Validity of Capital Assets Pricing Model (CAPM) (Empirical Evidences from Amman Stock Exchange)

The purpose of this study is to test the validity CAPM in Amman Stock Exchange (ASE) during period (2010 – 2014), which was divided into three sub periods. We used monthly returns 60 stocks Jordanian companies listed ASE. Black, Jensen and Scholes (1972) Fama MacBeth (1973) methods were different sub-periods. analysis results showed that higher risk (beta) not associated with levels return, violated assumption. Results leads contradict theory’s assumption beta coefficient a good toll predict relationship between return; hence some portfolios periods significant. In addition, testing SML that, slope should be equal average premium. Finally, tests nonlinearity return betas validated hypothesis, expected return-beta linear. Depending on above results, we couldn’t find conclusive evidence support