Abstract
From longtime ago, capital market has been engaged in decision-making about providing an optimumhigh-quality portfolio. Investors were always seeking a logical data base for correct dicision-making about shares.In recent years, Capital Assets Pricing Models (CAPM) have been broadly used to estimate securities returnlogically. In this research, anticipation power of Downside CAPM (D-CAPM) and Revised Downside CAPM(RD-CAPM) models to estimate destination year return (DYR) was examined. D-CAPM is a developed type ofCAPM that anticipates DYR according to past data and systematic risks of company. In contrast, RD-CAPMadditionally applies non-systematic risk in frame of financial and operational levers in its mathematical structureto anticipate DYR more precisely. Finally, we compare these two models in Tehran Stock Exchange for a periodof eight years (2001-2009) to anticipate return of companies in destination year.
Highlights
From longtime ago, capital market has been engaged in decision-making about providing an optimum high-quality portfolio
This paper studies anticipation power of these two models for investors to assign sources better
Capital Assets Pricing Models (CAPM) models have moved toward considering fundamentals of non-systematic risk in their structure
Summary
Capital markets as cheap finance sources play an important role in development of each country Notice to this problem may organize financial and economical structure of a country. CAPM relates two main columns of each business namely risk and return In recent years, this model has been noticed to anticipate future market behaviors and model real world performance. These models consider elements that create systematic and non-systematic risks by considering internal variables of a company and negative market risk They describe more percentage of expected return theoretically and use financial, economical, and operational levers in their mathematical models. Investors can select the most compatible model with capital structure They will expect an expected return proportional to the risk they incurred. By increment of risk-taking, investors claim for less reward and eventually, capital cost will decrease
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