capm

Hi @David Harper CFA FRM @Nicole Seaman Beta is a measure of a stock's volatility in relation to the market. It essentially measures the relative risk exposure of holding a particular stock or sector in relation to the market. Thus a beta greater than 1 indicates that the portfolio will move...

In our latest Week in Financial Education (WIFE), Richie's new video helpfully reviews a series of duration questions, including modified, Macaulay, money duration and price value of basis point (PVBP; aka, PV01). Compared to the FRM, the CFA's approach to duration differs only slightly. The...

Hi, I have a question and I know the answer for it is c, I understand why, but there is option d that I cannot understand as not being another correct answer. As per me, the correct answer should be options c and d... Can you please explain? Question:

Hello, In the CAPM/MPT chapter, I was trying to get an intuitive understanding of how Beta is computed, without using maths (just like CAPM can be expressed as price of time + price of risk * Quantity of risk). Covariance upon variance can be understood, but I was wondering what an intuitive...

Under the MPYT/CAPM notes, there are several illustrated examples. Is there a workbook resource that is available for me to see how these tables are actually generated. Im having trouble figuring out how to generate the eqtn for covariance(port, market)

Hi all, reading the FRM part I book 1 on CAPM (p. 75) I noticed that the text refers to the relationship between beta and expected return as the Capital Market Line. To me this is wrong as what they are describing is the Security Market Line. There is an important distinction between the two as...

Dear David, Sorry if missed something, but why do you think that RF should be stated in the question? It could be derived from the equations? Maybe irrelevant but I am afraid I am missing something methodologically important. Thanks in advance

why is correlation included to solve the problem? I cant see anything in the notes when we multiply the two terms x correlation? Beta (i,M) = covariance(i, M)/variance(M) = 24%*15%*0.70/15%^2 = 1.12 <<- must know all of these steps! CAPM: E[R(i)] = Rf + Beta (i,M)*[R(M) - Rf] = 3% +...

Risk-adjusted performance measures (RAPMs) include Treynor and Jensen's, both of which are functions of the CAPM/SML, and the Sharpe ratio, which can be understood in the context of the CML. David's XLS: https://trtl.bz/2EIIb6j

The CAPM is a ex-ante single-factor model where the single-factor is the market's excess return: it says that we should expect an excess return that is proportional to the stock's beta, which is the stock's exposure to market's excess return, as measured by the stock's beta. Beta can be...

Hi everyone, Where can I find the derivation of formula (10.4)? Kind Regards, Filip

Hi, I am looking at Elton, Modern Portfolio Theory, Chapter 13 / Study Notes: Elton, Chapter 13 but only able to find CAPM not APT also not in later chapters as I see questions related to APT or APT/CAPM comparisons in the question set under this chapter. Could someone point me to the right...

My question here is how do we find out each of them? And if not specified which one to use in calculating Information Ratio?

Learning objectives: Describe multifactor models, and compare and contrast multifactor models to the CAPM. Explain how stochastic discount factors are created and apply them in the valuation of assets. Describe efficient market theory and explain how markets can be inefficient. Questions...

Learning objectives: Provide examples of factors that impact asset prices, and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its assumptions, and explain how factor risk is addressed in the CAPM. Explain implications of using the CAPM to...

According to Bodie, Kane, Marcus each of the following is true, could someone please explain me how is it so? 1. While SMB (Small Minus Big) and HML (High Minus Low) are not themselves the candidates for relevant risk factors , the argument is that these variables are proxies for fundamental...

Questions: 609.1. Peter is evaluating the expected performance of two common stocks, Kintech and Zimit. He has gathered the following information: The riskfree rate is 1.0% The volatility of the market portfolio, σ(M), is 30.0% and its expected return, E(M), is 8.0%; i.e., its expected excess...

Yet again I found a set of notes that I had compiled from various sources and summarized the Portfolio Theory concepts within 17 pages.. This covers the important aspects of Portfolio theory including the various Modern Portfolio theory variations explained such as Efficient Frontier, CAPM, APT...

In the study notes for CAPM Equilibrium Theory: 1) All assets must be held in portfolios, including the risky asset portfolio. Sounds simple, but I'm not getting the importance of it. What does this mean? Why is this important?