Accuracy of the Capital Asset Pricing Model (CAPM) in the Bombay Stock Exchange
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2020
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Haverford users only
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Abstract
A plethora of economic literature describes different models that investors use to predict their returns so that they can decide which assets to invest in. I focus specifically on the Capital Asset Pricing Model (CAPM) in this paper. There exist conflicting opinions on the accuracy and applicability of the CAPM in predicting returns on investments in the real world. This paper adds to existing economic literature by testing the accuracy of the CAPM in predicting returns on investments in the 51 stocks traded on the BSE Sensex 50 Index across the time period of 30th November, 2009 to 30th November, 2018. This study finds that the CAPM does not accurately predict returns on investments in the 51 stocks traded on the BSE Sensex 50 Index, and explains certain factors that may have led to this inaccuracy.