Transcription of Capital Asset Pricing Model - UNSW
{{id}} {{{paragraph}}}
Example: bankruptcy
Capital Asset Pricing Model - UNSW
Capital Asset Pricing ModelEcon 487 Outline CAPM Assumptions and Implications CAPM and the Market Model Testing the CAPM Conditional CAPMCAPM Readings Zivot, Ch. 8 (pp. 185-191) (page # s at top of page) Benninga, Ch. 10 (pp. 221-228) Perold (2004) (pp. 288-289)What is the CAPM? Theory of Asset price determination for firms Based on portfolio theory and Market Model The only thing that matters is Beta (co-movement with the market) Alternative to valuation theory for individual firmsCAPM Assumption #1 Many investors who are all price takers , financial markets are competitive Returns provide full summary of investment opportunitiesCAPM Assumption #2 All investors plan to invest over the same time horizon Abstracts from heterogeneity in investors ( , risk averse have different time preferences than the risk tolerant)
idiosyncratic investor behavior. For example, optimal management of capital gains taxes involves early realization of losses and deferral of capital gains, and so taxable investors might react very differently to changes in asset values depending on when they purchased the asset (Constantinides, 1983). Nevertheless, it will still be a positive
Tags:
Information
Domain:
Source:
Link to this page:
Please notify us if you found a problem with this document: