Research proposal

The feasibility and sustainability of London Stock of Exchange: What other

factors influence LSE except Beta









2

Table of contents

Particulars Page number
Background 3
Literature review 4
Research methodology 9
Data analysis 11
Ethics, validity and presentation 13


















3

Background
Equity pricing has always been a vague area of the modern finance academia. Firstly it is a
demand and supply based phenomenon and then academicians can actually add on different
shades and different sources of price justification to the pricing model (Asgharian and Hansson,
2000). But as a whole it is a complicated game and there are different empirical model to
understand the pricing dynamics of assets.
CAPM is considered to be one of the famous and one of the oldest of the lot where assets are
priced based on its co-movement with the market under two basic assumptions market risk
takes care of all the risks and when a rational investor diversifies he or she actually should take
care of only the portfolio risk and nothing else.
But over the decades it had been proven that beta is dead as there are number of other factors
which affect security pricing (Asgharian and Hansson, 2000). This research paper is going to test
the effectiveness of beta in case of stock rotation policy as a part of the active portfolio
management activism and alternative pricing methods is also expected to be derived in order to
maximize the alpha.
1.1 Problem statement
London stock exchange has long been considered as a problematic stock exchange and there
needs to be a quick reversal of the pattern in terms of more trade, more profit and more
participant. LSE which used to be one of the finest and largest stock exchange across the globe is
now just shivering in the competitive world (Berk, 1995). Since global stock exchanges are lot
more decentralized and as everyone can trade in every country through international fund
managers the need of LSE is really dampening up. So, the student has taken up this research as a
moral and academic duty to understand the trading, profit making and pricing dynamics of LSE.
1.2 Rationale for scenario chosen
Over the years, London Stock exchange has failed to generate the required rate of return which
was actually expected from it and improper asset pricing is surely going to be the major reason.
As per the return standards of different asset classes it is the cash and cash equivalent items
which should get the lowest return as the risk exposure of these assets are the lowest (Griffin and
Lemmon, 2002). The equity items both the domestic equity items and the international equity
items should secure the highest ratings in terms of the return offering but actually the
performance of the stock exchange has been pretty low.
Since the stock exchange is not offering anything superior in return on a relative scale it has been
a great challenge to make investors attracted to the business and it was also very challenging for
everyone involved to earn a fair share in the overall proceedings like the issuers have failed to
fetch a good price, the brokerage house has not been able to earn good trading profit and the
4

investors as already mentioned have been on the lower note about earning the profit (Griffin and
Lemmon, 2002).
Since the stock exchanges very proposition of earning good amount of profit is at stake since the
market model of stock pricing is not working the whole game of the financial market is under a
threat. So, from that very point of view it is immensely important to track down the sustainability
and the feasibility of the LSE business model.
1.3 Aims and objectives
Research idea The researcher is going to test the feasibility and sustainability of London stock
exchange with specific reference to the asset pricing models effectiveness.
Research objectives:
To understand the level of feasibility of London stock exchange based business module
To pinpoint the sustainability of London stock exchange under the global competitive
pressure
To pinpoint the effectiveness of the traditional CAPM model in better industry selection
and alpha generation for stocks enlisted in LSE London stock exchange
To prescribe a better asset pricing model to maximize the alpha in London stock
exchange

Literature review

2.1 Conceptual framework Tracking the SWOT of LSE
By far the analysis goes, the core problem has been pinpointed several times it is the loss of
attraction and it is the loss of the trading volume and it is the non-inclination to participate in the
stock exchange business of the UK based investors. London Stock Exchange LSE is lagging
from the NYSE, from the TSE, from the HKSE. Fund raisers do not feel that it is the best place
to fetch a good price for the IPOs initial public offering, the stock investors do not feel that
profit is guaranteed here and eventually the global lucrativeness of the business module has
dampened (Berk, 1995). In order to be a good competitor on a global scale, each and every stock
exchange all across the globe needs to be efficient, effective, innovative and responsive to the
stock exchange participants need.
So, a rigorous SWOT analysis will be needed to understand the future sustainability of the
business. By understanding the strength and weakness of the business module the researcher can
understand the internal environment of the business and by tracking the opportunities and threats
5

of the business module the researcher can understand the external environment of the business
(Griffin and Lemmon, 2002). From a birds eye view the business reputation and the greater
image of the business module can be termed as the strength of the model and the absence of OTC
bulletin board and pink sheets can be a classical example of operational deficiency.
Business re-survival and business feasibility is based on a number of successful implementation
of strategies. There needs to be multiple layers of strategies operational, business level and
corporate level strategies to successfully implement. As an example, one can easily term
digitalization of the overall procedure a very good initiative to ensure operational efficiency and
the provision of inter-day trading can be another good example of operational strategy (Griffin
and Lemmon, 2002). On the other hand, the inclusion of quality global stock can be another very
good example of the business level strategy. These strategies need to be traced down.

2.2 Literature review:
The literature review portion of the study will discuss different issues like the evolution of
CAPM capital asset pricing model, calculation of industry beta, the critical arguments raised
against CAPM capital asset pricing model, alternative pricing models. The researcher is going
to start with the evolution of the CAPM.
CAPM the evolution: CAPM is the equilibrium model of asset pricing where market risks is
considered to be the one and only measurement risk and t is assumed that market as indicated by
beta captures all sorts of risk (Griffin and Lemmon, 2002). The very construction of CAPM is
very straight-forward. It is assumed under the CAPM model that the price of any asset will
compensate the investors for the risk free rate and the unique risk of the asst in comparison to the
market riskiness. So, under the CAPM model it is assumed that the expected return on a security
will be equal to the risk free rate and the extra compensation for getting involved in a separate
asset category (Berk, 1995).
Expected return on asset = Risk free rate + market risk premium * beta
Beta is a measure of systematic risk and since under the CAPM models only the portfolio risks
matters by using beta the covariance risk of the security with the market is taken into account.
Under the CAPM model it is assumed that all the investors will act as a rational investor and
since all the investors are ultimately rational it is expected that ultimately they will fully
diversify the portfolio and only the relevant risk for the portfolio will be the contribution risk of
the assert into the portfolio (Berk, 1995).
From the simple model, one logical conclusion can easily be derived by the researcher. Higher
the beta of the portfolio or higher the beta of the individual asset higher will be the expected
return. On the contrary, it is assumed that lower the beta of the portfolio and lower the beta of the
6

individual asset lower will be the expected return (Berk, 1995). But based on a ex-post analysis it
was later revealed that such simplifying of relationship does not hold good in reality as on a
longer period basis the academicians have not found any such kind of a very straight cut
relationship and actually the relationship is confusing and there had been number of doubts
raised by academicians whether the single period asset pricing model can actually capture all the
facts and facets of assert pricing (Griffin and Lemmon, 2002).
The criticism of CAPM Is beta dead? : The first and foremost criticism which has been
raised against CAPM proponents is the existence of the market portfolio and whether the
theoretical market portfolio actually holds good or not (Danthine and Donaldson, 2002). It has
been established that the definition of the market portfolio should not merely constitute just the
stocks and fixed income generating security, rather in the true sense the definition of market
portfolio should constitute fixed income, stocks, income generating g properly, land, human
capital and assets coming from all the sphere of life (Danthine and Donaldson, 2002). So, from
that perspective it will be impossible to build up such a market portfolio and judge the intrinsic
value of the asset based on that market portfolio.
The assumption of risk-free asset is also considered to be false argument and in really life all the
asset classes have significant extent of embedded risk. For example, even if government
Treasury bill is considered as a risk-free item but in reality the Treasury bill has interest rate risk,
liquidity risk and a number of risk factors which are not properly compensated through investing
in government based securities. So, the proxy for risk-free asset is not actually properly
determined (Berk, 1995). Moreover the century long tradition of thinking that treasury securities
are default risk free are not going to hold true as it has been established during the recent
financial turmoil that governmental securities also do default. Perhaps the concept of risk-free
asset can be better understood by the inclusion of zero-beta portfolio (Danthine and Donaldson,
2002). In the feasible set of portfolio an investor can find out number of portfolios which are
uncorrelated with the market portfolio with a correlation of zero. So, if an investor can pick up a
zero-beta portfolio where there is no systematic risk it can be used as a better proxy for risk-free
asset rather than relying on the tradition driven definition of risk free asset which are found only
in the government backed treasure securities.
It is assumed under the CAPM model that people can lend and borrow at the risk-free rate. The
reality is far more different at the individual level. An individual investor can lend at the risk-free
rate but unless the individual is a big gun in the share market even the brokerage firm will not get
credit at a risk-free rate. Moreover due to higher denomination at different assets an individual
will not have the access to all types of securities just because these securities are not perfectly
divisible. Even more importantly CAPM talks about a frictionless market where there will be no
information processing cost, no tax etc (Lakonishok et al., 1994). But the reality is far too
different as here individuals have to pay taxes of different genres and information processing is
supposed to be a costly game and there is nothing like symmetric information whatsoever.
CAPM is a single- period model but all the components which are inbuilt under the model are
7

dynamic and these refer to the continuous time frame. From that angle, for forecasting multi-
period return CAPM may not be a very good choice.
Perhaps there is big problem lying in the decision making model of the individuals. It is
generally assumed that the decision making power of the individual under the CAPM model is a
rational one. But reality is far different from anything closer to rational decision making.
Theoretically it is assumed that people will make rational decisions decisions free from any
biases and decisions free from any choices (Engsted and Tanggaard, 2004). For example, a
portfolio that generally sets a trading rule that he is going to sell off his or her portfolio after
having a 20% loss in the value may not be doing the same with a selected security. While
constructing the portfolio, that investors may have decided that the particular stock is for the
financing a pleasure trip. So, even if the portfolio manager should be more concerned about the
portfolio value rather than concerning on the value of an individual stock in this very case the
portfolio manager is completely focused on the value of the stock as he or she has some other
types of business to be done with this very stock (Lakonishok et al., 1994). So the traditional
thinking of just the portfolio and nothing else is not going to work here. Moreover many a times,
a portfolio manager has picked up a stock after rigorous level of business research and after
conducting that rigorous business research that very stock may not even click. Still the portfolio
manager may escalate all the possible levels of errors with that very decision. So, this is a type of
framing which is generally done by the investors. So, the rational decision making model is for
sure not the proper way of making an assumption. CAPM is based on the assumption of
homogenous expectation and it is assumed that all the investors will have a very precise idea
about the probability distribution of the return with the assumed risk level and the investors will
have a very precise idea about the dividends to be paid and all other cash related endowments
(Engsted and Tanggaard, 2004). But reality is far away from that. Information possessing does
vary and the different layers of information possession eventually distort the whole process of
decision making. Under the CAPM model it is generally assumed that individual will be risk
averse and for taking each amount of extra risk there will be some extra return (Lakonishok et
al., 1994). But once again the reality can be very different as for scanty amount of investments
investors may be prepared to take chances and the compensation may not be working on.
Perhaps for taking on major risks according to each ones investment value people can become
risk adverse. CAPM is built on number of assumptions and all these assumptions can be
challenged in real life.
Industry beta: What if an investor wants to shuffle his or her portfolio into stocks of different
industries based on the sector rotation policy and who wants to do an active portfolio
management. Surely industry beta can be a handful device to fulfill the investment strategy.
During the time of contraction and during the time of economic recession, defensive industry
shares are better choices since their beta will be less than one and it is a sign of lower sensitivity
with the market (Lakonishok et al., 1994). On the other hand, during the time of market boom
and business expansion, the cyclical, high-tech and the durable industry shares are going to work
8

on in the better way. This aforementioned industrys beta is more than one an indication of
higher market sensitivity. So, as a whole industry beta can be a good predictor to understand the
industrys sensitivities to the market and these basic themes can be used to construct active
portfolio which will foster sector rotation based investment strategy.
In this part of the study the researcher is going to discuss how an industry beta can be calculated.
There is a one easy solution instead of calculating the beta an industry index can be used
directly. What will happen if there is no industry beta data? This is obviously going to be a very
critical scenario but there is a very easy solution. On a weighted average basis, the researcher has
to calculate the industry indices and beta is just the covariance of the industry indices and the
market divided by the variance of the stock market (Bartholdy and Peare, 2001).
So, by calculating the industry beta one investor can go for investing under the sector rotation
policy guideline. Higher industry beta Company selected at the booming time and lower industry
beta company selected at the recession time. But as per the earlier discussion the readers must
have observed that in real life the assumptions of CAPM does not work and beta let it be
individual or let it be a portfolio or let it be an industry is not going to be the perfect solution for
fully utilizing the insights.
Alternative asset pricing model: For pricing an asset, there are multiple facets of models
available not just the prevalent one beta. For example, any researcher can go well with the no-
arbitrage model where it is assumed that if an asset is mispriced the combined activism of the
market participant will diffuse that price contradiction (Danthine and Donaldson, 2002).
For example, if a particular security is currently undervalued than the arbitrager is going to short
sell the portfolio and buy the undervalued one using the proceed of the sale. If after the stipulated
investment horizon the security price goes to the desired level then the security will be sold and
using the proceed the portfolio will be hold and the investor will obviously pocket the
differences. Quite on the contrary, if a particular security is currently overvalued, then the
investor will short sell the security and purchase the desired portfolio using the sales proceed
(Bartholdy and Peare, 2001). Once the security comes to the desired level, then it is purchased by
selling the portfolio and whatever the level of arbitrage profit is derived it is actually pocketed.
So, if all the rational investors start to do the same there will be no real scope of making a profit.
So, the no-arbitrage opportunity actually helps the investor to better price securities and any
opportunities and arbitrages are not going to be there forever (Engsted and Tanggaard, 2004).
Addition to the basic CAPM model can also be done and academicians have done and rectified
the model to the very perfection over the years. Under the Fama-French module of asset pricing
there are two more additional factors added into the traditional asst pricing module size factor
and value factor (Engsted and Tanggaard, 2004). It is empirically proven that since small sized
company has generally a higher tendency to default just because of their small size there needs to
be a premium paid to the investors for holding the relatively small size companies. On the other
9

hand, the mispricing based on the market value and book value ratio is going to be another big
source of premium or discount.
On the other hand, based on the return decomposition model, the expected price of an asset can
be referred as a sum of premiums to be paid for consuming different layers of risks for example
foreign exchange risk, liquidity risk, inflation risk and different types of risks (Bartholdy and
Peare, 2001). So, if the valuation expert accurately knows the different possible sources of risks
by investing in the particular stock then he or she will also be able to price these risks.
Conclusion
The existing academic textbooks and journals have already analyzed the effect of market models
and APT models on the asset pricing statistics of LSE but there had not been any real analysis to
incorporate the behavioral issues like market anomalies and the expectation of market
participants in the operating module. So, there is certainly a gap in the academic literature a
gap which will be addressed in the following study.

Research methodology
Business research is a systematic journey; it starts with the development of research idea,
question and objectives. Once the literature has been properly reviewed by the researcher the
researcher knows how to design the sampling framework and how to collect the information
from the respondents (Ragin, 1994). After the data is collected, the researcher uses the different
mechanisms at hand to analyze the data set and test the pre-formed hypothesis based on the
collected data. Finally a workable solution to the research problem is identified and a new sphere
of knowledge is generally created (Saunders, et al., 2003). In this research methodology part of
the study the researcher is going to discuss the research philosophy, research approach, the
research strategy, research design, the data collection mechanism and the sampling framework.
Style of business research: Research philosophy Research philosophy is the conceptual
framework which determines the quality of the business research. Positivism and
phenomenology is the two major stream of research philosophies which are generally used to
understand the possible path of research conduction (Mikkelsen, 2005).
The proponents of the positivism believe that statistical data and statistical inference says it all
and there is no need to consider the irrational decision making model and the cognitive biases
while interpreting the data (Ragin, 1994). Moreover there is no real need to take the help from a
social scientist while conducting the study. The proponents of the phenomenology believe that
statistical data and statistical inference cannot say it all and there will be every need to consider
the irrational decision making model and the cognitive biases while interpreting the data
10

(Saunders, et al., 2003). Moreover if it is needed, further help can be explored from a social
scientist.
This business research is going to be a phenomenological journey as the asset pricing does have
a number of cognitive biases and behavioral traits.
Style of business research: Research approach For conducting the study the researcher is
going to follow the deductive approach. So, null hypothesis is going to be built up and these null
hypotheses are going to be tested by the collected data (Saunders, et al., 2003). Theory
formulation is not an objective of the researcher but theory is certainly going to be the major
guide for this research.
Style of business research: Research strategy Because of the superior concentration and
because no primary data is needed, this business research is going to be a survey.
Style of business research: Research method There are a number of research methods
majorly the quantitative, qualitative and the mixed ones. In case of the quantitative research the
input and the output of the research is numerical; it is easier to form the hypothesis and it is even
easier to test the research validity and reliability (Silverman, 2005). On the other hand, in case of
the qualitative study, the inputs and outputs of the business research is going to be non-numeric;
it is difficult to form the null hypothesis but data collection will be easier (Saunders, et al., 2003).
For conducting this business research the method is going to be quantitative.
Research question: From analyzing the research area of interest the following research
questions can be genuinely derived.
What is the extent of feasibility of London stock exchange based business module?
Whether London stock exchange can conduct a sustainable business in midst of the
global competitive pressure?
What is the extent of effectiveness of the traditional CAPM model in better industry
selection and alpha generation for stocks enlisted in LSE London stock exchange?
What can be the better asset pricing model to maximize the alpha in London stock
exchange?
Methods of analysis Correlation, regression based data analysis tools will be needed to
analyze the data points and higher time series modules are also going to be used to analyze the
data set.
Correlation refers to the linear relationship between two research variables and regression
expresses the mathematical functionality between the variables (Marshall & Rossman, 2006).
Data sources Both primary and secondary data is going to be used by the researcher. The
trading volume, profitability data, CAPM related data sets are going to be extracted by the
secondary sources. The researcher also wants to highlight the expectations of different key
11

stakeholders throughout the study and in order to do so; a primary research by means of
questionnaire based survey will be needed (Silverman, 2005). The questions will be kept simple
and coherent.
The secondary information to be used for the study is going to be relevant, reliable and verifiable
(Silverman, 2005). So, before the usage of the secondary information these quality of the data
and information needs to be checked and rechecked at a regular basis (Ragin, 1994). Industry
report, London stock exchange report etc. are going to be the source of the secondary data.
Sampling issues For collecting the primary data, a questionnaire survey will be needed and
since all the participants cannot be addressed throughout the survey, the researcher needs to
conduct sampling to collect the data (Silverman, 2005).
Simple random sampling is going to be the sampling device and all the participants of the
population can be a part of the population. The sample size is 100 and this is surely pretty
enough to take care of the sampling biases.
Data analysis
As the research objectives have been set up, this business research is focused on building up an
empirical model where regression driven study is going to be used to explore the relationship
between stock pricing.
Since the regression based relationship is going to be understood through OLS ordinary least
square technique the researchers have to make it ascertain that the autocorrelation level, the
stationary level and the trendiness issues have been taken cared of as while using time series data
in case of a regression one needs to ensure that there is no trend, no autocorrelation and no
stationary in the data set (Patton, 2002). Now the researcher is going to present a diagnostic test
before the formal report starts on.
Research
variable
Diagnostic test Correction
Risk-free rate It was revealed from the diagnostic
test that there was trend in the data
set, there was cyclicality in the data
set and the data set did not possess
the stationary feature. So, initially
data set was not ready for usage. By
trend the researcher is referring to
any sign of upward and downward
significant movement in the data set
and by cyclicality the researcher is
referring to any specific pattern
which incurs time after time. For a
stationary data set, the mean, median
By using the first degree of change or
by using the first differentiation the
trendiness, the cyclicality is the data
set was removed. So, the data is ready
for analysis just by removing the first
degree of changes. After the
correction, the time series data was
prepared to be used in further business
research since the mean and median
was equal, there was no real season
specific movement and the upward
and downward significant pattern was
removed by the first degree of
12

and mode of the data set is going to
remain the same.
differencing.
Market risk
premium
It was revealed from the diagnostic
test that there was trend in the data
set, there was cyclicality in the data
set and the data set did not possess
the stationary feature. So, initially
data set was not ready for usage. By
trend the researcher is referring to
any sign of upward and downward
significant movement in the data set
and by cyclicality the researcher is
referring to any specific pattern
which incurs time after time. For a
stationary data set, the mean, median
and mode of the data set is going to
remain the same.
By using the first degree of change or
by using the first differentiation the
trendiness, the cyclicality is the data
set was removed. So, the data is ready
for analysis just by removing the first
degree of changes. After the
correction, the time series data was
prepared to be used in further business
research since the mean and median
was equal, there was no real season
specific movement and the upward
and downward significant pattern was
removed by the first degree of
differencing.
Industry beta It was revealed from the diagnostic
test that there was trend in the data
set, there was cyclicality in the data
set and the data set did not possess
the stationary feature. So, initially
data set was not ready for usage. By
trend the researcher is referring to
any sign of upward and downward
significant movement in the data set
and by cyclicality the researcher is
referring to any specific pattern
which incurs time after time. For a
stationary data set, the mean, median
and mode of the data set is going to
remain the same.
By using the first degree of change or
by using the first differentiation the
trendiness, the cyclicality is the data
set was removed. So, the data is ready
for analysis just by removing the first
degree of changes. After the
correction, the time series data was
prepared to be used in further business
research since the mean and median
was equal, there was no real season
specific movement and the upward
and downward significant pattern was
removed by the first degree of
differencing.
Business size
premium
It was revealed from the diagnostic
test that there was trend in the data
set, there was cyclicality in the data
set and the data set did not possess
the stationary feature. So, initially
data set was not ready for usage. By
trend the researcher is referring to
any sign of upward and downward
significant movement in the data set
and by cyclicality the researcher is
referring to any specific pattern
which incurs time after time. For a
stationary data set, the mean, median
and mode of the data set is going to
By using the first degree of change or
by using the first differentiation the
trendiness, the cyclicality is the data
set was removed. So, the data is ready
for analysis just by removing the first
degree of changes. After the
correction, the time series data was
prepared to be used in further business
research since the mean and median
was equal, there was no real season
specific movement and the upward
and downward significant pattern was
removed by the first degree of
differencing.
13

remain the same.
BV/Price ratio It was revealed from the diagnostic
test that there was trend in the data
set, there was cyclicality in the data
set and the data set did not possess
the stationary feature. So, initially
data set was not ready for usage. By
trend the researcher is referring to
any sign of upward and downward
significant movement in the data set
and by cyclicality the researcher is
referring to any specific pattern
which incurs time after time. For a
stationary data set, the mean, median
and mode of the data set is going to
remain the same.
By using the first degree of change or
by using the first differentiation the
trendiness, the cyclicality is the data
set was removed. So, the data is ready
for analysis just by removing the first
degree of changes. After the
correction, the time series data was
prepared to be used in further business
research since the mean and median
was equal, there was no real season
specific movement and the upward
and downward significant pattern was
removed by the first degree of
differencing.
P/E ratio It was revealed from the diagnostic
test that there was trend in the data
set, there was cyclicality in the data
set and the data set did not possess
the stationary feature. So, initially
data set was not ready for usage. By
trend the researcher is referring to
any sign of upward and downward
significant movement in the data set
and by cyclicality the researcher is
referring to any specific pattern
which incurs time after time. For a
stationary data set, the mean, median
and mode of the data set is going to
remain the same.
By using the first degree of change or
by using the first differentiation the
trendiness, the cyclicality is the data
set was removed. So, the data is ready
for analysis just by removing the first
degree of changes. After the
correction, the time series data was
prepared to be used in further business
research since the mean and median
was equal, there was no real season
specific movement and the upward
and downward significant pattern was
removed by the first degree of
differencing.

Ethics, validity and presentation
Business research is an ethical process and the basic features of an ethical conduct have to be
well ensured while conducting a business research (Silverman, 2005). This research is not going
to be an exception and by adhering to the following issues the ethical concerns are going to be
entertained by the researcher.
The secondary sources from where academic help has been garnered will be properly
acknowledged.
The collected data will be properly kept under strong maintenance and good preservation.
Nobody will have the access to the collected data except the supervisor and the researcher
(Maxwell, 2005).
14

Before the participation in the primary research, all the participants will know about the
research objectives exactly and it is going to be a voluntary business research. Moreover,
their description will remain anonymous and necessary permission before interviewing
will be obtained.
Work plan
Activities Percentage of the
allocated time
Research idea, objectives and question development 20%
Literature review 32%
Methodology design and the development of sampling framework 28%
Collection of the data through secondary sources and analysis of the data 15%
Write-up of the report 5%

Gantt chart
Particulars 1
st

week
2
nd

week
3
rd

week
4
th

week
5
th

week
6
th

week
7
th

week
8
th

week
Research idea, objectives and
question development

Literature review
Methodology design and the
development of sampling framework

Collection of the data through
secondary sources and analysis of
the data

Write-up of the report

Possible limitations
Since this research is partially based on sample survey, sampling biases should affect the proper
conduction of business research. Moreover, the irrational decision making model, the cognitive
biases are going to affect the research results.
Expected outcomes
After conducting the business researcher, the researcher is quite certain to find solution to the
survival question of LSE London stock exchange. The researcher is also going to come up with
a good solution to the appropriate asset pricing models which can be used to price the stocks to
be traded in the business.
This business research is quite certainly going to be valid one as all the research objectives are
going to be achieved during the regular course of research conduction (Patton, 2002). This
15

business research is obviously going to be a reliable business research as little changes in the
methodology will not bring about too much of a change in the research findings.























16

References
Asgharian, H. and B. Hansson (2000) Cross-Sectional Analysis of Swedish Stock Returns with
Time-Varying Beta: The Swedish Stock Market 1983-96 European Financial Management,
Vol. 6, No. 2, pp. 213.
Bartholdy, J. and P. Peare (2001) The Relative Efficiency of Beta Estimates Aarhus School of
Business.
Berk, J. B. (1995) A Critique of Size-Related Anomalies Review of Financial Studies, Vol.
Summer 95, Vol. 8 Issue 2
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