Revisiting CAPM betas in an incomplete market: Evidence from the Korean stock market

Seok-Kyun Hur and Chune Young Chung

Finance Research Letters, 2017, vol. 21, issue C, 241-248

Abstract: This study develops a model of CAPM betas (true betas) in an incomplete market version of a security market line (SML), and these are compared to the CAPM betas (perceived betas) in a traditional SML. In addition, based particularly on the Korean stock market, we empirically discover that true betas tend to diverge from the perceived betas, especially when the perceived betas are greater than one. Moreover, the distribution of perceived rather than true betas tends to be more centered around one. Overall, this study provides new insight into the CAPM in an incomplete market.

Keywords: CAPM; Beta; Incomplete market; SML; Portfolio choice; Korean stock market (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:21:y:2017:i:c:p:241-248

DOI: 10.1016/j.frl.2016.12.018

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