Non-Standardized Form of CAPM and Stock Returns
Muhammad Irfan Khan

Abstract
Emerging markets like Pakistan confront with the problem to validate the CAPM in its original form. Since standard form of this model has unrealistic assumptions, different non-standardized forms have been introduced by different researchers. This paper also introduces a non-standardized form of CAPM to validate whether it is applicable in Pakistan. The data of 20 companies of different sectors, covering the period of 2007 to 2008 were collected. One year KIBOR is taken in replacement of T-bill rates. Beta 3 is calculated using an equation to show the negative relationship between interest rate and market returns. The results of regression analysis reveal mixed results. For instance, mean return of companies in cement and chemical sector is linearly related to its beta risk while other sectors have volatile results.

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