C R I T I C a L E V a L U a T I O N O F C a P M M O D E L |
Table of Contents
错误！未定义书签。
Critical Evaluati on of CAPM Model |2
1. Introduction:
Over the years, the financial management theorists and practitioners have developed different financial management models and concepts that in turn have been facilitating the task of investment, financial and assets utilization decisions (Brigham & Houston, 1999). One such important and most widely tool that has been widely used for the portfolio management and risk assessment is Capital Asset Pricing Model (CAPM hereinafter). The model that was developed by William F. Sharp of the Rand Corporation, and the first publications regarding the model appears in 1952 that were updated in 1959 (Kuhlemeyer, 2004). Since the very introduction o the model, the financial experts in different parts of the world have been using the model and basing their decisions on the basis of the model. However, due to changes in the environmental conditions and better research in the field of financial management different models has been suggested that has a clear edge over the CAPM model (Brigham & Houston, 1999). After the publication of the French and Fama (1992) model regarding "the CAPM is wanted, Dead or Alive" most of the user think that the model has lost its significance and should be no more used for solving financial problems confronted business organizations. The CAPM model, which from the very start has remain one of the most widely contested model as different theorist and practitioners has been raising their concerns over the different shortcomings of the model (VanHorne & Wachowics, 2007). Realizing the significance of the issue, efforts will be made in this paper to critically investigate that whether the CAPM model is dead or could be still utilized for solving business problems. The paper will first explore the salient features and characteristics of the CAPM model and then list the different shortcomings
Critical Evaluati on of CAPM Model |3
of the model that has led
错误！未定义书签。
Critical Evaluati on of CAPM Model |2
1. Introduction:
Over the years, the financial management theorists and practitioners have developed different financial management models and concepts that in turn have been facilitating the task of investment, financial and assets utilization decisions (Brigham & Houston, 1999). One such important and most widely tool that has been widely used for the portfolio management and risk assessment is Capital Asset Pricing Model (CAPM hereinafter). The model that was developed by William F. Sharp of the Rand Corporation, and the first publications regarding the model appears in 1952 that were updated in 1959 (Kuhlemeyer, 2004). Since the very introduction o the model, the financial experts in different parts of the world have been using the model and basing their decisions on the basis of the model. However, due to changes in the environmental conditions and better research in the field of financial management different models has been suggested that has a clear edge over the CAPM model (Brigham & Houston, 1999). After the publication of the French and Fama (1992) model regarding "the CAPM is wanted, Dead or Alive" most of the user think that the model has lost its significance and should be no more used for solving financial problems confronted business organizations. The CAPM model, which from the very start has remain one of the most widely contested model as different theorist and practitioners has been raising their concerns over the different shortcomings of the model (VanHorne & Wachowics, 2007). Realizing the significance of the issue, efforts will be made in this paper to critically investigate that whether the CAPM model is dead or could be still utilized for solving business problems. The paper will first explore the salient features and characteristics of the CAPM model and then list the different shortcomings
Critical Evaluati on of CAPM Model |3
of the model that has led
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