文档介绍：Chapter 13: The Capital Asset Pricing Model
Objective
The Theory of the CAPM
Use of CAPM in benchmarking
Using CAPM to determine
correct rate for
discounting
Chapter 13 Contents
The Capital Asset Pricing Model in Brief
Determining the Risk Premium on the Market Portfolio
Beta and Risk Premiums on Individual Securities
Using the CAPM in Portfolio Selection
Valuation & Regulating Rates of Return
Introduction
CAPM is a theory about equilibrium prices in the markets for risky assets
It is important because it provides
a justification for the widespread practice of passive investing called indexing
a way to estimate expected rates of return for use in evaluating stocks and projects
The Capital Asset Pricing Model in Brief
CAPM is an equilibrium theory based on the theory of portfolio selection
The basic question
What would risk premiums on securities be in equilibrium if people had the same set of forecasts of expected returns and risks and all chose their portfolios optimally according to the principles of efficient diversifications?
Assumptions of CAPM
Assumption 1 (homogeneous in information processing)
Investors agree in their forecasts of expected rates of return, standard deviation, and correlations of the risky securities
Assumption 2 (homogeneous in behavior)
Investors generally behave optimally according the theory of portfolio selection
Intuitive of CAPM
All the investors will allocate their investments between the riskless asset and the same tangent portfolio
In equilibrium, the aggregate demand for each security is equal to its supply
The only way the asset market can clear is if the relative proportions of risky assets in tangent portfolio are the proportions in which they are valued in the market place, . the market portfolio
The Capital Market Line (CML)
Standard Deviation s
Expected Return (%)
CML
rf
Lending Borrowing
M
E(rM)- rf
sM
Efficient Risk-reward
In equilibrium, any efficient portfolio should