Research on the Tendency Relationship between Individual Stock and Stock Index
DOI:
https://doi.org/10.54691/bcpbm.v32i.2905Keywords:
CAPM, S&P 500, AAPL, linear regression, beta, R-squared value.Abstract
This paper mainly centers on exploring the tendency relationship between individual stock and stock index using CAPM method. The research chooses the stock of Apple Inc. as an individual stock and S&P 500 as the stock index. Then CAPM is used to tests indicating that this model does not fit the rate of return on Apple very well. Therefore, this paper explores the possible reasons behind the phenomenon and refers to some constructive improvements in the evaluation of expected rate of return on individual stocks under the influence of the stock index. One reason is probably that AAPL is so powerful a corporation that it is extremely immune to anomalous volatility of the stock market, which implies that unsystematic risk dominates the trend of stock of Apple Inc. Therefore, this paper suggests that CAPM model should only be applied when the target company is a small-sized or medium-sized one that is prone to the fluctuation of the stock market.
Downloads
References
Brounen D, De Jong A, Koedijk K. Corporate finance in Europe: Confronting theory with practice. Financial management, 2004, 71-101.
Graham J R, Harvey C R. The theory and practice of corporate finance: Evidence from the field. Journal of financial economics, 2001, 60(2-3): 187-243.
Berk C, Tutarlı B. Dead or alive: Modern portfolio theory based on financial analysis. Universal Journal of Accounting and Finance, 2021.
Phuoc L T, Kim K S, Su Y. Reexamination of Estimating Beta Coecient as a Risk Measure in CAPM. The Journal of Asian Finance, Economics and Business, 2018, 5(1): 11-16.
Chen Z. The Applicability of Classic Capital Asset Pricing Model in Chinese Stock Market//2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022). Atlantis Press, 2022: 1213-1218.
Urbański S. The cost of equity capital in stock portfolios listed on the Warsaw Stock Exchange using the classic CAPM. e-Finanse, 2019, 15(2): 48.
O’Neill M. The validity of the Capital Asset Pricing Model, in the Modern Irish Market. Dublin, National College of Ireland, 2021.
Ji Z, Chang V, Lan H, et al. Empirical research on the Fama-French three-factor model and a sentiment-related four-factor model in the Chinese blockchain industry. Sustainability, 2020, 12(12): 5170.
Musallam S R M. Exploring the relationship between financial ratios and market stock returns. Eurasian Journal of Business and Economics, 2018, 11(21): 101-116.
Ayub U, Kausar S, Noreen U, et al. Downside risk-based six-factor capital asset pricing model (CAPM): A new paradigm in asset pricing. Sustainability, 2020, 12(17): 6756.
Kamalov F, Smail L, Gurrib I. Forecasting with Deep Learning: S&P 500 index//2020 13th International Symposium on Computational Intelligence and Design (ISCID). IEEE, 2020: 422-425.
Downloads
Published
Issue
Section
How to Cite
