Title: CAPM model applied to the Portuguese stock market

Authors: Natália Teixeira; Mariana Silva; Rui Vinhas da Silva; Leandro Pereira; Sérgio Vinhas da Silva

Addresses: ISG – Business and Economics School, Av. Mal. Craveiro Lopes 2A, 1700-284 Lisboa, Portugal ' ISG – Business and Economics School, Av. Mal. Craveiro Lopes 2A, 1700-284 Lisboa, Portugal ' Business Research Unit – BRU-IUL, ISCTE – Instituto Universitário de Lisboa, Av das Forças Armadas, 1649-026 Lisboa, Portugal ' Business Research Unit – BRU-IUL, ISCTE – Instituto Universitário de Lisboa, Av das Forças Armadas, 1649-026 Lisboa, Portugal ' Universidade Europeia-IADE, UNIDCOM/IADE – Unidade de Investigação em Design e Comunicação, Av. D. Carlos I, 4, 1200-649 Lisboa, Portugal

Abstract: The stock market volatility is well correlated with the VUCA (volatility, uncertainty, complexity, and ambiguity) environment, so it's important to understand the best techniques that capture this relationship. The main objective of this work is to analyse the capital asset pricing model (CAPM) to understand the relationship between risk and return. The other objective is to try to understand if the CAPM model is reflected in the Portuguese stock exchange. If there is a direct correlation between risk and expected return, then we are looking at an efficient market. Through the method of observation and bibliographic and documentary research, a practical assessment is made of the relationship between the CAPM model and the Portuguese stock exchange. Analytically, an analysis of 40 companies of the Portuguese stock index (PSI 20) is carried out, where the behaviour of the beta and the rate of return is demonstrated.

Keywords: capital asset pricing model; CAPM model; risk; expected return; stock market; Portuguese.

DOI: 10.1504/IJEF.2023.127900

International Journal of Electronic Finance, 2023 Vol.12 No.1, pp.55 - 63

Received: 12 Apr 2022
Accepted: 10 Jul 2022
Published online: 21 Dec 2022 *