A Test for CAPM in Japan and US

Research Article
Open access

A Test for CAPM in Japan and US

Shixuan Zhang 1*
  • 1 University of Warwick    
  • *corresponding author u2185200@live.warwick.ac.uk
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/23/20230398
AEMPS Vol.23
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-89-8
ISBN (Online): 978-1-915371-90-4

Abstract

Asset pricing model is one of the most fundamental studies in the field of finance. The simple CAPM model introduced in 1960s aims to relate the return of stocks and portfolios to the beta, which represents these assets’ level of risk. It has covered a long distance, so the paper conducts a test on it based on the data of Japanese and US stock market to see whether it’s still accurate. The data is from January 2020 to December 2022 and 72 cross-sectional regression equations was calculated. The results of the test indicate that the CAPM is not applicable in Japan but still precise in US. And it can help the investors and other financial researchers to have an overview about the stock market in these two countries and their market index. The paper also suggests that people who invest in financial markets should not only rely on the basic CAPM model but also take other factors into account.

Keywords:

CAPM, asset pricing, US, Japan, stock market index

Zhang,S. (2023). A Test for CAPM in Japan and US. Advances in Economics, Management and Political Sciences,23,336-342.
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References

[1]. Markowitz, H.: Portfolio selection. Journal of Finance 7(1), 77-91 (1952).

[2]. Markovitz, H. M.: Portfolio selection: Efficient diversification of investments. John Wiley (1959).

[3]. Sharpe, W. F.: Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance 19(3), 77-91 (1964).

[4]. Lintner, J.: Security prices, risk and maximal gains from diversification. Journal of Business 36, 294-419 (1965).

[5]. Black, F.: Capital market equilibrium with restricted borrowing. Journal of Business 45(3), 444-445 (1972).

[6]. Stattman, D.: Book values and stock returns. The Chicago MBA: A Journal of Selected Papers 4, 25-45 (1980).

[7]. Basu, S.: The relationship between earnings yield, market value and return from NYSE common stocks: Further evidence. Journal of Financial Economics 12(1), 129-156 (1983).

[8]. Investing.: https://www.investing.com [Accessed on: 1/03/2023]

[9]. Bloomberg.: https://www.bloomberg.com [Accessed on: 1/03/2023]

[10]. Data Library.: http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/index.html [Accessed on: 10/03/2023]

Cite this article

Zhang,S. (2023). A Test for CAPM in Japan and US. Advances in Economics, Management and Political Sciences,23,336-342.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-89-8(Print) / 978-1-915371-90-4(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.23
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Markowitz, H.: Portfolio selection. Journal of Finance 7(1), 77-91 (1952).

[2]. Markovitz, H. M.: Portfolio selection: Efficient diversification of investments. John Wiley (1959).

[3]. Sharpe, W. F.: Capital asset prices: A theory of market equilibrium under conditions of risk. Journal of Finance 19(3), 77-91 (1964).

[4]. Lintner, J.: Security prices, risk and maximal gains from diversification. Journal of Business 36, 294-419 (1965).

[5]. Black, F.: Capital market equilibrium with restricted borrowing. Journal of Business 45(3), 444-445 (1972).

[6]. Stattman, D.: Book values and stock returns. The Chicago MBA: A Journal of Selected Papers 4, 25-45 (1980).

[7]. Basu, S.: The relationship between earnings yield, market value and return from NYSE common stocks: Further evidence. Journal of Financial Economics 12(1), 129-156 (1983).

[8]. Investing.: https://www.investing.com [Accessed on: 1/03/2023]

[9]. Bloomberg.: https://www.bloomberg.com [Accessed on: 1/03/2023]

[10]. Data Library.: http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/index.html [Accessed on: 10/03/2023]

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