Applicability of CAPM (Capital Asset Pricing Model) to Office Building Market in Seoul

서울의 오피스빌딩 시장에서 자본자산가격결정모형(CAPM) 의 적용가능성

  • Park, Jong-Kwon ;
  • Jun, Jae-Bum
  • 박종권 ;
  • 전재범
  • Received : 2015.06.04
  • Accepted : 2015.08.13
  • Published : 2015.08.30


This research aims to find out the impact of systematic risk on risk-premium and understand if CAPM (Capital Asset Pricing Model) is applicable to office building market at Seoul city in South Korea. In light of this notion, this research, specifically, considers four different office building markets in Seoul city area, called GBD(Gangnam Business District), YBD(Yeouido Business District), CBD(Central Business District), and Other Business District, to figure out whether there exists any positive-linearity between systematic risk and risk-premium for each business district. Afterward, this research seeks to verify applicability of CAPM to four office building markets based upon Black, Jensen, and Scholes(1972)'s statistical method. Finally, the results show some meaningful findings that there is positive linear-relationship between systematic risk and risk-premium in all business districts apart from YBD, which means capital-asset could be fairly priced in GBD, CBD, and other Business District, and that the applicability of CAPM should be only taken into account in Other Business District.


Commercial Real Estate;Office Building Market;CAPM(Capital Asset Pricing Model);Systematic Risk;Seoul City


  1. Bank of Korea. Economic Statistics System. Retrieved April 15, 2015 from
  2. Black, F., Jensen, M., & Scholes, M. (1972). The Capital Asset Pricing Model : Some Empirical Test. New York : Praeger Publishers, 79-121.
  3. Fama, E., & Macbeth, J. (1973). Risk, Return and Equilibrium: Empirical Tests. Journal of Political Economy, 81(3), 607-636.
  4. Jun, J. B. (2013). Lecture Note of Real Estate Investment Theory at Kangwon National University.
  5. Kim, H., & Kim, H. (2006). A Study on the Characteristics of Regional Land Price Fluctuation Using CAPM in Korea. Journal of Korea Planning Association, 41(2), 121-137.
  6. Kim, M. (1998). An Empirical Study on the Application Possibility of the Capital Asset Pricing Model in Korea Land Market. Thesis, Konkuk University, 72.
  7. Kim, Y., Ahn, S., Oh, J., Lee, C., & Jung, S. (2002). Real Estate Finance. Hyeong-Seol Publisher.
  8. Lee, S., & Lee, H. (2005). Estimation of Capitalization Rates and Gross Income Multipliers in Seoul Office Market. Journal of Korea Planning Association, 40(6), 245-256.
  9. Lintner, J.(1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics, 47(1), 13-37.
  10. Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91.
  11. Min, S. (1999). Study on the Methods of Risk Measurement for the Valuation of Real Estate Investment. Thesis, Yonsei University, 133.
  12. Min, S., & Koh, S. (2013). A Test on the Efficiency of the Office Market in Seoul. Journal of Korea Planning Association, 48(1), 69-79.
  13. Ministry of Land, Infrastructure, and Transport & Korea Appraisal Board. Leasing Trends Survey of Commercial Real Estate Market, (2009-2014).
  14. Moon, H., & Cho, J. (2012). A Study on the Risk Premium through Office Capitalization Rate Analysis, Journal of Korea Planning Association, 47(3), 345-361.
  15. Mossin, J. (1966). Equilibrium in a Capital Asset Market. The Econometric Society Econometrica, 34(4), 768-783.
  16. Ross, S., Westerfield, R., & Jaffe, J. (2009). Corporate Finance. 9th ed, McGraw-Hill.
  17. Ryu, T. (1993). An Empirical Study of the Capital Asset Pricing Model in Korea Real Estate Market Analysis. Thesis, Korea University, 42.
  18. Sharpe, W. (1964). A Theory of Market Equilibrium under Conditions of Risk, The Journal of Finance, 19(3), 425-442
  19. Shin, J. (1993). A Study on the Application of the Capital Asset Pricing Model to the Land Market in Korea. Ph.D. Dissertation, Incheon University, 181.
  20. ShinYoung Asset. (2014). Office Market Report.
  21. Suh, B., & Kim, J. (2006). A Study on the Price Equilibrium of Korea Housing Market Using CAPM. Journal Finance and Accounting Information, 6(2), 44-72.
  22. Yoo, J., Lee, J., & Son, J. (2010). A Preliminary Study on Application of CAPM to Seoul Housing Sub-markets, Journal of the Korea Real Estate Analysts Association, 16(2), 39-57.