Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis
<p>The study focuses on widely used CAPM test, the two-pass test. It is argued and shown by a simulation that power of the test does not continuously decrease when the standard deviation of market premium increases as existing literature reports. Rather it is peaked at the middle indicating th...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Faculty of Commerce & Manangement Studies, University of Kelaniya
2014-02-01
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| Series: | Kelaniya Journal of Management |
| Subjects: | |
| Online Access: | https://kjm.sljol.info/articles/6542 |
| _version_ | 1819237490546966528 |
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| author | Sandun Fernando PD Nimal |
| author_facet | Sandun Fernando PD Nimal |
| author_sort | Sandun Fernando |
| collection | DOAJ |
| description | <p>The study focuses on widely used CAPM test, the two-pass test. It is argued and shown by a simulation that power of the test does not continuously decrease when the standard deviation of market premium increases as existing literature reports. Rather it is peaked at the middle indicating the standard deviation of market premium has negative as well as positive effects on the power. The implication of this finding is that rejecting the CAPM is highly possible in lesser volatile market as in a highly volatile market even when the CAPM exists in those markets.</p><p>DOI: <a href="http://dx.doi.org/10.4038/kjm.v2i1.6542">http://dx.doi.org/10.4038/kjm.v2i1.6542</a></p> <p>Kelaniya Journal of Management Vol.2(1) 2013:18-38</p> |
| first_indexed | 2024-12-23T13:21:10Z |
| format | Article |
| id | doaj.art-a140a40a1ab147d4b265b7c4702d1415 |
| institution | Directory Open Access Journal |
| issn | 2279-1469 2448-9298 |
| language | English |
| last_indexed | 2024-12-23T13:21:10Z |
| publishDate | 2014-02-01 |
| publisher | Faculty of Commerce & Manangement Studies, University of Kelaniya |
| record_format | Article |
| series | Kelaniya Journal of Management |
| spelling | doaj.art-a140a40a1ab147d4b265b7c4702d14152022-12-21T17:45:28ZengFaculty of Commerce & Manangement Studies, University of KelaniyaKelaniya Journal of Management2279-14692448-92982014-02-0121183810.4038/kjm.v2i1.65425082Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation AnalysisSandun Fernando0PD Nimal1Department of Finance, University of KelaniyaDepartment of Finance, University of Kelaniya<p>The study focuses on widely used CAPM test, the two-pass test. It is argued and shown by a simulation that power of the test does not continuously decrease when the standard deviation of market premium increases as existing literature reports. Rather it is peaked at the middle indicating the standard deviation of market premium has negative as well as positive effects on the power. The implication of this finding is that rejecting the CAPM is highly possible in lesser volatile market as in a highly volatile market even when the CAPM exists in those markets.</p><p>DOI: <a href="http://dx.doi.org/10.4038/kjm.v2i1.6542">http://dx.doi.org/10.4038/kjm.v2i1.6542</a></p> <p>Kelaniya Journal of Management Vol.2(1) 2013:18-38</p>https://kjm.sljol.info/articles/6542Two-pass OLS regressionPower determinantsMarket volatility |
| spellingShingle | Sandun Fernando PD Nimal Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis Kelaniya Journal of Management Two-pass OLS regression Power determinants Market volatility |
| title | Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis |
| title_full | Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis |
| title_fullStr | Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis |
| title_full_unstemmed | Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis |
| title_short | Conflicting Effects of Market Volatility on the Power of Two-Pass OLS Test of the CAPM: A Simulation Analysis |
| title_sort | conflicting effects of market volatility on the power of two pass ols test of the capm a simulation analysis |
| topic | Two-pass OLS regression Power determinants Market volatility |
| url | https://kjm.sljol.info/articles/6542 |
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