## Research Methods for Public AdministratorsAs in previous editions, this highly practical book is written with beginning MPA students and practitioners in mind. It focuses on the interpretation and use of research findings, not just number crunching. It covers the entire research process, from initial questions to final report, in clear, jargon-free language, and includes numerous easy-to-understand examples and exercises that provide opportunities for concrete applications of the concepts. It is solidly grounded in public administration and recognizes both the promise and limitations of research within a political environment. |

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Capital Asset Pricing model (CAPM ) is widely researched, tested , and paradoxically both generally accepted and rejected model of asset pricing. From its beginning (1964) it has occupied the pride of place among the financial economist’s research, and still part of the text books on finance in the leading business schools all over the world. The study covered Indian companies’ monthly data from the ‘National Stock Exchange’ (NSE) for the period 2005 to

2009.We have estimated the betas from the CAPM model where the return of each company

is the dependent variable , and the price of the risk – the difference between the market return and the risk free rate is the independent variable and the intercept value is deemed as the risk free rate, for the monthly return of all those Indian companies. We then estimated the Jensen’s alpha - first estimate an alpha with the return of the company is the dependent variable and the return of the market as the independent variable , and then multiply the risk free rate with unity minus the beta , and subtract the latter from the former - and find out if the Jensen’s alpha is positive or not . If positive that company earns a return higher than the returns of the companies of similar betas. Lastly we have calculated the average actual return of each company and compared with the expected and required returns calculated from the CAPM model for each company .In the 2 section the CAPM theory and major criticisms of that theory are explained and the literature survey is given. In section 3 the models , results and the interpretations are given. The conclusions are given in section 4. The references are given section 5.

2 Literature survey

2.1 CAPM theory including the major criticisms

William Sharpe (1964) has taken forward Markowitz’s (1959) variance-covariance analysis of the optimum portfolio choice through diversification , and Tobin’s( 1958) analysis of the optimum efficiency frontier as a straight line of the combination of risk free rate and risky assets by establishing the required return of a portfolio and even a firm or company as how much it is related to the market risk as whole , which cannot be further diversified and the price- beta – , and the price of risk in general –the difference between the market return and the risk free rate. The CAPM comes out of two things : Markowitz( 1959) who showed how to create an efficient frontier, and James Tobin (1958) said if you hold risky securities and are able to borrow –buying stocks on the margin- or lend-buying risk free assets –and you do so at the same rate ,then the efficient frontier is a single portfolio of risky securities plus borrowing and lending , and that dominates any other combination Tobin’s ( 1958) Separation Theorem says that you can separate the problem into first finding that optimal combination of risky securities

and then deciding whether to lend or borrow , depending on your attitude towards risk. It then showed that if there is only one portfolio plus borrowing and lending, it’s got to be the market

.If the markets were perfectly efficient ,you ‘d buy the market and then use borrowing and lending to the extent you can .The beta of the security is the covariance of the security and market divided by the variance of the market; if the security co vary as much as the market, beta is equal to one, and if it varies less than the market, beta is less than one, and if it varies more than the market the beta is greater than one. One should be careful to note that if beta is greater than one it does not necessarily mean that the required or actual return will be always higher than that of a security whose beta is less than one. In William Sharpe’s( 1964) words” A greater than one beta means that in good times high returns are required to compensate f or the expected low returns during the bad times! “The main criticism of the CAPM model has come from Fama and French (2004),where apart from

### Contents

Research Methods for Public Administrators | 3 |

2 Basic Research Concepts | 16 |

3 What Is the Question? | 31 |

4 Identifying Measures and Measurement Strategy | 43 |

The Xs and Os Framework | 55 |

6 Other Research Approaches | 72 |

Available Data and Observation | 84 |

Interviews and Focus Groups | 98 |

Regression | 182 |

15 Data Analysis Using Inferential Statistics | 194 |

16 Communicating Research Results | 207 |

Research at the Intersection of Politics and Administration | 217 |

Mathematical Formulas for Selected Statistics | 230 |

Statistics as a Second Language | 248 |

256 | |

Logic Model Template | 262 |