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Asset Pricing in Discrete Time: A Complete Markets Approach

Ser-Huang Poon and Richard Stapleton

Published in print:
2005
Published Online:
July 2005
ISBN:
9780199271443
eISBN:
9780191602559
Item type:
book
Publisher:
Oxford University Press
DOI:
10.1093/0199271445.001.0001
Subject:
Economics and Finance, Financial Economics

Relying on the existence, in a complete market, of a pricing kernel, this book covers the pricing of assets, derivatives, and bonds in a discrete time, complete markets framework. It is primarily ... More


No Free Lunches

John Kay

in The Business of Economics

Published in print:
1996
Published Online:
November 2003
ISBN:
9780198292227
eISBN:
9780191596520
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198292228.003.0009
Subject:
Economics and Finance, Microeconomics

Discussing the irrelevance of corporate finance to firm valuation, this chapter provides support for the assertion that the profitability of a business can only be the result of its underlying ... More


ASSET PRICES IN A SINGLE-PERIOD MODEL

Ser-Huang Poon and Richard Stapleton

in Asset Pricing in Discrete Time: A Complete Markets Approach

Published in print:
2005
Published Online:
July 2005
ISBN:
9780199271443
eISBN:
9780191602559
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199271445.003.0001
Subject:
Economics and Finance, Financial Economics

‘Asset Prices in a Single-period Model’ derives asset prices in a one-period model. The authors derive a version of the Capital Asset Pricing Model (CAPM) using a complete market, state-contingent ... More


Portfolio Pricing Methods

Patrick L. Anderson

in The Economics of Business Valuation: Towards a Value Functional Approach

Published in print:
2013
Published Online:
September 2013
ISBN:
9780804758307
eISBN:
9780804783224
Item type:
chapter
Publisher:
Stanford University Press
DOI:
10.11126/stanford/9780804758307.003.0011
Subject:
Economics and Finance, Financial Economics

The idea of business investments assembled as part of an investment portfolio is a powerful one with ramifications that extend to the pricing of individual investments. The author describes the ... More


International Equity Markets: Risk and Return

YIGIT ATILGAN, TURAN G. BALI, and K. OZGUR DEMIRTAS

in International Finance: A Survey

Published in print:
2012
Published Online:
May 2013
ISBN:
9780199754656
eISBN:
9780199979462
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199754656.003.0009
Subject:
Economics and Finance, Financial Economics, International

There is mixed evidence from U.S. studies on the relationship between conditional expected market returns and conditional variance. This chapter investigates the risk-return tradeoff in the ... More


Cost of Capital

H. Kent Baker, J. Clay Singleton, and E. Theodore Veit

in Survey Research in Corporate Finance: Bridging the Gap between Theory and Practice

Published in print:
2010
Published Online:
May 2011
ISBN:
9780195340372
eISBN:
9780199894215
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195340372.003.0004
Subject:
Economics and Finance, Financial Economics

This chapter reviews the findings of academic surveys of corporate executives indicating the estimation and use of cost of capital (also known as weighted average cost of capital or WACC). The ... More


Asset Pricing and Portfolio Choice Theory

Kerry E. Back

Published in print:
2017
Published Online:
May 2017
ISBN:
9780190241148
eISBN:
9780190241179
Item type:
book
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780190241148.001.0001
Subject:
Economics and Finance, Financial Economics

This book is intended as a textbook for asset pricing theory courses at the Ph.D. or Masters in Quantitative Finance level and as a reference for financial researchers. The first two parts of the ... More


Introduction and Overview

Claus Munk

in Financial Asset Pricing Theory

Published in print:
2013
Published Online:
May 2013
ISBN:
9780199585496
eISBN:
9780191751790
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199585496.003.0001
Subject:
Economics and Finance, Econometrics

The first chapter introduces and motivates the topic of the book and explains the approach and structure of the book. The deficiencies of the well-known Capital Asset Pricing Model are discussed. ... More


Basic Consumption-Based Asset Pricing

Claus Munk

in Financial Asset Pricing Theory

Published in print:
2013
Published Online:
May 2013
ISBN:
9780199585496
eISBN:
9780191751790
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199585496.003.0008
Subject:
Economics and Finance, Econometrics

This chapter combines the general results on state-price deflators from Ch. 4 with the relation between state-price deflators and individuals’ marginal rate of substitution developed in Ch. 6. This ... More


Factor Models

Claus Munk

in Financial Asset Pricing Theory

Published in print:
2013
Published Online:
May 2013
ISBN:
9780199585496
eISBN:
9780191751790
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199585496.003.0010
Subject:
Economics and Finance, Econometrics

The consumption-based asset pricing models are elegant, but tests and applications suffer from the questionable quality of the available consumption data, and at least some of these models are ... More


Factor Theory

Andrew Ang

in Asset Management: A Systematic Approach to Factor Investing

Published in print:
2014
Published Online:
August 2014
ISBN:
9780199959327
eISBN:
9780199382323
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199959327.003.0006
Subject:
Economics and Finance, Financial Economics

Assets earn risk premiums because they are exposed to underlying factor risks. The capital asset pricing model (CAPM), the first theory of factor risk, states that assets that crash when the market ... More


Valuation with Risk Factors and Risk Neutrality

Andrew Davidson and Alexander Levin

in Mortgage Valuation Models: Embedded Options, Risk, and Uncertainty

Published in print:
2014
Published Online:
August 2014
ISBN:
9780199998166
eISBN:
9780199363698
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199998166.003.0005
Subject:
Economics and Finance, Financial Economics

This chapter introduces key principles of valuation. Using an example of a single-factor economy, a proof is given that the expected investment return is equal to the risk-free rate plus a risky ... More


Risk Management in a Normal World

Gilles Bénéplanc and Jean-Charles Rochet

in Risk Management in Turbulent Times

Published in print:
2011
Published Online:
April 2015
ISBN:
9780199774081
eISBN:
9780190258474
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:osobl/9780199774081.003.0010
Subject:
Business and Management, Finance, Accounting, and Banking

This chapter explores risk management in the Normal world. A Normal world where the mean-variance criterion can be used safely, portfolio choice is easy, the diversification principle works well, and ... More


Winners and Losers in Financial Economics, or Fama versus Black: How Markets Became Efficient and Equilibrium Was Defeated

Simone Polillo

in The Ascent of Market Efficiency: Finance That Cannot Be Proven

Published in print:
2020
Published Online:
January 2021
ISBN:
9781501750373
eISBN:
9781501750397
Item type:
chapter
Publisher:
Cornell University Press
DOI:
10.7591/cornell/9781501750373.003.0004
Subject:
Sociology, Economic Sociology

This chapter looks at the conflict between the exponents of two different and incompatible ways of conducting financial research by Fischer Black and Eugene Fama. It contrasts the trajectory of the ... More


Factor Models

Kerry E. Back

in Asset Pricing and Portfolio Choice Theory

Published in print:
2017
Published Online:
May 2017
ISBN:
9780190241148
eISBN:
9780190241179
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780190241148.003.0006
Subject:
Economics and Finance, Financial Economics

The CAPM and factor models in general are explained. Factors can be replaced by the returns or excess returns that are maximally correlated (the projections of the factors). A factor model is ... More


Dynamic Asset Pricing

Kerry E. Back

in Asset Pricing and Portfolio Choice Theory

Published in print:
2017
Published Online:
May 2017
ISBN:
9780190241148
eISBN:
9780190241179
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780190241148.003.0010
Subject:
Economics and Finance, Financial Economics

The distinction between conditional and unconditional factor pricing models is explained. The conditional CAPM implies that unconditional risk premia are linear in the expected beta and the beta of ... More


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