Comparison of capital asset pricing model with arbitrage pricing theory in ISE

In the finance theory, there are two important pricing models. These are Arbitrage Pricing Model and Capital Asset Pricing Model. The purpose of this study is to compare these models on the basis of explanatory power and number of variables used and find which model is more efficient.For analysis firstly sensitivity coefficients and beta prediction equations have been created and necessary coefficients have been calculated. After that Arbitrage Pricing Models and Capital Asset Pricing Model have been created based on these coefficients. Also one Arbitrage Pricing Model that has been created with factor analysis included for comparison. Lastly sensitivity coefficients and models that have been created with these coefficients and compared on the basis of model complexity and explanatory power. According to analysis and comparisons, it?s found that Capital Asset Pricing Model have more explanatory power with less variables compared to Arbitrage Pricing Model and this makes Capital Asset Pricing Model more efficient than Arbitrage Pricing Model for İstanbul Stock Exchange (ISE).