This study investigates the performance of the Capital Asset Pricing Model (CAPM) and multifactor model on the Swedish stock market during periods of high volatility. Data spanning from 2006 - 2024 is analyzed, capturing both economic crises such as the global financial crisis of 2007 - 2009 and the COVID-19 pandemic. The study focuses on six key variables: Exchange index, Volatility index, Money supply 3, Unemployment rate, GDP, and Brent crude oil price.
Results reveal that CAPM demonstrates significant explanatory power throughout the entire period and during individual crises. On the other hand, the multifactor model exhibits varying results, performing best during crises but somewhat weaker over the entire period. While the multifactor model provides insights into how macroeconomic variables influence asset returns, CAPM offers a simpler explanation of returns based on market risk alone. The study underscores the importance of understanding both the strengths and limitations of these asset pricing models in financial assessments. While CAPM can serve as a guideline for assessing risk and return, the multifactor model offers insights into how macroeconomic factors affect asset returns, especially during times of high volatility.