Single factor financial asset pricing models: an empirical test of the Capital Asset Pricing Model CAPM and the Downside Capital Asset Pricing Model D-CAPM

Abstract

This study analyzed the Capital Asset Pricing Model CAPM as well as the Downside Capital Asset Pricing Model D-CAPM and evaluated the latter as an efficient alternative asset pricing model. The returns of 40 companies on the São Paulo Stock Exchange BOVESPA were studied between December 1996 and August 2002. To test the models the study used as variables the Interbank Deposit Certificate CDI as a risk free asset and the Index of São Paulo Stock Exchange IBOVESPA as a proxy of the market portfolio. The D-CAPM was shown to be more useful in explaining the return of the stock market than the CAPM.