Testing practical application of CAPM: A study of stocks of automobile sector using CNX auto index in NSE Dr. Agarwal Rachna*, Mangla Jyoti** *Associate Professor, Deptt. Of Management Studies, YMCA University of Science & Technology, (Haryana State Govt. University), Faridabad, Haryana, India **Project Student, Deptt. Of Management Studies, YMCA University of Science & Technology, Haryana State Govt. University, Faridabad, Haryana, India Online published on 7 June, 2014. Abstract Since the birth of the Capital Asset Pricing Model (CAPM), enormous efforts have been devoted to evaluate the validity of this model. No one can deny its unique breakthrough and valuable contribution to the world of financial economics. Some empirical studies conducted, have appeared to be in harmony with the principles of CAPM while others contradict the model. These differences in previously conducted studies serve as a major stimulating factor to researchers’ curiosity verify its practical applicability of the CAPM. The aim of this paper is to study if the CAPM holds in the automobile sector in Indian Stock Market(NSE). The present paper is a sincere attempt to find answers of the questions by applying CAPM - Is higher beta yields higher expected return? Is there exist linearity between the stock beta and the expected return? For the same objectives, the paper is focusing to investigate the under & over valued stock of six firms of automobile sector. Top Keywords Capital Asset Pricing Model, Higher beta, Expected return, Under and overvalued stock. Top |