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Asset Pricing Models Essay Examples

The asset pricing models CAPM
For instance, wereas the capital asset pricing model uses the expected return of a security, AT uses a security’s risk expected return, i addition to, te risk premiums of a couple of macro-economic elements. Terefore, fom this proposition it is undeniable that CAPM has...
Pages: 4 (1000 words) , Essay , Finance & Accounting
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Asset pricing models (CAPM and APT)
Agents are appointed under this model to get information quite reliable regarding the risk and returns of an asset. Aent provides the expected returns of the asset depending on his experience. Rsk factor calculated by the agent is more preferable because it is actually based...
Pages: 4 (1000 words) , Essay , Macro & Microeconomics
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Explaining the Poor Performance of Consumption-based Asset Pricing Models
According to the argument presented, te variable investigated would influence the outcome of the accounting system. I this sense, te article seems to focus on developing an acceptable model, wich does not only attract criticism, bt also support from various think tanks. Ithink the approach...
Pages: 8 (2000 words) , Essay , Finance & Accounting
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We often hear that information is crucial to investors in the financial market. Comment on the role of information in the asset pricing models we saw in class
Investment is not just a question of stocks and bonds but that of protection and opportunities with respect to a wide range of contingencies (Markowitz, 1952). I helps individuals and corporations to allocate financial resources to areas where future cash flows are assured. Wile deciding...
Pages: 6 (1500 words) , Essay , Macro & Microeconomics
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Critically analyse the relative merits of the capital asset pricing model (CAPM) and
The following issues: te period to which the evaluation will refer, te lack of risk – the investment is riskless apart from the risk premium, te fact that investors would generally prefer the lack o risk and the most possible return and so on (Armitage,...
Pages: 7 (1750 words) , Essay
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Critically analyse the capital asset pricing model (CAPM) and arbitrage pricing theory (APT) models.your analysis may include drawing simlarities ,difference and weakness of the models in relation to real life practical situations .MBA FINACCE SUBJECi
In the late 40s, Hrry Markowitz, agraduate student in economics with a penchant for mathematical processes, ws developing his dissertation on the stock market. Originally, h was fashioning his paper after the present value model of John Burr Williams. Halfway through, hwever, Mrkowitz realized that...
Pages: 12 (3000 words) , Assignment
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Review of The augmented CAPM
The asset pricing model was first developed by Sharpe (1964) and Lintner (1965). Hwever, tere had been lot of advancement in asset pricing for the past 35 years. Te progress was important for understanding the issues encountered while implementing asset pricing models in any emerging...
Pages: 16 (4000 words) , Literature review , Finance & Accounting
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Corporate Finance
The difference between the company’ scurrent assets and current liability is known as working capital. A mentioned by Levy (2010), crrent liabilities of the companies arise due to the current assets. Tus, b controlling the current assets, te company can manage the working capital. Mst...
Pages: 6 (1500 words) , Essay , Finance & Accounting
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How good is the Arbitrage Pricing Theory as an asset pricing model
Arbitrage Pricing Theory facilitates the understanding of historic sensitiveness of share prices to macroeconomic fluctuations of a company especially when the market is bullish or bearish. AT can be helpful for an investor in the formulation of long-term and short-term investment strategies according to different...
Pages: 4 (1000 words) , Essay
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Analyse the relative merits of the capital asset pricing model (CAPM) and empirical approaches to asset pricing
In accordance to Fabozzi et al.209) CAPM is based on a series of assumptions, wich can be indicatively described as follows: a the investment decisions are influenced by the level of the return expected; tis means that each investment decision is expected to result to...
Pages: 7 (1750 words) , Essay
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The three main developments in asset pricing during the last 25 years
Models are mathematical representations of significant patterns that could be derived from data, uually the result of econometrics exercises based on regression analyses. Coming in the form of equations (packed with Greek letters), tese models help us to understand the reality that is captured by...
Pages: 4 (1000 words) , Essay
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Critically analyse the relevance of portfolio theory and the capital asset pricing model (CAPM) to an investor or fund manager in the equity markets
This interplay between risk and return became the cornerstone principle behind the modern portfolio theory. Amodel that is popular among most finance professionals, ad is based on the modern portfolio theory that has seen wide acceptance by both academics and practitioners is the Sharpe-Lintner Capital...
Pages: 8 (2000 words) , Essay
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FINANCIAL MARKET AND PRODUCT RISK
It is useful as it represents a statistical representation of the past risk. Athough there is no certainty but a high probability will be attached to infer the statement that the companies which strong stock price history will also performs in the future. Te critical...
Pages: 4 (1000 words) , Essay , Finance & Accounting
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Discussion on the CAPM and the APT Models
This article was published in “Portfolio Section”. For his body of work which introduced the concept of risk in portfolio selection, he was awarded the Nobel Prize in economics in 1990. By the 1960s, several financial economists were intrigued by the idea of a systematic...
Pages: 12 (3000 words) , Assignment , Macro & Microeconomics
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Critically analyse the relevance of portfolio theory and the capital asset pricing model (CAPM) to an investor or fund manager in the equity markets
According to Scott (2003), te portfolio theory holds that the basis for choosing assets for investment is the manner in which they interact with one another instead of how they perform individually or in isolation. The combination of assets is termed the portfolio. The theory...
Pages: 8 (2000 words) , Essay
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Critically analyse the relative merits of the capital asset pricing model (CAPM) and empirical approaches to asset pricing
Moreover the relative advantages of CAPM over APT are low. CPM states that the “opportunity cost of equity” equals the risk-free rate of return, pus the systematic risk of the company multiplied by the stock’s excess return over the risk free rate of return (also...
Pages: 8 (2000 words) , Essay
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Critically analyse the relative merits of the capital asset pricing model (CAPM) and empirical approaches to asset pricing (such as the Fama and French model)
This is then the basis for deciding what investment action to take in the asset. If the market price is presently $9 then the market overvalues the stock, ad it would be a good time to sell the stock, bt not a good time to...
Pages: 8 (2000 words) , Essay
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Main Concepts behind the Capital Asset Pricing Model
The model also considers the markets expected return and the theoretical risk-free assets expected return. CAPM draws from the portfolio theory developed by Harry Markowitz (1959). The formula of calculating expected return of an asset portfolio using the CAPM model is given as E(Ri) =...
Pages: 7 (1750 words) , Term Paper , Finance & Accounting
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A central assumption made in Mean-Variance Analysis and the Capital Asset Pricing Model (CAPM) is that investors prefer to invest in the most efficient portfolios available
The market prices and inflation, sch investor can incur a loss simply because the future movements of the portfolio cannot be predicted (Fama 2009, p Given an axiom that all investors fear risk, nne of them will be willing to invest in a portfolio that...
Pages: 5 (1250 words) , Essay , Finance & Accounting
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The Idiosyncratic Volatility Anomaly
The tangible market returns of a security will, a times, ilustrate a direct relationship with such modelling that serves to justify these scientific methods of analyses. Dring other market conditions, sch returns conflict these models designed to facilitate a more shrewd investment with no legitimate...
Pages: 6 (1500 words) , Essay , Finance & Accounting
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Do you believe that equity fund managers with a good knowledge of behavioural finance can consistently outperform the market on a risk-adjusted basis Give reas
Here emotional factors and intuition to a large extent are the decisive factors in trading. Sme of the most likely occurrences that can lead to fund managers deviate from making rational decisions in the market include importance of playing safe compared to earning high risk...
Pages: 6 (1500 words) , Essay
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The Capital asset pricing model (CAPM) is a very useful model and it is used widely in the industry even though it is based on very strong assumptions. Discuss in the light of recent developments in the area
Investors of present-day economic theory demand that they get maximum returns on their investments based on the risks which they are willing to take. I spite of the fact that these two suppositions constitute the foundations of advanced financialtheory, te formal advancement of CAPM includes...
Pages: 6 (1500 words) , Assignment , Finance & Accounting
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Finance For Management
No wonder, Nale & McElroy (2004) were less categorical, ad stated that “sometimes stock market valuations may look irrational. Bt in the longer term the markets are efficient processors of information and get valuation about right”In addition, te random walk theory indicates that price movements...
Pages: 4 (1000 words) , Essay
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The Economics of Financial Markets: Asset Prices Variability and Pricing Model
The main aim of this section is to develop the net present value relationship. The net present value equation is open to misapprehension but if the equation is developed carefully, it provides several in-depth information about evaluation of asset prices as well as enlightens few...
Pages: 14 (3500 words) , Essay , Finance & Accounting
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Some academics refute the usefulness of the capital asset priceing model stating that it has a number of empirical problems. critically evaluate this view
The following paragraphs evaluate the various problems regarding the empirical validity of the CAPM. Oe of the most important factors is the measurement of beta which is the covariance between an asset’s return and the market return divided by market return’s variance. Hnce, etimation of...
Pages: 6 (1500 words) , Essay
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Critically analyse the relevance of portfolio theory and the capital asset pricing model (CAPM) to an investor or fund manager in the equity markets
(CAPMs) (Furman and Zitikis, 2008). Te most frequently used of these CAPMs is that of Sharpe (1964), Lntner (1965) and Black (1972). Te CAPM relates the expected return on an asset to the expected return on the market portfolio of all assets in the market....
Pages: 8 (2000 words) , Essay
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Personal statement to LSE MScFinance
Finance has always been my favorite subject. I is marvellous to see how sophisticated products, sch as futures and swaps, hve been specially tailored for clients to transfer risks between counterparties. Ihave also enjoyed studying the behaviors of stock prices and empirical tests of asset...
Pages: 4 (1000 words) , Essay , Finance & Accounting
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The Capital Assets Pricing Model
The introductory part of this paper sets the principal arguments underlying this study. The most important themes needed to be discussed have also been introduced. The remaining part of the paper will be structured as follows. Section two of the paper discusses the theoretical framework....
Pages: 12 (3000 words) , Research Paper , Management
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Ross(1976) introduced multi factor models into the framework of asset pricing when CAPM maintains that there is only the beta of the portfolio. Discuss the AP
In analyzing the theory, w must first discuss the covariance matrix and the portfolio risk. Tere are several method in estimating covariance matrix one can be by using the simple volatility estimator (Garman-Klass, 1980) or with GARCH estimators (Engle,1982; Bllerslev, 1986). Aother method is that,...
Pages: 14 (3500 words) , Essay
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Risk Aversion, Portfolio Theory and the Capital-Asset Pricing Model
Hillebrand (2003) building on the concept advanced by Black argues that mean reversion phenomenon is a major cause of stock market crashes. Using data derived from the NYSE and S&P 500 indexes he demonstrates that mean reversion is a ‘transient but recurring phenomenon’, which has...
Pages: 12 (3000 words) , Assignment , Finance & Accounting
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An examination of the efficacy of Behavioral Finance
All these state that markets are in fact efficient. Hwever, rsearchers have also exposed many stock market anomalies that seem to be inconsistent with the efficient market hypothesis. Tading strategies seem to be widespread among fund managers and there is little evidence that they would...
Pages: 8 (2000 words) , Essay
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Explain the limitations of the Capital Asset Pricing Model and the extent to which the multi-factors approach has overcome these limitations
A good example is the single time period horizon that means that the investor is only concerned with the earning and his portfolio comes at the end point of the present period (Banz 1981). Hwever, i the real world, te investor also aims at securing...
Pages: 12 (3000 words) , Essay , Finance & Accounting
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STOCK MARKET EFFICIENCY
May follow a ‘Deductive Approach’ by testing the theoretical propositions with the adoption of suitable testing methods or an ‘Inductive Approach’ by collecting relevant empirical data and evolving the necessary theories based on the data collected. Fr the present study on the Stock Market Efficiency,...
Pages: 4 (1000 words) , Essay
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Lessons of What Can You Learn from Warren Buffett
Although Buffett had undergone several business failures before he became one of the world’s most famous business personalities, his innovative, resourceful, and cautious attitude caused him to overcome his financial crisis and push beyond his limits. Buffett’s success in Berkshire Hathaway and his other financial...
Pages: 5 (1250 words) , Book Report/Review , Business
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Investment and Portfolio Analysis
As such the model is useful in helping portfolio managers identify portfolio investments. Bsically, te model is considered a good method for optimal construction of portfolios, alocation of assets, ad rationalization of the value of diversification (Black et al. Te MV optimization model makes the...
Pages: 12 (3000 words) , Essay , Finance & Accounting
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*Topic:Marketing-'Shareholder value provides a comprehensive frameworks for evaluating and strategic and tactcal marketing decision. Critically evaluate this as
Marketing is a complex activity that aims to satisfy people outside (customers) in order to satisfy the people inside (shareholders, mnagers, ad employees) the business, ad not the other way around. Since customers are satisfied if the business makes the right strategic and tactical marketing...
Pages: 8 (2000 words) , Essay
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Evaluate the predictability of excess stock returns
The argument is that all there are about the future of the stock markets is basically news. Nws is always unpredictable since if something could be predicted then it ceases being news. Tis being the case, pedicting the excess returns from securities is by all...
Pages: 6 (1500 words) , Coursework , Finance & Accounting
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Financial economics
A good example is when two countries output similar physical amounts of goods in two separate years. De to adverse fluctuation in market exchange rates when the GDP of one country (measured in its own currency is converted to the other countrys currency using market...
Pages: 10 (2500 words) , Essay , Macro & Microeconomics
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International financil markts
Risk (risk associated with events occurring in individual companies such as strikes, nw marketing programs, lwsuits and new inventions (b) non diversifiable or market risk (risk associated with factors that affect all companies such as inflation, wr and recession (Elton, 1999). Te careful construction of...
Pages: 8 (2000 words) , Essay
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Evaluate the role of theory in explaining corporate risk management practice
Help of an example, a organization that discovers a mode to develop its business beneficially cannot hedge economically many of the risks from doing so. Te organization recognizes the risks from the development superior than anybody else. I it finds a technique to hedge these...
Pages: 7 (1750 words) , Essay
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Discuss the various ways in which modern investors manage the risk in their portfolios
The question is: Were do V and P come from? Sme say that V and P spring from the imagination while others maintain that V and P are a result of a deliberate cognitive process of logic and dispassionate judgment. Prhaps these, ad other conjectures...
Pages: 11 (2750 words) , Essay
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Using gretal express express the characteristic line of modern investment analysis from the CAPM , 2 MONTH BEFORE the 2008 financial crisis and 2 months after it. Using the time series Daily dow jones industrial average,risk free benchmark(3month treasur
This is because the p value of the before the crisis excess return is greater than 0.05 while that of the intercept is less than 0. Terefore, tis equation or model can’t be used in forecasting the Dow Jones excess returns using the after crisis...
Pages: 9 (2250 words) , Essay , Macro & Microeconomics
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Financial Modelling Report
However, i is widely accepted that the securities that have high return will also have a high risk. A such, fom the figure 1 and 2 below, te beta is directly proportional to the stock return, maning that as the beta increases, te return on...
Pages: 8 (2000 words) , Essay , Finance & Accounting
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How good is the Arbitrage Pricing Theory as an asset pricing model
These were then evaluated to find whether there is correspondence to any economic variables. Te empirical studies showed that there is very less consistency in terms of: Te second approach specified factors as a ‘priori’ rather than found out by evaluating returns on stocks. Te...
Pages: 4 (1000 words) , Essay
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Economics of Development
This paper illustrates that one of the frequent reasons for business failure is poor management and insufficient and poor management of financing comes second. For starting or relocating or expanding a business sufficient capital is required. Having good financing is not enough in attaining profits;...
Pages: 7 (1750 words) , Essay , Finance & Accounting
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Critically analyse the relative merits of the capital asset pricing model (CAPM) and empirical approaches to asset pricing
The approach is slightly different when there is auto-correlated variation in the risk and the prices of risk. Wen there is auto-correlated variation in risks, ten one period expected returns follow. Te sum of expected cash flows discounted for one period are not equivalent to...
Pages: 8 (2000 words) , Essay
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Modern pricing models
The Black–Scholes model assumes that the market consists of at least one risky asset, uually called the stock, ad one riskless asset, uually called the money market, csh, o bond. Te key idea is to hedge the option by buying and selling the underlying asset...
Pages: 10 (2500 words) , Essay , Mathematics
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Modern pricing models
This essay, te researcher purposes to cover various modern pricing models (MPM) and show case how useful they are for a particular company based on their financial application and compare each model, Sch as Geometric Brownian motion (GBM), Mrton Model, Hston Model, ad Bates Model...
Pages: 12 (3000 words) , Essay , Mathematics
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This EMA has two objectives: (a) to help you engage with new material in Part Four of the module, Regulation and the long term; and (b) to consolidate your understanding of the module as a whole. This will include a consideration of some of the prac
This further increases the probability of an amplified consultancy fee to be paid by investors who actually need expert’s advice. O the other hand investors are also resorting to the use of DIY (do-it-yourself) investment platforms which have the capability to advice investors on picking...
Pages: 13 (3250 words) , Essay , Human Resources
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Business schools bear a certain responsibility for (not preventing) the current financial crisis. Discuss by providing relevant examples
Prices of necessary goods and services are increasing at rapid speed and global organisations are increasingly cutting off their labour force. Tese are resulting in further decline in global income and hence decline in people’s purchasing power. Acording to many researchers, icluding Noble laureate Paul...
Pages: 10 (2500 words) , Essay , Management
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