Neutrosophic statistical approach to the capital asset pricing model

Neutrosophic Statistics is an emerging trend in the field of statistics, designed to address the challenges of uncertainty. Given that the stock market is inherently uncertain, this study aims to apply a Neutrosophic statistical approach to the Capital Asset Pricing Models. The neutrosophic methodologies, techniques and calculations are consistently used through out the study to address the significant criticisms of the existing model such as unrealistic assumptions, misleading beta and single valued risk and return. The study findings effectively capture these criticisms up to certain extent and offer customized neutrosophic models that investors can use based on their specific investment needs. Further these results may be able to explain the relationship between risk and return which many of the CAPM studies struggle to justify in literature. The models’ flexibility and ability to capture the indeterminacy may enhance the quality of the results. Additionally, this approach enhances the reliability and accuracy of financial modeling in decision making. Not only finance, but also these sophisticated neutrosophic methodologies can be employed in most of the real-world scenarios with full of indeterminacy. Netflix is a leading company in the streaming industry, and it has high trading volume which reflects the market sentiment. Netflix stock prices, S&P500 market index, NASDAQ market index, Gross Domestic Product (GDP) and Consumer Price Index (CPI) from 2009-2023 have been used to conduct 5-year and 15-year period analysis using the proposed models in this study. The primary goal is to develop one-factor, two-factor, and three-factor Neutrosophic models. The focus is on calculating appropriate neutrosophic beta values to develop different Neutrosophic Models and then calculate the neutrosophic expected return across four different scenarios.