UNVEILING the COVID-19 SHOCK: ITS INFLUENCE ON BETAS and the SECURITY MARKET LINE—A CAPM ANALYSIS of DOW JONES 30 IIS
Abstract
The most well-known, broadly adopted, and frequently applied asset pricing model is the capital asset pricing model (CAPM). Sharpe (1964), Lintner (1965), and Mossin (1966) independently created the model. Prior to their discovery, there were no asset pricing models constructed from the ground up with unambiguous predictions that are testable about risk and return and the nature of preferences and investment opportunities. Additional improvements were suggested by Fama (1968), Black, Jensen, and Scholes (1972), Fama and Mac Beth (1973), Fama and French (1992), and others. The link between an asset's risk and expected return is precisely predicted by the CAPM. In applications including calculating a firm's cost of equity capital and assessing the managed portfolios' performance, the CAPM is still frequently employed even after 60 years. The widely use of CAPM is directly related with its clear logic and satisfying predictions on measuring the risk and about the risk and return trade-off. Inspite of the empirical results of the model is weak it is employed in practical applications, due to its simplicity. In this study, we tested if the CAPM works in practice to estimate the relationship between the expected return and the risk by using the monthly prices between 1/12/2016 and 1/12/2021 on the securities of Dow Jones Industrial Index (Dow-30). Also, it is tested whether Security Market Line (SML) holds for individual securities.
Keywords
Asset Pricing Theory, CAPM, Alfa and Beta Estimation, Diversification, Risk.
Ethical Statement
Bu çalışma, "UNVEILING the COVID-19 SHOCK: Its Influence on Betas and the Security Market Line—A CAPM Analysis of Dow Jones 30 IIS" başlığıyla hazırlanan akademik araştırma kapsamında gerçekleştirilmiştir.
Çalışmada kullanılan tüm veriler kamuya açık, ikincil nitelikte ekonomik ve finansal verilerdir.
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Bu nedenle, etik kurul izni gerektirecek herhangi bir deneysel uygulama, bireysel anket veya klinik veri toplanmamıştır.
Kullanılan tüm veri kaynakları açıkça belirtilmiş, atıf kurallarına uygun şekilde referanslandırılmıştır.
Yazar(lar), araştırma sürecinde akademik dürüstlük, şeffaflık ve bilimsel etik ilkelerine uygun hareket ettiklerini beyan eder.
Bu bağlamda, bu çalışmanın yürütülmesi ve yayımlanması için etik kurul onayı gerekmemektedir.
Doç Dr. Orkun BAYRAM
Doç. Dr. Selminaz ADIGÜZEL
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