Econometric testing of the CAPM: A granger causality analysis on the Turkish banking industry

Selçuk Bayracı ()

MPRA Paper from University Library of Munich, Germany

Abstract: The CAPM suggests that stock returns are linearly dependent to the market returns. The only risk factor that an asset bears is the market risk which is captured by the asset's beta. But the CAPM equation does not say much about the causal relationship between market and asset returns. In order to test the validity of the CAPM equation, we have applied Granger causality tests. The causal relationship between the Istanbul Stock Exchange 100 index and banking sector stocks are examined through Granger tests. The data between 04.12.2007 and 04.12.2009 are used for the analysis. Overall we have found weak causal relationships between market and asset returns, therefore the CAPM is not an adequate model for the asset returns of Turkish banking stocks.

Keywords: CAPM; Granger causality; unit-root tests (search for similar items in EconPapers)
JEL-codes: C01 C30 (search for similar items in EconPapers)
Date: 2010-01-10, Revised 2011-05-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/30839/1/MPRA_paper_30839.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:30839

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().