Abstract:
The current research is done to check or examine the CAPM and the DCAPM in the raising
stock market of the Pakistan i.e. KSE. This research also tried to show the relationship between
the risk and the returns of the individual or the separate stocks. This study also tried to show the
performance of both the model and the comparison between both the models in the KSE for the
risk and the return calculation. In this research, the sample size consists of the 60 companies
listed or registered on the KSE with the time period starting from January 2005 to December
2010. The monthly data taken from the official website of KSE. State bank announces the
treasury rate which is taken as the risk free rate. The methodology used in this study id the Fama
& MacBeth methodology which is the three steps methodology for the numerical investigation of
the models. After that t-test are applied to examine the data statistically. But the results show
that both the models are not suitable for the emerging economy of the Pakistan and both the
model failed in the raising stock market of Pakistan i.e. KSE.
