An Empirical Testing of Capital Asset Pricing Model in Bangladesh

Asset Pricing Model (CAPM) provides an equilibrium linear relationship between expected return and risk of an asset. The purpose of this paper is to investigate a risk-return relationship within the CAPM framework. The study also aims at exploring whether CAPM is a good indicator of asset pricing in Bangladesh. For this study, a period 1999- 2003 have been considered. Fama-French (1992) methodology on five variables-stock market return, beta, book to market value, size (Market capitalization) and size 1 (sales) were used to test this model. In the present findings on the CAPM it has been shown that the variables studied have significant relationship with stock return, are still too alive on this ground.