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Analysis of French stock market’s CAPM based on asymmetric exponential power distribution

Liuling Li, Mengyang Lin

Abstract


Asymmetric Exponential Power Distribution (AEPD) which can be reduced to Normal distribution. AEPD is better than Normal distribution for its features of fat tail and skewness, which are essential to describe a financial data. Based on a former paper, we establish a Capital Asset Pricing Model (CAPM) based on AEPD distribution (CAPM-AEPD), use Maximum Likelihood Estimation to estimate the model and get the empirical results based on the 20 stocks chosen from the constituent stocks of CAC40. Besides, we do significance test of each parameters under several limitations. The empirical results show that the CAPM-AEPD is better than CAPM.

Keywords


Capital Asset Pricing Model(CAPM), Asymmetric Exponential Power Distribution (AEPD), France stock market, significance test.

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