Capital Asset Pricing Model(CAPM) predicts a positive relation between an asset's risk and its expected return. However, the statistical evidence supporting the positive relation between risk and expected return is surprisingly weak.
To summarize the...
Capital Asset Pricing Model(CAPM) predicts a positive relation between an asset's risk and its expected return. However, the statistical evidence supporting the positive relation between risk and expected return is surprisingly weak.
To summarize the result of this cross-sectionally regression analysis, BETA is positive, SIZE is semi-positive and DER is not positive correlation with the expected common stock returns during the test period. but Pooling data, before 1990 data and upward-cycle of before and after 1990 is positive. Especially, The evidence suggests that "the premium associated with the EDR is not likely to be just some kinds of risk premium". Therefore, we suspect that the expected common stock returns will be correlate with the another market and accounting variables.