Empirical Tests of Capital Asset Pricing Model and its Testability for Validity Verses Invalidity

Copyright © 2014 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. ABSTRACT: This paper reviews an advanced literature on capital asset pricing model. It starts by a brief introduction in welcoming scholars into the model background and its relevant assumptions and implications. It then explains the model in its real form, both the conceptual and the analytical part of it. The CAPM and the Index Model is then clearly looked at and explained in the dimensions of the Index Model and Realized Returns and also the Index Model and the Expected Return-Beta Relationship. The researchers penultimately look at a number of empirical tests for CAPM to explain the validity of th