Empirical Test of Capital Asset Pricing Model on Selected Banking Shares from Borsa Istanbul

Academic Journal of Economic Studies Vol. 4, No. 1, March 2018, pp. 74–81 ISSN 2393-4913, ISSN On-line 2457-5836

8 Pages Posted: 12 Feb 2018

See all articles by Dr. Fuzuli Aliyev

Dr. Fuzuli Aliyev

Baku Engineering University

Aysel Soltanli

Baku Engineering University

Date Written: January 30, 2018

Abstract

In this paper we tested Capital Asset Pricing Model (shortly CAPM hereafter) on the selected banking stocks of Borsa Istanbul. Here we tried to explain how to price financial assets based on their risks in the case of BIST-100 index. CAPM is an important model in the portfolio management theory used by economic agents for the selection of financial assets. We used 12 random banking stocks’ monthly return data for 2001–2010 periods. To test the validity of the CAPM, we first derived the regression equation for the risk-free interest rate and risk premium relationship using January 2001–December 2009 data. Then, estimated January–December 2010 returns with the equation. Comparing forecasted return with the actual return, we concluded that the CAPM is valid for the portfolio consisting of the 12 banks traded in the ISE, ie. The model could predict the overall outcome of portfolio of selected banking shares.

Keywords: CAPM, Stock return prediction, Expected return, Banking shares, Ordinary Least Squares

JEL Classification: G12, G11

Suggested Citation

Aliyev, Fuzuli and Soltanli, Aysel, Empirical Test of Capital Asset Pricing Model on Selected Banking Shares from Borsa Istanbul (January 30, 2018). Academic Journal of Economic Studies Vol. 4, No. 1, March 2018, pp. 74–81 ISSN 2393-4913, ISSN On-line 2457-5836 , Available at SSRN: https://ssrn.com/abstract=3113110

Fuzuli Aliyev (Contact Author)

Baku Engineering University ( email )

120 Hasan Aliyev str.
Khirdalan
Baku, Baku AZ0101
Azerbaijan
+994504651228 (Phone)

HOME PAGE: http://beu.edu.az/~faliyev

Aysel Soltanli

Baku Engineering University ( email )

Hasan Aliyev str. 120
Khirdalan, Baku AZ 0101
Azerbaijan

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