scholarly journals Stock Price Booms and Expected Capital Gains

2017 ◽  
Vol 107 (8) ◽  
pp. 2352-2408 ◽  
Author(s):  
Klaus Adam ◽  
Albert Marcet ◽  
Johannes Beutel
Keyword(s):  
Asset Pricing ◽  
Stock Prices ◽  
Stock Price ◽  
Rational Expectations ◽  
Capital Gains ◽  
Strong Positive Correlation ◽  
Pricing Model ◽  
Rational Agents ◽  
Asset Pricing Model ◽  
Internal Rationality

Investors' subjective capital gains expectations are a key element explaining stock price fluctuations. Survey measures of these expectations display excessive optimism (pessimism) at market peaks (troughs). We formally reject the hypothesis that this is compatible with rational expectations. We then incorporate subjective price beliefs with such properties into a standard asset-pricing model with rational agents (internal rationality). The model gives rise to boom-bust cycles that temporarily delink stock prices from fundamentals and quantitatively replicates many asset-pricing moments. In particular, it matches the observed strong positive correlation between the price dividend ratio and survey return expectations, which cannot be matched by rational expectations. (JEL D83, D84, G12, G14)

scholarly journals Analysis of the Relationship of Risk and Return Using the Capital Asset Pricing Model (CAPM) Method at Kompas 100 for the 2015-2019 Period

2020 ◽  
Vol 2 (2) ◽  
pp. 383-393
Author(s):  
Andini Nurwulandari
Keyword(s):  
Asset Pricing ◽  
Stock Price ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Expected Return ◽  
Risk And Return ◽  
Asset Pricing Model ◽  
The Relationship

This research aimed to investigate the relationship between risk and return on Kompas 100 shares using the Capital Asset Pricing Model (CAPM) approach from 2015 to 2019. The sample amounted to 52 companies registered in Kompas 100. This study used a quantitative approach. The data used includes the closing price of shares and the Composite Stock Price Index (IHSG) for 4 years (1 January 2015 - 31 December 2019) and the risk-free rate, which is calculated using the interest rate on Bank Indonesia Certificates ( SBI) issued by the Bank Indonesia. The results of testing the relationship with the simple correlation coefficient of CAPM calculation, Beta, and CAPM predicted return has a significant positive relationship. If beta increases, the expected return will increase, and vice versa. If Beta goes down, the expected return will go down. Of the 52 sample companies, 33 companies deserve to be used as investment destinations and purchase their shares.

scholarly journals Perspektif Asset Pricing Model dan Pengembangannya Pada Pasar Modal Indonesia

2020 ◽  
Vol 11 (1) ◽  
pp. 25
Author(s):  
Yunan Surono ◽  
Akhmad Irwansyah Siregar ◽  
R Adisetiawan
Keyword(s):  
Asset Pricing ◽  
Interest Rates ◽  
Stock Prices ◽  
Trading Volume ◽  
Arbitrage Pricing Theory ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Holding Period ◽  
Activity Factor ◽  
Stock Indexes

Every investor will pay attention to return and risk in investing in portfolios. In portfolio investment, this is known as the principle of high return high risk. To see this return and risk, 4 (four) models are known, namely 1) Capital Asset Pricing Model (CAPM) with beta factors (market risk), 2) French Fama models with beta, size and value factors, 3) Carhart model with factors beta, size, value and momentum, 4) the Arbitrage Pricing Theory (APT) model in this study, in addition to factors such as the model above, macro economic factors include economic growth, inflation, interest rates, the rupiah exchange rate against US dollars and the money supply. Models 1, 2 and 3 analyze from the fundamental side of the company while models 4 analyze from the macroeconomic side. Based on the theory of Ying (1966), Tauchen & Pitts (1983), Blume (1994), Lee & Swaminathan (2000), Gervais (2001) and Kaniel (2003) that the total trading volume affects the movement of stock indexes, stock prices and affects the magnitude of the level return and investment risk, then in this study the researchers added the total volume of activity factor as an effort to overcome the weaknesses found in the Carhart model where in calculations using the three sequential sort method, this model has not been able to record a holding period (the length of shares in the hands of investors) which in this study. The model with the addition of the total volume activity variable as a five factor pricing model is a model of the researcher's development. From the test results it can be concluded that the development model turned out to be better precision in estimating return and risk and its accuracy is more accurate than existing models.

scholarly journals Testing Capital Asset Pricing Model (CAPM) on Dhaka Stock Exchange

2021 ◽  
Author(s):  
Ataur Rahman Chowdhury
Keyword(s):  
Asset Pricing ◽  
Risk Premium ◽  
Stock Prices ◽  
Stock Exchange ◽  
Securities Market ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model

Abstract The study focuses on finding the validity of the capital asset pricing model (CAPM) on the Dhaka Stock Exchange (DSE) on both individual securities and portfolio levels. Using 102 securities data with the monthly stock prices for preceding five years, the outcome suggests that CAPM does not hold true for DSE, both on an individual company level and portfolio level. The securities market of Bangladesh (DSE in this case) proved inefficient as unsystematic risk premium become significant and beta cannot measure the risk component of securities investment.

Asset pricing with flexible beliefs

2015 ◽  
Vol 19 (4) ◽  
Author(s):  
Christos Axioglou ◽  
Spyros Skouras
Keyword(s):  
Asset Pricing ◽  
Rational Expectations ◽  
Equity Premium ◽  
Pricing Model ◽  
Present Value ◽  
Asset Pricing Model ◽  
Excess Volatility ◽  
Full Rationality ◽  
Predictability Of Returns ◽  
Statistical Criteria

AbstractWe develop a present-value asset pricing model with an econometrically useful representation that accommodates a plethora of stylized assumptions about beliefs. Using 20th century S&P500 data we use our model to compare the empirical fit of belief assumptions associated with rational expectations, asymmetic information, learning, behavioral effects and evolution. Among these, asymmetric information with evolution is particularly useful both in terms of statistical criteria and in terms of ability to explain the equity premium, excess volatility and predictability of returns. Our work suggests that popular relaxations of rationality can easily lead to econometric representations that may be impossible to work with in empirical research. Furthermore, replication of stylized facts may be too weak a requirement when evaluating such models. Fortunately, there exist simple relaxations of rationality that are sufficient to drastically improve the empirical fit of models with full rationality.

COMPLEX DYNAMICS IN LUCAS’ TREE ASSET PRICING MODEL WITH DYNAMIC SELF-CONTROL PREFERENCES

2019 ◽  
pp. 1-24
Author(s):  
Marco Airaudo
Keyword(s):  
Asset Pricing ◽  
Rational Expectations ◽  
Complex Dynamics ◽  
Self Control ◽  
Pricing Model ◽  
Stochastic Version ◽  
Asset Pricing Model ◽  
Equilibrium Dynamics ◽  
Endogenous Cycles ◽  
Period 2

This paper studies the global equilibrium dynamics implied by a Lucas’ tree asset pricing model where the representative agent is subject to temptation in consumption choices, and displays dynamic self-control preferences, as defined by Gul and Pesendorfer [(2004) Econometrica 72, 119–158.]. It shows that endogenous cycles of period 2 and higher, as well as chaotic dynamics exist provided temptation utility is sufficiently important (with respect to standard commitment utility) and sufficiently convex. For parameterizations leading to complex deterministic dynamics, a stochastic version of the model admits rational expectations equilibria displaying excess volatility with respect to the underlying fundamentals.

A NOTE ON BUBBLES, WORTHLESS ASSETS, AND THE CURIOUS CASE OF GENERAL MOTORS

2013 ◽  
Vol 18 (1) ◽  
pp. 244-254 ◽  
Author(s):  
Tom Ahn ◽  
Jeremy Sandford ◽  
Paul Shea
Keyword(s):  
Asset Pricing ◽  
High Volume ◽  
Share Price ◽  
General Motors ◽  
Anecdotal Evidence ◽  
Pricing Model ◽  
Rational Agents ◽  
Share Prices ◽  
Asset Pricing Model ◽  
Dow Jones Industrial Average

Since the company declared bankruptcy in June 2009, shares of General Motors stock (now known as Motors Liquidation Company) have continued to trade at a high volume while maintaining a market capitalization near $300 million through most of 2010. Anecdotal evidence strongly suggests that both rational speculators and uninformed investors (often mistaking Motors Liquidation for the new, reorganized GM) have purchased the stock. We develop a theoretical asset-pricing model that includes both types of agents. We present two major results. First, the most frequent state is one where a small fraction of rational agents ensure that the share price behaves as if all agents are rational. A second state exists where all rational agents exit and the share price is inflated. Second, fitting the model to Motors Liquidation, we find evidence of irrational asset pricing for this firm. We find little evidence of similar behavior in the share prices of the thirty stocks that compose the Dow Jones Industrial Average.

scholarly journals Effect of Capital Asset Pricing Model on Stock Prices

2020 ◽  
pp. 1-11
Author(s):  
Dini Dinahastuti ◽  
Jajang Badruzaman ◽  
Euis Rosidah, Wursan
Keyword(s):  
Asset Pricing ◽  
Stock Prices ◽  
Capital Asset Pricing Model ◽  
Measurement Scale ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Ratio Measurement ◽  
Asset Pricing Model ◽  
Technology Sector

Capital Asset Pricing Model (CAPM) is one of the balance models that can be used to determine the magnitude of the relationship between risk and return obtained by investors so that it will help investors to avoid investment errors. This study aims to determine (1) capital asset pricing model, and company stock prices in the Nikkei 225 Index technology sector; (2) capital asset pricing model on the company's stock prices in the Nikkei 225 index technology sector. The technique of data collection is done through secondary data, namely data obtained from the study of documentation and literature. The method used is descriptive method with census approach method. The population and sample of this study were the technology sector companies of the Nikkei 225 Index in 2016-2018. There were 57 companies in 2016-2018. The data analysis technique used is panel data regression analysis with a ratio measurement scale. Based on the results of the research and the results of data processing, it is shown that (1) Capital Asset Pricing Model in the technology sector company Nikkei 225 Index shows fluctuating results each year and effective in determining efficient and inefficient stocks for investors to use in making investment decisions. The company's stock price in the technology sector. The Nikkei 225 index shows an increase in average stock prices each year; (2) Capital Asset Pricing Model has a significant positive effect on Stock Prices.

scholarly journals ANALYSIS Of CAPITAL ASSET PRICING MODEL ACCORDING TO SHARIAH PRINCIPLE: INDONESIAN EVIDENCE

2019 ◽  
Vol 3 (03) ◽  
Author(s):  
Yuni Pristiwati Noer Widianingsih
Keyword(s):  
Asset Pricing ◽  
Stock Prices ◽  
Capital Asset Pricing Model ◽  
Stock Index ◽  
Capital Asset Pricing ◽  
Financial Instruments ◽  
Pricing Model ◽  
Capital Asset ◽  
Expected Return ◽  
Asset Pricing Model

Capital Asset Pricing Model (CAPM) is one of the estimated return models developed in conventional financial instruments that have different characteristics from Islamic financial instruments. So the CAPM model cannot be directly applied in Islamic financial instruments, so an estimation model is needed, namely the Shariah Compliant Capital Asset Pricing Model (SCAPM). This study aims to produce a SCAPM model that can be applied to estimate returns in Islamic financial instruments. The data used in the test is a list of sharia companies listed on the IDX, sharia company stock prices, Indonesia Sharia Stock Index (ISSI), yield of sukuk and return of Bank Indonesia Certificates (SBI) for the period 2010 - 2018. Testing is done by comparing expected return with the CAPM and SCAPM models. The SCAPM model used is to eliminate the risk free asset factor and replace it with inflation, zakat, and yield of sukuk. The results of the analysis using graphs and the compare mean test show that the results of the expected return with the SCAPM and CAPM models have no difference, so the SCAPM model can be used as an alternative model of return estimation in Islamic Financial Instruments on the IDX.

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