CAPM EMPIRICAL TEST: NON LINEAR APPROACH TO THE SPANISH STOCKE EXCHANGE MARKET

Rubén Lado Sestayo

Revista Galega de Economía, 2013, vol. 22, issue 2

Abstract: The CAPM has had a fundamental role in the price formation process. However, its empirical results at the moment of valuing assets have not been completely satisfactory due to, among other questions, the different investor’s behavior to up or down market movements or extreme market movements. This paper analyzes if this investor’s behavior has effects on the equilibrium CAPM valuation. Using a threshold regression model, the empirical evidence for the Spanish stock exchange market supported that asset prices are sensitive to both up and down market movements and extreme market movements. Additionally, our evidence also indicated no stability as a structural change was found in the equilibrium relationship in the onset of the global financial crisis.

Keywords: CAPM; /; IBEX-35; /; Nonlinearity; /; Structural; change (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:sdo:regaec:v:22:y:2013:i:2_7

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