THE RELATIONSHIP BETWEEN ACCOUNTING BETA AND CAPM: EVIDENCE FROM TURKEY

Year 2012, Volume: 4 Issue: 2, 233 - 243, 01.12.2012

Hakan Er İbrahim Kaya

Abstract

The relationship between the risk and return is the central issue in the field of finance. The capital asset pricing model (CAPM) has long become the standard way to model this relationship. The CAPM and its derivatives have been extensively investigated in the financial literature. As the pure CAPM can only be applied to publicly traded companies, finance researchers have always been interested in finding a way to apply CAPM to companies whose stock price information are not publicly available. One way to apply CAPM to unlisted companies is to use their financials to predict their beta. Therefore, ın studies related to CAPM one of the most actively investigated issues has been the relationship between CAPM's beta and the accounting variables. However, most of these studies are on developed market data. The number of empirical studies on emerging markets is quite limited and there are only a handful of studies on Turkish market data. Therefore, this study aims to contribute to the literature by analyzing the relationship between the accounting variables and systematic risk using Istanbul Stock Exchange data. Our results suggest that only one accounting variable, Operating Leverage, have an association with CAPM’s beta

Keywords

Accounting Beta, CAPM, Istanbul Stock Exchange, Emerging Markets

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