The Usefulness of The Capital Asset Pricing Model in Predicting Total Shareholder Return

Authors

  • Chnar Abdullah Rashid Department of Accounting Technique, Technical College of Administration, Sulaimani Polytechnic University-Sulaimani
  • Rizgar Abdullah Sabir Jaf Department of Accounting, College of Administration and Economic, Salahaddin University-Erbil

DOI:

https://doi.org/10.21271/zjhs.27.1.25

Keywords:

CAPM, abnormal returns (Ab. R), and Cost of equity.

Abstract

This research aims to study the usefulness of CAPM in predicting total shareholders return, and its effectiveness in a UK-listed stock portfolio. Pearson Co. chose to compute the equity cost by calculating total shareholder return (TSR) using appropriate dividend yields and capital gains along with the CAPM and related data. This was done within the framework of 2016 to 2021 according to Pearson's financial reports. It was concluded that CAPM is suitable as a UK share price indicator. It demonstrates that CAPM is linear but does not need to capture unique and systematic risks. CAPM can be used by managers as a proxy to evaluate stock returns and diversify portfolios in order to minimise unsystematic risk, so they can implement the right policies in management to maximize profits while increasing shareholder wealth.

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Published

2023-02-25

How to Cite

Abdullah Rashid , C., & Abdullah Sabir Jaf, R. (2023). The Usefulness of The Capital Asset Pricing Model in Predicting Total Shareholder Return. Zanco Journal of Human Sciences, 27(1), 408–416. https://doi.org/10.21271/zjhs.27.1.25

Issue

Vol. 27 No. 1 (2023)

Section

Articles

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