THE RELATIONSHIP BETWEEN ACCOUNTING BETA AND CAPM: EVIDENCE FROM TURKEY

The relationship between the risk and return is the central issue in the field of finance. The capital asset pricing model (CAPM) has long become the standard way to model this relationship. The CAPM and its derivatives have been extensively investigated in the financial literature. As the pure CAPM can only be applied to publicly traded companies, finance researchers have always been interested in finding a way to apply CAPM to companies whose stock price information are not publicly available. One way to apply CAPM to unlisted companies is to use their financials to predict their beta. Therefore, ın studies related to CAPM one of the most actively investigated issues has been the relationship between CAPM's beta and the accounting variables. However, most of these studies are on developed market data. The number of empirical studies on emerging markets is quite limited and there are only a handful of studies on Turkish market data. Therefore, this study aims to contribute to the literature by analyzing the relationship between the accounting variables and systematic risk using Istanbul Stock Exchange data. Our results suggest that only one accounting variable, Operating Leverage, have an association with CAPM’s beta

Keywords:

Accounting Beta, CAPM Istanbul Stock Exchange, Emerging Markets,

PDF

___

Beaver W., Kettler P. and Scholes M.,, “The Association between Market Determined and Accounting Determined Risk Measures”, The Accounting Review, (October 1970), 654- 682.
Beaver, B. and Manegold J., “The Association between Market-Determined and Accounting-Determined Measures of Systematic Risk: Some Further Evidence”, Journal of Financial and Quantitative Analysis, 10, 1975, pp. 213-284.
Bekçiğlu, S, Öztürk,M and Kaderli Y,. “Beta Katsayısını Etkileyen Finansal oranlar: Gıda ve Makine İmalat Sektöründe bir uygulama”, Muhasebe ve Denetime Bakış Dergisi September 2003
Ismail B. and Kim M, “On the Association of Cash Flow Variables with Market Risk: Further Evidence”, The Accounting Review, 64, 1989, pp. 125-136
Lintner, J., (1965), “The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets”, Review of Economics and Statistics, Vol. 47, pp. 13–37.
Mossin, J., (1966), “Equilibrium in a Capital Asset Market,” Econometrica, Vol. , No. 4, pp. 768-783.
Sharpe, W.F., (1964), “Capital asset prices: a theory of Market Equilibrium under Conditions of Risk”, Journal of Finance, Vol. 19, pp. 425-442.
Sıvacıyan, T. A., “Relation Between Systematic Risk and Fundamental Variables of the Firm”, Boğaziçi University, Unpublished Masters Thesis, İstanbul, 1985.