The application of the CAPM model on selected shares on the Croatian capital market

The Capital Asset Pricing Model is a model that describes the relationship between risk, expected return and valuation of securities. The theoretical and practical value of this model has proved unquestionable, but under ideal circumstances. The theory has been utilized by numerous researchers and i...

Full description

Saved in:
Bibliographic Details
Published inEkonomski vjesnik Vol. XXVII; no. 2; pp. 297 - 311
Main Authors Zrinka Tolušić, Sandra Odobašić, Marija Tolušić
Format Journal Article
LanguageEnglish
Published Faculty of Economics and Business in Osijek 01.12.2014
Subjects
beta index
CAPM Model
return
risk
share
Online AccessGet full text

Cover

More Information
Summary:The Capital Asset Pricing Model is a model that describes the relationship between risk, expected return and valuation of securities. The theoretical and practical value of this model has proved unquestionable, but under ideal circumstances. The theory has been utilized by numerous researchers and it confirms the linear relationship between risk and return under the CAPM (Capital Asset Pricing Model) model showing that greater exposure to risk provides higher returns. However, empirical research showed there were numerous factors that CAPM model did not take into account since it is based on assumptions which exist in reality, but are invisible. Therefore, it is very interesting to study the application of the CAPM model on selected shares on the Croatian capital market and analyze the possibilities of its application in discovering the misvalued shares. Share price changes on the Croatian capital market suggest there are some unknown factors that also influence share valuation. There is no doubt that the fundamental analysis of shares is not sufficient for evaluating the real share value in light of various invisible elements and all available information available which affect their value as well.
ISSN:0353-359X
1847-2206