Journal ArticleDOI
Why the CAPM is Half‐Right and Everything Else is Wrong
Thomas J. Smith,Kathleen Walsh +1 more
Reads0
Chats0
TLDR
The authors argued that the CAPM is still the reigning champion of asset pricing models and the belief that unless a model works 100% of the time that it should be rejected for an unspecified alternative is misplaced.Abstract:
The global financial crisis has caused many academics to question the validity of market efficiency and the CAPM.A recent example of this is Dempsey (2013).We pick up on two central tenets of Dempsey’s paper—market efficiency and the status of the CAPM—and provide a critique.With respect to market efficiency, we argue that it is still very difficult to make abnormal returns from publicly available information and thus the basic tenet of market efficiency still holds.With respect to asset pricing models, we argue that the CAPM is still the reigning champion of asset pricing models and the belief that unless a model works 100% of the time that it should be rejected for an unspecified alternative is misplaced. In the spirit of a lively discussion we argue that the CAPM is half-right and everything else is wrong.read more
Citations
More filters
Journal ArticleDOI
The Impact of Sentiment on Price Discovery
TL;DR: This research design is novel as it considers a sentiment beta as well as economy-wide sentiment, which provides more comprehensive evidence on the impact of differing types of sentiment on the price formation process.
Journal ArticleDOI
An Empirical Testing of Capital Asset Pricing Model in India
Shweta Bajpai,Anil K. Sharma +1 more
TL;DR: In this paper, an empirical study of the Indian equity market was conducted for a period of 10 years ranging from January 2004-December 2013 and the data is daily data for 10 years.
References
More filters
Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Book
The Elements of Statistical Learning: Data Mining, Inference, and Prediction
TL;DR: In this paper, the authors describe the important ideas in these areas in a common conceptual framework, and the emphasis is on concepts rather than mathematics, with a liberal use of color graphics.
Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal Article
The Cost of Capital, Corporation Finance and the Theory of Investment
TL;DR: In this article, the effect of financial structure on market valuations has been investigated and a theory of investment of the firm under conditions of uncertainty has been developed for the cost-of-capital problem.
Journal ArticleDOI
A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory
TL;DR: In this paper, a mathematical equivalence between the individual return/beta linearity relation and the market portfolio's mean-variance efficiency is discussed, which implies that every individual asset must be included in a correct test.