The Application of the Capital Asset Pricing Model on the Croatian Capital Market

FIP - Financije i pravo, Vol. 1 No. 1, 2013.

20 Pages Posted: 15 Jul 2020

See all articles by Bojan Tomić

Bojan Tomić

EFFECTUS University College for Law and Finance

Date Written: June 3, 2013

Abstract

The paper describes and analyzes the application of the capital asset pricing model (CAPM) and the single-index model on the Zagreb stock exchange during the drop in the total trade turnover, and mostly in the trade of equity securities. This model shows through the analysis techniques used to estimate the systematic risk per share compared to the market portfolio. Also, the model quantifies the environment in which a company and its stocks exist, expressing it as risk, or a beta coefficient. Furthermore, with respect to the market stagnation, one can also discuss the usefulness of the model, especially if the quality of the input data is questionable. In this regard, the importance of the proper application and interpretation of the results obtained based on the model during the stagnation of the market, and especially during the stagnation of the trade of equity securities, is gaining even greater importance and significance. On the other hand, the results obtained through the analysis of data point to problems arising during the application of the model. It turns out the main problem of applying the CAPM model is the market index with negative returns during the observation period.

Keywords: systematic risk, CAPM, beta coefficients, rate of return

JEL Classification: G11, G12, G15

Suggested Citation

Tomić, Bojan, The Application of the Capital Asset Pricing Model on the Croatian Capital Market (June 3, 2013). FIP - Financije i pravo, Vol. 1 No. 1, 2013., Available at SSRN: https://ssrn.com/abstract=3632847

Bojan Tomić (Contact Author)

EFFECTUS University College for Law and Finance ( email )

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