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ICWAI -Notes on Capital Asset Pricing Model (CAPM)
« on: September 05, 2012, 09:59:02 PM »
Notes on Capital Asset Pricing Model (CAPM)

Notes on Capital Asset Pricing Model (CAPM)


 


Road Map
Part A Introduction to finance.
Part B Valuation of assets, given discount rates.
Part C Determination of discount rates.
• Historic asset returns.
• Time value of money.
• Risk.
• Portfolio theory.
• Capital Asset Pricing Model (CAPM).
• Arbitrage Pricing Theory (APT).
Part D Introduction to corporate finance.


 


Main Issues
• Derivations of CAPM
• Implications of CAPM
• Empirical Evidence


 


Contents
1 Introduction .......................... 11-3
2 TheMarketPortfolio...................... 11-4
3 DerivationofCAPM...................... 11-5
3.1 ANumericalIllustrationofCAPM ................. 11-6
3.2 AFormalDerivationofCAPM ................... 11-8
3.3 Implications of CAPM . . . . . . . . ................ 11-9
4 UnderstandingRiskinCAPM ................. 11-12
5 ApplicationsofCAPM..................... 11-18
6 Empirical Evaluation of CAPM . . . . . . . . . . . . . . . . . 11-20
7 SummaryofCAPM....................... 11-23
8 AppendixA:CapitalMarketLine ............... 11-24
9 AppendixB:ExtensionsofCAPM............... 11-25
9.1 MultifactorCAPM ......................... 11-25
9.2 Consumption CAPM (CCAPM) . . . ................ 11-28
10 Homework ........................... 11-31


Source: Notes on Capital Asset Pricing Model (CAPM)

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ICWAI -Notes on Capital Asset Pricing Model (CAPM)
« on: September 05, 2012, 09:59:02 PM »

 
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