Sensitivity Analysis of CAPM Estimates: Data Frequency and Time Frame

Syed Jawad Hussain Shahzad, Muhammad Zakaria and Naveed Raza

MPRA Paper from University Library of Munich, Germany

Abstract: This study is based on positivism research philosophy and utilizes deductive approach using quantitative data analysis of 117 firms listed at KSE-100 Index from 2005 to 2012. Objective of study is to analyze the predictability of Capital Asset Pricing Model (CAPM) under different data frequencies, time frames and indices. It is found that there is no difference between value weighted and equally weighted index. Six months of daily data, as opposed to recommended five years monthly data provides the best estimates. However, the performance of model can be regarded as poor with 5.3% power to explain difference in returns.

Keywords: Beta; CAPM; Markowitz Mean-Variance Framework; Pakistan (search for similar items in EconPapers)
JEL-codes: G11 G12 G31 (search for similar items in EconPapers)
Date: 2014-11-20
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https://mpra.ub.uni-muenchen.de/65382/1/MPRA_paper_65382.pdf revised version (application/pdf)

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