Application of CAPM in Vietnam stock market
Abstract
The idea is to estimate an intrinsic price of each stock at the end of 2009 based on cost of equity calculated by CAPM, assuming that present time is the end of 2009. Then, compare with market price at the end of 2009 and make buy/sell decisions. For example, if the intrinsic price calculated based on CAPM is higher than the market price on Dec 2009, a buy decision will be made and vice versa. After that, those buy/sell decisions will be checked whether they were profitable decisions based on the historical price data available in 2010.