Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)

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Evaluating Extensions to CAPM: The Predictive Power of Market Capitalization and Turnover in the Australian Stock Market

Authors
Yunxin Liu1, *
1Faculty of Arts, University of Melbourne, Parkville, VIC, 3010, Australia
*Corresponding author. Email: yunxinl@student.unimelb.edu.au
Corresponding Author
Yunxin Liu
Available Online 3 July 2025.
DOI
10.2991/978-94-6463-748-9_68How to use a DOI?
Keywords
CAPM; Market Capitalization; Stock Trading Turnover; Liquidity; Australian Stock Market
Abstract

The Capital Asset Pricing Model (CAPM) has faced empirical and theoretical criticisms and extensions to improve its explanatory power by incorporating additional characteristics have been widely tested over the past decades. This study examines the predictive impact of stock trading turnover and market capitalization as extensions to the traditional Capital Asset Pricing Model (CAPM) within the Australian stock market. It uses panel data collected from eighteen companies across nine Global Industry Classification Standard sectors from January 2021 to November 2024. The CAPM adopted the Random-Effect model, and its extension is regressed under the Fixed-Effects framework according to the Hausman Test. Results suggest the extended CAPM slightly outperforms the traditional model. Stock trading turnover is statistically insignificant and is likely attributed to the high efficiency of the Australian market and the sample predominantly comprising large-cap firms. Market capitalization, on the other hand, significantly explains the model but its overall contribution remains minimal. This study contributes to the ongoing discourse by offering insights into the role of firm-specific market-related factors in asset pricing.

Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)
Series
Advances in Economics, Business and Management Research
Publication Date
3 July 2025
ISBN
978-94-6463-748-9
ISSN
2352-5428
DOI
10.2991/978-94-6463-748-9_68How to use a DOI?
Copyright
© 2025 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Yunxin Liu
PY  - 2025
DA  - 2025/07/03
TI  - Evaluating Extensions to CAPM: The Predictive Power of Market Capitalization and Turnover in the Australian Stock Market
BT  - Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)
PB  - Atlantis Press
SP  - 607
EP  - 616
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-748-9_68
DO  - 10.2991/978-94-6463-748-9_68
ID  - Liu2025
ER  -