An empirical test of the CAPM on the stocks listed on the Tokyo stock exchange

Yasuhiro Yonezawa; Tio Kia Hin

doi:10.1016/0922-1425(92)90015-I

An empirical test of the CAPM on the stocks listed on the Tokyo stock exchange

Yasuhiro Yonezawa, Tio Kia Hin

Research output: Contribution to journal › Article › peer-review

Abstract

The present paper is an empirical test of the Sharpe-Lintner-Mossin model of the CAPM based on a modified version of Gibbons' methodology. We use the rates of return of the data listed in the first section of the Tokyo Stock Exchange. The monthly data on the rates of return from January 1952 to December 1986 was divided into seven five year periods. At 5% significance level the null hypothesis is rejected for all 7 sub-periods in the Alpha sorted portfolios. In the Beta sorted portfolios, the null hypothesis is rejected for three sub-periods. It is concluded that the lack of diversification is the main reason for the invalidity of the CAPM in the Japanese stock market.

Original language	English
Pages (from-to)	145-161
Number of pages	17
Journal	Japan and The World Economy
Volume	4
Issue number	2
DOIs	https://doi.org/10.1016/0922-1425(92)90015-I
Publication status	Published - 1992 Sep
Externally published	Yes

Keywords

Beta sorted portfolios
Capital asset pricing
multivariate test

ASJC Scopus subject areas

Finance
Economics and Econometrics
Political Science and International Relations

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10.1016/0922-1425(92)90015-I

Cite this

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AB - The present paper is an empirical test of the Sharpe-Lintner-Mossin model of the CAPM based on a modified version of Gibbons' methodology. We use the rates of return of the data listed in the first section of the Tokyo Stock Exchange. The monthly data on the rates of return from January 1952 to December 1986 was divided into seven five year periods. At 5% significance level the null hypothesis is rejected for all 7 sub-periods in the Alpha sorted portfolios. In the Beta sorted portfolios, the null hypothesis is rejected for three sub-periods. It is concluded that the lack of diversification is the main reason for the invalidity of the CAPM in the Japanese stock market.

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An empirical test of the CAPM on the stocks listed on the Tokyo stock exchange

Abstract

Keywords

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