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This paper examines the tradeoff between equity price risk and returns obtained through
various approaches. Capital asset pricing model (CAPM) and arbitrage pricing model (APT)
are considered to be the fundamental building blocks of the portfolio theory, while these
models only provide some intuition to risk but they do not account for the probability of
adverse moves in the risk factors. Empirically, we have evidence that beta values tend to be
insignificant in terms of a multifactor of BIRR model using APT approach. VAR values seem
to have fitted in the BIRR model very well and have improved the stability in terms of
explaining the returns acquired through APT approach. Therefore, we have also affixed the
returns obtained through arbitrage pricing model with the value at risk (VAR) values such as
to measure the downside risk. The theory that is proposed is distinctive and its empirical
application has been presented in the paper.
Talha-Bin-Ali Khan, Ali Khizar Aslam. (2009) Equity Price Risk and Return: Evidence from the Karachi Stock Exchange, Journal of Independent Studies and Research-Management, Social Sciences and Economics, Volume-07, Issue-1.
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