has argued that to claim whether the CAPM is dead or alive‚ some improvements on the model must be considered. Rather than take the view that one theory is right and the other is wrong‚ it is probably more accurate to say that each applies in somewhat different circumstances (assumptions). Finally it’s argued that even the examination of the CAPM’s variants is unable to solve the debate into the model. Rather than asserting the death or the survival of the CAPM‚ we conclude that there is no consensus
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ZEUS ASSET MANAGEMENT INC. Huy Tu Nguyen 22491465 1. Overview of Zeus Asset Management Inc. Founded in 1968‚ Zeus Asset Management Inc. (ZAM) is an independent‚ money – management company offering services to both institutional and individual clients. ZAM follows a conservative‚ risk-averse‚ quality-oriented investment management to exploit the extra return from long term strategies. In fact‚ the company’s investment philosophy of risk-aversion can be guaranteed by the experienced staff‚ who
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role is taken by Capital Asset Pricing Model (CAPM) as well. The CAPM is the key theory in the stock market and industries; it is widely used by analysts‚ investors and corporations. In this essay I am going to discuss the recent developments about the CAPM‚ and refer to both advantages and disadvantages. Capital Asset Pricing Model The initial development of the CAPM was building upon Markowitz’s idea‚ and the model was further developed by Sharpe‚ Treynor‚ Lintner‚ Mossion in 1960s. Basically
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per share. What was your rate of return on this investment? A) 2.91% B) 3.07% C) 1.10% D) 1.78% E) -1.18% Answer: C Difficulty: Moderate Rationale: R = ($13.74-14.50+0.27+0.65)/$14.50 = 1.103% 15. You want to evaluate three mutual funds using the Sharpe measure for performance evaluation.
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investment recommendation According to Frino et al (2013)‚ both Mean-Variance and CAPM are based on the assumptions that returns are normally distributed. However‚ both of the two approaches are unstable and untenable to some extent then they also followed with many critiques and queries from the publicity. Here are some rational and underlying assumptions as follows. 2.1 Rationale and underlying assumptions of MV and CAPM approaches The total risk with a security has two elements. The first element
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The Evolution of Finance: A Review of Peter Bernstein’s Capital Ideas The world of finance is ever-changing. Over the last century‚ the modern form of economic and financial theory as we see today has been developed and shaped by the minds of many. What we have come to know and accept as fact today were seemingly unheard of nearly fifty years ago. It is with the endless efforts of these like-minded scholars that gives us the opportunity to appreciate the tools and fundamentals we used today to
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Developing Robust Asset Allocations1 Working Paper First Version: February 17‚ 2006 Current Version: April 18‚ 2006 Thomas M. Idzorek‚ CFA Director of Research Ibbotson Associates 225 North Michigan Avenue Suite 700 Chicago‚ Illinois 60601-7676 312-616-1620 (Main) 312-616-0404 (Fax) tidzorek@ibbotson.com Abstract Over the last 50 years‚ Markowitz’s mean-variance optimization framework has become the asset allocation model of choice. Unfortunately the model often leads to highly concentrated asset
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Appendix I C1: Equity = Stock Price x Number of Shares Outstanding = $42.09 X 271.5 = $11‚427.435 million C2: Using Adjusted Beta formula: Adjusted Beta = 0.67* historical Beta + 0.33 = 0.67* 0.69 +0.33=0.79 C3: Using CAPM formula: KE = Krf + ß (Km-Krf) = 3.59%+0.79*6.7%=8.89% C4: Using rearranged DGM formula: KE =D1/P0 +g= 0.48(1+5.5%)/42.09 +5.5%=6.7% C5: Using redeemable bond formula: KD: 95.6= 100/ (1+KD/2)40 + 3.375(1-0.38)/(1+KD/2)n KD=4.52% C6: Using WACC formula: Rwacc =4.52*10.19% + 8
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[7] This view‚ that the data are too noisy to invalidate the CAPM‚ is supported by Amihud‚ Christensen‚ and Mendelson (1992) and Black (1993). In fact‚ Amihud‚ Christensen‚ and Mendelson (1992) find that when a more efficient statistical method is used‚ the estimated relation between average return and beta is positive and significant. The widely accepted capital asset pricing model (henceforth CAPM) developed by Sharpe (1964)‚ Lintner (1965) and Mossin (1966) postulates a simple linear
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International Research Journal of Finance and Economics ISSN 1450-2887 Issue 4 (2006) © EuroJournals Publishing‚ Inc. 2006 http://www.eurojournals.com/finance.htm Testing the Capital Asset Pricing Model (CAPM): The Case of the Emerging Greek Securities Market Grigoris Michailidis University of Macedonia‚ Economic and Social Sciences Department of Applied Informatics Thessaloniki‚ Greece E-mail: mgrigori@uom.gr Tel: 00302310891889 Stavros Tsopoglou University of Macedonia‚ Economic and Social
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