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- Title
The CAPM Revisited Using Structural Equation Model: Mediating Role of GDP-Growth in Pakistan Stock Exchange.
- Authors
Azam, Mohammad; Naveed
- Abstract
In emerging equity markets, the Capital Asset Pricing Model (CAPM) continues to produce significant results. The CAPM is investigated in this study using time-series OLS regression and the Structural Equation Model (SEM), with GDP-Growth acting as a moderator. Using monthly data from January 2002 to December 2020 and a comprehensive sample of 522 financial and non-financial firms listed on PSX, the study's findings reveal a statistically significant nexus between market excess returns and portfolio excess returns. Based on four portfolios constructed as small, big, value, and growth stock portfolios, the results show a positive and statistically significant relationship between market excess returns and GDP-growth, as well as a negative relationship between market excess returns and GDP-growth. Furthermore, the CAPM is still used to explain average stock portfolio returns in PSX.
- Subjects
PAKISTAN Stock Exchange Ltd.; CAPITAL assets pricing model; STRUCTURAL equation modeling; GROWTH stocks; STOCK exchanges; ABNORMAL returns; STOCK price indexes; CAPITAL costs
- Publication
Journal of Managerial Sciences, 2022, Vol 16, Issue 1, p93
- ISSN
1992-4364
- Publication type
Article