Testing the validity of the Capital Asset Pricing Model with empirical evidence from the London Stock Exchange, in the period of 2012-2020: an examination of the validity of the Capital Asset Pricing Model in the UK financial market and the potential impact of size, value and momentum risk factors
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School of Business |
Bachelor's thesis
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Date
2021
Department
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Mcode
Degree programme
(Mikkeli) Bachelor’s Program in International Business
Language
en
Pages
46 + 9
Series
Abstract
Historical data of stocks listed on London Stock Exchanges (LSE) since 2012 is collected for the testing purpose, while the market benchmark index is the FTSE-100 Index. In testing for CAPM validity, this thesis adopts the simple linear regression method to examine the positive and linear relationship between Beta values and the average daily/weekly/monthly real return in the period of 2012-2020. To investigate the impact of other risk variables including risk, value and momen,tum on the UK financial market, two portfolios are formed for each factor, and the portfolio actual return is regressed against the UK market risk premium, respectively in the before and after BREXIT vote periods.Description
Thesis advisor
Inci, CanKeywords
CAPM, CAPM validity, UK financial market, regresison analysis, market risk