Capital Asset Pricing Model and Stock Data Analysis Financial Essay
The second part of the article includes a discussion on assessing the performance of two respective mutual funds and pension funds invested in Argentine junk bonds. According to Levy 2011, pg. 55, the Capital Asset Pricing Model CAPM is used in determining the required return of various risky assets, such as: The Capital Asset Pricing Model CAPM states that assets are priced in accordance with a trade-off between non-diversifiable risk and return expectations. . The model supports the status of academic finance, as well as the belief that asset pricing is an appropriate subject for economic study. The formula. ra, rrf, Ba rm-rrf Essentially, the expected return is equal to the return on a risk-free asset plus a risk premium. where the required rate of return for an asset is required. Ba the risk. The Capital Asset Pricing model CAPM is used to calculate expected returns given the cost of capital and risk of assets. The CAPM formula requires the return for the general market, the. The Capital Asset Pricing Model CAPM is an investment theory and stock valuation model proposed by William Sharpe 1964, John Litner 1965, Jack Treynor 1961, 1962 and Jan Mossin 1966, and builds on the model of portfolio choice created by Harry Markowitz. 1959. The CAPM was proposed by the founders. The CAPM model for capital asset pricing states that the price of assets is proportional to a trade-off between non-diversifiable risk and return expectations. The model supports the status of academic finance, as well as the belief that asset pricing is an appropriate subject for economic study.