Market Indexes Several Capital Markets Around The World

Capital Markets	Jan 2, 2008	Dec 31, 2008	Change		Jan 2, 2009	Feb 6, 2009	Change
			Points	%			Point	%
Shanghai	5262	1820.8	-3441	-65.39%	1880.7	2181.2	300.52	15.98%
Nikkei	14691	8859.6	-5832	-39.70%	9043.1	8076.6	-966.5	-10.69%
Hang Seng	27561	14387	-13173	-47.80%	15043	13655	-1388	-9.23%
KLSE	1436	876.75	-558.9	-38.93%	894.36	896.64	2.28	0.25%
STI	3461	1761.6	-1700	-49.11%	1829.7	1715.4	-114.4	-6.25%
FTSE	6417	4434.2	-1983	-30.90%	4561.8	4291.9	-269.9	-5.92%
NASDAQ	2610	1577	-1033	-39.57%	1632.2	1591.7	-40.5	-2.48%
DJIA	13044	8776.4	-4268	-32.72%	9034.7	8280.6	-754.1	-8.35%
IDX	2732	1355	-1376	-50.38%	1437	1350.6	-86.7	-6.03%

CAPM

CAPM stands for Capital Asset Pricing Model. This model tries to relate between return of securities and the risk of the securities. CAPM is developed by Treynor, Sharpe, and Lintner. This model can be used to calculate the value of the securities such as stocks. The idea of this model is that rational investors will demand additional return if they take the additional risk (called risk premium). CAPM decomposes portfolio risk in two categories systematic risk and unsystematic risk (firm risk/unique risk). According this model investor will get compensation from the market because of taking systematic risk from that portfolio. The model of CAPM is

     R_e = R_f + β_e (R_m – R_f)

• R_e = expected return for security
• R_f  = risk-free rate
• R_m = market return
• β_e  = Beta of security (measure systematic risk)

 To get Beta (β_e)  we can use simple regression model. 

     R_e = R_f + β_e (R_m – R_f) + α

     R_e –  R_f  = α  + β_e (R_m – R_f)  

Substitute R_e –  R_f   with Y and R_m – R_f  with X, then we can get simple regression model 

      (R_e –  R_f)  = α  + β_e (R_m – R_f)      

          Y        = α  +      β X