Whether Capital Asset Pricing Model Matters: Pakistani Banking Sector.

This study examines the rationality of utilizing the capital asset pricing model in Pakistani banking sector. The estimated return on banking sector is used as a proxy for measuring the best possible estimate of the stock return on banking sector in Pakistan. For conducting this study, the data was collected from 20 banks in total covering the period of 2006-2017 for which the time series yearly based pooled was applied. The capital asset pricing model is applied for the size and book to market portfolios. The excessive return is taken as dependent variable reflects that the investors required excessive return over the above Rf in order to take any additional risk, while independent variable used in study is market risk premium. The study shows that capital asset pricing model reflects more precisely the expected return. [ABSTRACT FROM AUTHOR]