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CHAPTER TWELVE ARBITRAGE PRICING THEORY --Arti Pradhan
Background ,[object Object],[object Object],[object Object]
Market Index on Efficient Set Corresponding Security Market Line Expected Return Risk (Return Variability) Market Index A B C Market Beta Expected Return x x x x x x x x x x x x x x x x x x x x x x x x
Market Index Market Index Inside Efficient Set Corresponding Security Market Cloud Expected Return Risk (Return Variability) Expected Return Market Beta
FACTOR MODELS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Curved Relationship Between Expected Return and Interest Rate Beta -15% -5% 5% 15% 25% 35% Expected Return -3 -1 1 3 Interest Rate Beta A B C D E F
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],The Arbitrage Pricing Theory
The Arbitrage Pricing Theory ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],The Arbitrage Pricing Theory
APT Relationship Between Expected Return and Interest Rate Beta -15% -5% 5% 15% 25% 35% Expected Return -3 -1 1 3 Interest Rate Beta A B C D E F
FACTOR MODELS ,[object Object],[object Object],[object Object],[object Object],[object Object]
FACTOR MODELS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
FACTOR MODELS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
FACTOR MODELS ,[object Object],[object Object],[object Object],[object Object]
FACTOR MODELS ,[object Object],[object Object]

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12 apt

  • 1. CHAPTER TWELVE ARBITRAGE PRICING THEORY --Arti Pradhan
  • 2.
  • 3. Market Index on Efficient Set Corresponding Security Market Line Expected Return Risk (Return Variability) Market Index A B C Market Beta Expected Return x x x x x x x x x x x x x x x x x x x x x x x x
  • 4. Market Index Market Index Inside Efficient Set Corresponding Security Market Cloud Expected Return Risk (Return Variability) Expected Return Market Beta
  • 5.
  • 6. Curved Relationship Between Expected Return and Interest Rate Beta -15% -5% 5% 15% 25% 35% Expected Return -3 -1 1 3 Interest Rate Beta A B C D E F
  • 7.
  • 8.
  • 9.
  • 10. APT Relationship Between Expected Return and Interest Rate Beta -15% -5% 5% 15% 25% 35% Expected Return -3 -1 1 3 Interest Rate Beta A B C D E F
  • 11.
  • 12.
  • 13.
  • 14.
  • 15.