Empirical evidence on the capital asset pricing model (CAPM) in two Scandinavian stock exchanges

Abstract

In the paper the Capital Asset Pricing Models of two Scandinavian Stock Markets are compared. With Finnish Stock data, a lower coefficient of determination is obtained than with Swedish Stock data. With Swedish data, the explanatory power of the squared beta and standard error components is markedly better. In so far as the sign of the regression coefficients is concerned, the Finnish models show a better correspondence with international evidence on the maifunctioning of the CAPM. With Swedish data, the coefficients are fairly close to those obtained with multiple factor models in the US-stock market. The finding suggests that the standard CAPM is unable to exhaustively represent the economic forces of capital asset pricing, especially in Sweden.CAPM Scandinavian stock markets