Testing the CAPM on the German Stock Market

Front Cover
GRIN Verlag, 2007 - 72 pages
0 Reviews
Seminar paper from the year 2005 in the subject Business economics - Investment and Finance, grade: 1,3, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, course: Asset Management Seminar, 34 entries in the bibliography, language: English, abstract: Although the model is widely accepted and practically used as explained above, it is nevertheless far from being perfect as outlined in its record of empirical studies.9 Generally criticized is on the one hand that the underlying assumptions of the model are very theoretical and thus not able to illustrate reality and on the other one that there are problems in implementing well-founded tests of the model relating to the choice of the right market portfolio.10 But, the success of the CAPM will remain as long as there is no other model which offers as "[...] powerful and intuitively pleasing predictions about how to measure risk and the relation between risk and return."11 The objective of this study is to empirically test the CAPM on the German stock market. Since most of the empirical studies that have been made in the past focus on the U.S. stock market, this paper will try to find out if the results of these U.S. empirical studies can also be shown on the German stock market. Therefore, the goal of this paper is to analyze the relationship between risk and return on the German stock market to find out whether the CAPM holds.

What people are saying - Write a review

We haven't found any reviews in the usual places.

Other editions - View all

Common terms and phrases

Popular passages

Page 24 - R. (1995): The CAPM Debate, in: Federal Reserve Bank of Minneapolis Quarterly Review, Vol. 19, No. 4, pp.
Page 24 - ERIK (2003): Beta and returns revisited — Evidence from the German stock market, in: Journal of International Financial Markets, Institutions & Money, Vol.
Page 1 - CAPITAL ASSET PRICING MODEL The capital asset pricing model (CAPM) is one of the most important contributions of financial economics.
Page 24 - E. (1970): Measurement of Portfolio Performance Under Uncertainty, in: American Economic Review, Vol. 60, No.
Page 3 - Ri, with the market return, RM, divided by the variance of the market return.
Page 23 - BREALEY, RICHARD A. / MYERS, STEWART C. (2003): Principles of Corporate Finance, 7th revised and extended Edition, New York.
Page 23 - An empirical Appraisal of Market Efficiency, in: Yale Economic Essays, Vol. 9, pp.

Bibliographic information