Abstract
This study discussed the Capital Assets Pricing model (CAPM) and its ability to measure the required return, the researcher tested this model on Amazon Company listed in S&P 500 during the period (2009-2016), to measure the impact of beta stock and market index return on the required return. Multiple regression model was used to test the effect of independent variables (Beta stock, Market Index Return) on the dependent variable (Required return), it should be noted that there is a statistically significant impact of the US stock market Return (S&P500) and Amazon stock Beta factor on Amazon stock required return, and the study model explanatory was 20% , this means that 20% of the changes in the required return are due to beta and market return, and 80% of the changes due to other factors, also find that CAPM can be applied on efficiency markets and huge companies.The researcher recommends applying the variables of the study on a group of large companies in the S&P 500 index, and looking for other factors that may affect the required return.
Highlights
Financial markets have an important role in the economic development process because of attracting investors and the accumulated savings and directing them to the right investments by the published information that reflect the market situation and the assets being traded in such a way that gives investors the best choice among the available investments especially in the efficient markets.Having said this, investors look for an appropriate return that is commensurate with the risk in this investment
The most important of these methods is the capital asset pricing model (CAPM), which is based on the required return measurement on a number of factors; nature of the relationship and correlation between the stock returns and market index returns, in addition to the investment risks that the model divided it into systematic risk and non-systematic risk. (Mullins, 1982)
This study was conducted to examine the ability of the capital asset pricing model in order to explain the changes in stocks returns, and its ability to price stocks by forecasting and measuring the required return by applying this model to an important company listed on the S&P500 index, Amazon (2009-2016)
Summary
Financial markets have an important role in the economic development process because of attracting investors and the accumulated savings and directing them to the right investments by the published information that reflect the market situation and the assets being traded in such a way that gives investors the best choice among the available investments especially in the efficient markets. There are many mechanisms that are used in financial analysis and determination of the required return on investments. The most important of these methods is the capital asset pricing model (CAPM), which is based on the required return measurement on a number of factors; nature of the relationship and correlation between the stock returns and market index returns, in addition to the investment risks that the model divided it into systematic risk and non-systematic risk. This study was conducted to examine the ability of the capital asset pricing model in order to explain the changes in stocks returns, and its ability to price stocks by forecasting and measuring the required return by applying this model to an important company listed on the S&P500 index, Amazon (2009-2016)
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