The Gap between the Returns that Calculated by Capital Asset Pricing Model and the Actual Returns in Abu Dhabi Securities Exchange ( ADX ) : Evidence from the United Arab Emirates

This study aimed to compare the Historical Returns (Rit) in companies listed in Abu Dhabi Securities Exchange (ADX) with the return which calculated by Capital Asset Pricing Model (E(Rit)) for the same companies and periods, and trying to figure out the level of dispersion, distortions and differences between them, and trying to figure out the strengths and weaknesses for the CAPM to explain the variances which happened in the Annual Return. The researcher used the time series analysis to achieve the target of this study, using Microsoft Office Excel software to introduce some figure and graphs which considered as output from Scatter charts, which are often used to find out if there's a relationship between variable X and Y to make judgment on the gap between the variables mentioned before. The researcher found that in the most of the study sample firms the capital asset pricing model could not to predict the returns were generated by companies in Abu Dhabi Securities Exchange (ADX), except in the banking sector, the result was amazing because the graphs which output from the time series analysis show the ability of CAPM to predict the Historical Returns, they were very closed and they Walking in the same direction without volatility. After the results appear in the time-series analysis researcher can says that there are weaknesses in the ability of CAPM to predict the returns in the financial markets which consistent with the (Fama & French, 1992) and with most studies conducted in this regard, but the model shows high ability to predict the returns in the banking sector. Therefore, the researchers can generalization this result on the financial markets in the United Arab Emirates.


Introduction
The capital asset pricing model (CAPM) is a mathematical model which describes the hypothetical relationship between risk and expected return for financial assets, especially stocks, it extensively used in finance management field for the estimation of securities that include risk, therefore, this model takes into account the risks involved on capital which used in the investment in securities.CAPM, introduced a theoretical exemplification of the conduct of securities, it can be used in assess a firm's cost of equity capital.In spite of restriction, this model can be an advantageous supplement to several parties like financial managers, investors, Prospective shareholders, Creditors and Potential lenders.
The charisma of the CAPM is that it offering strong satisfactory prognostications for how to measurement involved risk and the relationship between the most important items in the finance field expected return and risk.Unluckily, the experimental record in this model is inferior enough to decline the method it is used in implementations.The CAPM's experimental troubles might reflect theoretical weakness, because of many

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6.2
The second step: calculate the Annual return from the monthly return that collected in the first step, for the study sample using the Holding Period Return (HPR).

6.3
The third step: calculate the Beta (systematic Risk) for the companies in the study sample, for the same period above, using the covariance of the return of an asset and the return of the industry index divided by the variance of the return of the industry index over a study period.

6.4
The fourth step: getting the risk free rate (Rf) from the Central Bank in Abu Dhabi for the years including in this study (2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015), it equals the Interest Rate for the Treasury Bills that issued from the CB in Abu Dhabi.
6.6 The sixth step: calculate the E(Rit) Expected Return for each company in the study sample using the CAPM.
Because the Variables that need to use CAPM equation become existed in the previous steps 6. 7 The seventh step: the researcher will use the output in the previous steps especially the Historical Return (Rit) and the Expected Return E(Rit) to achieve the time series analysis, by insert the output these information to the Microsoft Office Excel software, and from the result of the Graphics which produced by Excel software then the researcher can make the comparison between the variables above.

The Study Variables
The variables of this study as following: 7.1 The Historical Return: the returns which actually earned by investors in the study period, in this regard the researcher used the HPR equation to calculate this variable: Figure 2 b main varia by CAPM Figu ADAVIAT the Servic between th relationshi which are Given the 2008 to 20 very high a This case exceed the significant 8.2 The 2n