Capital Asset Pricing Model (CAPM) provides an equilibrium linear relationship between expected return and risk of an asset. The purpose of this paper is to investigate a risk-return relationship within the CAPM framework. The study also aims at exploring whether CAPM is a good indicator of asset pricing in Bangladesh. For this study, a period 19992003 have been considered. Fama-French [1992] m...

By formulating a nested test of the asymmetric response model of Bawa, Brown, and Klein (1981), the mean-lower partial moment CAPM (LPMCAPM) of Bawa and Lindenberg (1977) and the mean-variance CAPM of Sharpe (1963, 1964), Lintner (1965) and Mossin (1969), this paper investigates the relative merits of symmetric and asymmetric risk measures using UK equity data for di®erently sized companies and...

The aim of this paper is to test the performance of the standard version of CAPM in an evolutionary framework. We imagine a heterogeneous population of long-lived agents who invest their wealth according to di¤erent portfolio rules and we ask what is the fate of those who happen to behave as prescribed by CAPM. In a complete securities’ market with aggregate uncertainty, we prove that traders w...

The existence theorem of Allingham (Econometrica 59:1169–1174, 1991) for the capital asset pricing model (CAPM) is generalized to the case where agents have heterogeneous expectations on the return distribution and the mean-variance utility functions are quasiconcave. This result is built upon new conditions which are distinct from and weaker than the conditions imposed on the CAPM in the liter...

We show that Black Capital Asset Pricing Model (Black CAPM) is extremely sensitive to the choice of the market portfolio and becomes unstable as market portfolios approach the Global Minimum-Variance portfolio. When market portfolios approach the minimum-variance portfolio, the expected return on the zero beta asset approaches negative infinity and its variance increases rapidly. Moreover, expe...

In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically approximate equilibria for a variety of di erent speci cations for preferences, endowments and dividends and c...

Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W Second Quarter 2002 D o financial markets offer higher rewards in the form of average returns for holding risks related to recessions and financial distress in addition to the risks from overall market movements? The answer to this question is related to the way financial economists understand the investment world. Fifteen years ago, f...