Testing the Traditional CAPM and MCAPM on Tehran Stock Exchange

Abstract

The purpose of this paper is to empirically test and evaluate the possibility of using the traditional Capital Asset Pricing Model (CAPM) and the Modified Capital Asset Pricing Model (MCAPM) in the Tehran Stock Exchange. Traditional CAPM by Sharpe-Linter (1965) as one of the ways in which investors can help explain the risk and return on investment offered by CAPM model to models of different MCAPM suggested by the Santosh Koirala (2015).Therefore, to achieve the desired objective, the research models using monthly returns of firm 96 (2009 to 2015) and test based on index of cash and capital gain returns. The results indicate that the explanatory power MCAPM more about stock returns compared to traditional CAPM in the Tehran Stock Exchange.

Keywords

• market return
• stock return
• pricing model