Fama-French Three-Factor Model: An Evaluation of Effectiveness in Explaining Excess Return in Dhaka Stock Exchange," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(5), pages 119-119, April.
    2. André F. Perold, 2004. "The Capital Asset Pricing Model," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 3-24, Summer.
    3. Eugene F. Fama & Kenneth R. French, 2004. "The Capital Asset Pricing Model: Theory and Evidence," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 25-46, Summer.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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