Testing Agency Model in Capital Asset Pricing

Document Type : Research Paper

Authors

1 Assistant Prof. in Management, Faculty of Administrative and Economics Sciences, University of Isfahan, Isfahan, Iran

2 Associate Prof. in Management, Faculty of Administrative and Economics Sciences, University of Isfahan, Isfahan, Iran

3 MSc in Business Management – Finance, Faculty of Administrative and Economics Sciences, University of Isfahan, Isfahan, Iran

Abstract

A new area in capital asset pricing is violation of direct investment assumption leading to agency CAPM. The aim of this study is to make a comparative analysis between direct and agency capital asset pricing models. So, we compared single-factor, FF three-factor and five-factor CAPM concerning agency and direct investment using the data obtained from Tehran Stock Exchange from 2009 to 2016. To test the capital asset pricing models, two methods of zero Alpha of time series models (using GRS statistics) and Beta pricing (based on Fama-Macbeth test) were used. The results of Fama-Macbeth test showed that all the capital asset pricing model, three-factor and five-Factor Model of Fama& French would yield better results in agency conditions compared to the direct conditions.

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References
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Financial Research Journal
Volume 19, Issue 4
2017
Pages 521-534

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