SSRN-Validity of Capital Assets Pricing Model: Evidence from KSE-Pakistan by Uzair Bhatti, Muhammad Hanif:
"Purpose of the research is to form an opinion about authenticity and validity of CAPM. Our methodology includes the beta calculation through variance/covariance approach in order to predict the required return, consequently price the underlying security. Pricing of the security and risk calculation is required by the investors in portfolio composition. In this study returns used are the capital gains only due to unavailability of information about the dividends paid. Historical returns are used for calculation of results. Findings suggest that CAPM gives accurate results for a limited period and for few companies only. Out of 360 observations only 28 results supporting CAPM while 332 are against it, hence model is rejected in this institutional frame work.
CITE: Bhatti, Uzair and Hanif, Muhammad, Validity of Capital Assets Pricing Model: Evidence from KSE-Pakistan (January 29, 2010). European Journal of Economics, Finance and Administrative Sciences, No. 20. Available at SSRN: http://ssrn.com/abstract=1544287