Adjusting the consumption-based capital asset pricing model by the estimate bid-ask spreads based on daily highest and lowest prices in Iran
by Sedighe Alizadeh; Mohammad Nabi Shahiki Tash; Reza Roshan
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 11, No. 5, 2021

Abstract: This study aims to investigate a capital asset pricing model (CAPM) based on consumption within the capital market in Iran, which is adjusted using transaction costs and liquidity risk. The study is carried out on twenty portfolios, formed on the basis of liquidity criteria using seasonal data from 2009 to 2018. In other words, this approach is applied to analyse the target pricing model through transaction costs proxy and evaluation of the portfolios. Exploiting the proposed bid-ask spread estimator as the transaction costs proxy shows that liquidity-adjusted CCAPM explains a bigger portion of cross-sectional return changes compared to the traditional CCAPM model. In addition, the results show that disregarding transaction costs and liquidity risk may lead to an inaccurate estimate of the expected return.

Online publication date: Tue, 07-Dec-2021

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the Afro-Asian J. of Finance and Accounting (AAJFA):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com