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Nguyen Thuy
Nguyen Thuy
BusinessEconomy & Finance
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Investments Chapter 10: The Capital Asset Pricing Model
Two Definitions Explained ,[object Object],[object Object],[object Object],[object Object]
The Basic Question of the CAPM ,[object Object]
Two Additional Concepts Introduced in the CAPM Framework ,[object Object],[object Object],[object Object],[object Object]
Assumptions Behind the CAPM ,[object Object],[object Object],[object Object],[object Object],[object Object]
The Opportunity Line: I ,[object Object],[object Object],[object Object],[object Object]
The Opportunity Line: II - Illustration Exhibit 10.1 Investment opportunities with risk-free asset Source: From Introduction to Investments , 2nd edn, by Levy. © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215.
The Capital Market Line: I ,[object Object],[object Object],[object Object]
The Capital Market Line: II ,[object Object],[object Object],[object Object]
The Separation Principle ,[object Object],[object Object],[object Object],[object Object],[object Object]
Separating Systemic from Nonsystemic Risk ,[object Object],[object Object],[object Object]
Definition of Risk When Investors Hold the Market Portfolio ,[object Object],[object Object]
Aggressive, Neutral and Defensive Assets ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
The Security Market Line: I ,[object Object],[object Object],[object Object],[object Object]
Expected Return on an Individual Security ,[object Object],[object Object],[object Object],Expected return on a security = Risk-free rate + Beta of the security × Market risk premium
The Security Market Line: II – The Risk Premium ,[object Object],[object Object],[object Object],[object Object]
The Security Market Line: III – Illustration Exhibit 3.4 Security line (SML) Source: From Introduction to Investments , 2nd edn, by Levy. © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215.
Estimating an Asset ’s Beta: I – The Characteristic Line ,[object Object],[object Object]
Estimating an Asset ’s Beta: II – The Characteristic Line Exhibit 10.4 Examples of the characteristic line Source: From Introduction to Investments , 2nd edn, by Levy. © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215.
Estimating an Asset ’s Beta: III – The Characteristic Line ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Estimating an Asset ’s Beta: IV – The Characteristic Line ,[object Object],Exhibit 10.8 Estimating the characteristic line for Microsoft
Estimates of  for Selected Stocks Stock Beta Bank of America 1.55 Borland International 2.35 Travelers, Inc. 1.65 Du Pont 1.00 Kimberly-Clark Corp. 0.90 Microsoft 1.05 Green Mountain Power 0.55 Homestake Mining 0.20 Oracle, Inc. 0.49
Theoretical Extensions of the CAPM ,[object Object],[object Object],[object Object],[object Object],[object Object]
Empirical Validity of the CAPM ,[object Object],[object Object],[object Object]
Empirically Testing the Predictions of the CAPM ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
CAPM Anomalies ,[object Object],[object Object],[object Object],[object Object]
Methodological Problems in Testing the CAPM ,[object Object],[object Object],[object Object],[object Object]

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L Pch10

  • 1. Investments Chapter 10: The Capital Asset Pricing Model
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  • 7. The Opportunity Line: II - Illustration Exhibit 10.1 Investment opportunities with risk-free asset Source: From Introduction to Investments , 2nd edn, by Levy. © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215.
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  • 17. The Security Market Line: III – Illustration Exhibit 3.4 Security line (SML) Source: From Introduction to Investments , 2nd edn, by Levy. © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215.
  • 18.
  • 19. Estimating an Asset ’s Beta: II – The Characteristic Line Exhibit 10.4 Examples of the characteristic line Source: From Introduction to Investments , 2nd edn, by Levy. © 1999. Reprinted with permission of South-Western, a division of Thomson Learning: www.thomsonrights.com. Fax 800 730-2215.
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  • 22. Estimates of  for Selected Stocks Stock Beta Bank of America 1.55 Borland International 2.35 Travelers, Inc. 1.65 Du Pont 1.00 Kimberly-Clark Corp. 0.90 Microsoft 1.05 Green Mountain Power 0.55 Homestake Mining 0.20 Oracle, Inc. 0.49
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