Testing the Effectiveness of CAPM in the Valuation of Financial Instruments − Estimation of the Risk-free Rate Using a Zero-beta Portfolio
DOI:
https://doi.org/10.15678/ZNUEK.2016.0956.0802Keywords:
CAPM, zero-beta portfolio, portfolio theory, efficient market hypothesisAbstract
The article describes the issue of capital asset pricing using Capital Assets Pricing Models (CAPM). The theoretical section presents the assumptions, zero-beta portfolio modification and results of using CAPM. The empirical part focuses on studies of the effectiveness of the CAPM model. Empirical tests are given, providing evidence that both denies and confirms the findings of the CAPM model, while the correlation coefficient is used to verify the model on the Polish capital market. The zero-beta portfolio was created based on futures contracts on WIG20 and units of the Multi Units Luxembourg Lyxor. As indicated by the results, this portfolio may be an appropriate method for estimating the risk-free interest rate. Research on the effectiveness of the valuation was carried out on the basis of two companies: KGHM Polska Miedź SA and Próchnik SA. The results of the study show that in most cases the variability of the companies’ returns is greater than that resulting from the CAPM model.
Downloads
References
Black F. [1972], Capital Market Equilibrium with Restricted Borrowing, „Journal of Business”, vol. 45, nr 3, https://doi.org/10.1086/295472. DOI: https://doi.org/10.1086/295472
Black F., Jensen M.C., Scholes M. [1972], The Capital Asset Pricing Model: Some Empirical Tests [w:] Studies in the Theory of Capital Markets, ed. M.C. Jensen, Preager, New York.
Bruner R.F., Eades K.M., Harris R.S., Higgins R.C. [1998], Best Practices in Estimating the Cost of Capital: Survey and Synthesis, „Financial Practice and Education”, vol. 8, nr 1.
Elton E.J., Gruber M.J. [1998], Nowoczesna teoria portfelowa i analiza papierów wartościowych, WIG-Press, Warszawa.
Fama E.F., French K.R. [1992], The Cross-Section of Expected Stock Returns, „Journal of Finance”, vol. 47, nr 2, https://doi.org/10.1111/j.1540-6261.1992.tb04398.x. DOI: https://doi.org/10.2307/2329112
Fama E.F., French K.R. [2004], The Capital Asset Pricing Model: Theory and Evidence, „Journal of Economic Perspectives”, vol. 18, nr 3, https://doi.org/10.1257/0895330042162430. DOI: https://doi.org/10.1257/0895330042162430
Fama E.F., MacBeth J.D. [1973], Risk, Return, and Equilibrium: Empirical Tests, „Journal of Political Economy”, vol. 81, nr 3, https://doi.org/10.1086/260061. DOI: https://doi.org/10.1086/260061
French C.W. [2003], The Treynor Capital Asset Pricing Model, „Journal of Investment Management”, vol. 1, nr 2.
Olbrys J. [2013], Zastosowanie wybranych miar płynności aktywów kapitałowych na Giełdzie Papierów Wartościowych w Warszawie SA, „Zarządzanie i Finanse”, nr 3.
Reilly F.K., Brown K.C. [2001], Analiza inwestycji i zarządzanie portfelem, t. 1 i 2, PWE, Warszawa.
Roll R. [1977], A Critique of the Asset Pricing Theory’s Tests Part I: On Past and Potential Testability of the Theory, „Journal of Financial Economics”, vol. 4, nr 2, https://doi.org/10.1016/0304-405x(77)90009-5. DOI: https://doi.org/10.1016/0304-405X(77)90009-5
Rutkowska J., Żarnowski J. [2012], Stopy zwrotu z portfeli sortowanych według współczynnika beta z modelu CAPM na przykładzie akcji notowanych na Giełdzie Papierów Wartościowych w Warszawie w latach 1998–2010, Zeszyty Naukowe Polskiego Towarzystwa Naukowego, nr 13.
Rynki, instrumenty i instytucje finansowe [2008], red. J. Czekaj, Wydawnictwo Naukowe PWN, Warszawa.
