Comparison Test of D-CAPM and U-CAPM Models: the Approach of Financial Knowledge Development
Comparison Test of D-CAPM and U-CAPM Models: The Approach of Financial Knowledge Development
Subject Areas : Financial Knowledge of Securities Analysis
فریدون رهنمای رودپشتی
1
,
Mohsen Imeni
2
*
1 - Department of Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran.
2 - Department of Accounting, Ayandegan Institute of Higher Education, Tonekabon, Iran. (Corresponding Author)
Keywords: Capital asset pricing model (CAPM), Downside Beta, Upside Beta, Stock returns.,
Abstract :
The traditional capital asset pricing model (CAPM) is the most widely used asset pricing model and that measures the nexus between risk and return. The beta coefficient used in the CAPM is based on the mean-variance criteria Markowitz’s. This paper aim is to comparative the downside and upside CAPM risks and the classical capital asset pricing model (CAPM); and can further insight into evaluation the risks and measurement of their better-performing at explaining stock returns. In order to achieve the purpose of the present study, 30 big companies listed in the Tehran Stock Exchange during the years 2013 to 2023 (on a monthly scale) were examined. Harlow and Rao (1989) and Estrada (2002) indexes have been used to measure downside and upside betas. The results show that the distribution of returns on the Tehran Stock Exchange is asymmetric; and has a skew to the right. In other words, a large number of downward returns have been observed in the Iranian capital market. Also the results indicate that downside beta and upside beta have a better explanatory power than traditional beta in distributing stock returns. In addition, the Estrada (2002) index was more powerful in calculating the downside and upside beta betas than the Harlow and Rao index (1989). This study provides invaluable insights of compare CAPM, upside and downside CAPM beta measures in the emerging market context namely Iran.