Risk and Return: Portfolio Theory and Asset Pricing Models Portfolio Theory Capital Asset Pricing Model (CAPM) Efficient frontier Capital Market Line (CML) Security Market Line (SML) Beta calculation Arbitrage pricing theory Fama-French 3-factor model Portfolio Theory • Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent. Asset B has an expected return of 16 percent and a standard deviation of 40 percent. If the correlation between A and B is 0.6
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Global Trading FINC 6015 Arbitrage Source: Frino Segara (2008) Chapter 3 – Course Text Joakim Westerholm Hui Zheng MARKET COMMENTARY MACRO: Any economic indicators that show the US economy is improving are now perceived as negative news for stock markets as this means the FED can wind back on flooding the market with liquidity created by buying back government bonds. POLITICAL: Syria Australian Reserve bank appears at ease with the weaker dollar and will continue to ease rates:
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Multiple Choice Questions 1. In the context of the Capital Asset Pricing Model (CAPM) the relevant measure of risk is A. unique risk. B. beta. C. standard deviation of returns. D. variance of returns. E. none of the above. Once‚ a portfolio is diversified‚ the only risk remaining is systematic risk‚ which is measured by beta. Difficulty: Easy 3. In the context of the Capital Asset Pricing Model (CAPM) the relevant risk is A. unique risk. B. market risk C. standard deviation
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Model…………………………………………. 6 1. Advantages of CAPM…………………………………………………………………...6
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investment. The term ‘reasonable’ is what makes all the difference. There are various models which are used to estimate this reasonable rate of return which will satisfy the shareholders. One such model is Capital Asset Pricing Model (CAPM). 3 - Capital Asset Pricing Model (CAPM) The Capital Asset Pricing Model
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three-factor model which is a development of the traditional CAPM model and the findings of the 1992 paper. It believes the theory should be able to explain not only stock but also bond returns. Also this paper uses the method of time-series regression‚ which is quite different from the previous paper. After the development of the capital asset pricing model (CAPM) in the 1960s‚ many empirical tests were developed. The poor performance of the CAPM in explaining realized returns was founded and significant
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Asset Pricing Model (CAPM) and the APT have developed as two models that have tried to exactly calculate the possible for assets to produce a profit or a loss. They are similar in that they try to calculate an asset’s trend to track the overall market however APT tries to split market risk into lesser risks. Irrespective‚ it is very problematic to guess which organisations are strategically located properly into the upcoming future in the right rising markets. Bodie describes CAPM as‚ “The capital
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INNOVATIVE AND COST EFFECTIVE ENGINEERING‚ EQUIPMENT AND MANUFACTURING SERVICES FOR THE SUBSEA OIL & GAS INDUSTRY COMPANY PROFILE Deepsea Technologies‚ Inc (DTI) was established in March 2001. Company head-quartered in Houston‚ Texas‚ USA with a sister concern located in Hyderabad‚ India. Company provides turnkey design‚ engineering and manufacturing of equipment for subsea field development projects. Customers include E&P Majors‚ Independents‚ Oilfield Equipment Suppliers and Service Companies
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Article Critique “The Value Premium and the CAPM” Endri Seiti Course: Research Methods in Finance and Accounting Instructor: Dr. Magdy S. Roufaiel Introduction: “The Value Premium and the CAPM” paper‚ written by Eugene Fama and Kenneth French was published in the Journal of Finance in October 2006. Eugene Fama is an American economist‚ known for his work on portfolio theory and asset pricing and is working as a Professor of Finance at the Chicago University; while Kenneth French is
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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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