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Granger Causality and the Capital Asset Pricing Model

Mihir Dash ()

Journal of Applied Management and Investments, 2014, vol. 3, issue 2, 68-73

Abstract: At the heart of the CAPM lies the concept of systematic risk. The systematic risk of a security is that component of the total risk of the security that is explained by market risk. This study investigates the econometrics of the CAPM. In particular, it analyses Granger causality from market returns to security returns, the absence of which would weaken the significance of beta, and undermine the foundations of the CAPM.

Keywords: Capital Asset Pricing Model; beta; systematic risk; market risk; Granger causality (search for similar items in EconPapers)
Date: 2014
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Handle: RePEc:ods:journl:v:3:y:2014:i:2:p:68-73