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Adjustment Of The Capital Asset Pricing Model For Inflation
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Book Synopsis Adjustment of the Capital Asset Pricing Model for Inflation by : C. de Groof
Download or read book Adjustment of the Capital Asset Pricing Model for Inflation written by C. de Groof and published by . This book was released on 1976 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Fallacy of Adjusting Valuation for Growth and Inflation by : Richard A. Booth
Download or read book The Fallacy of Adjusting Valuation for Growth and Inflation written by Richard A. Booth and published by . This book was released on 2016 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: It has become almost standard practice in Delaware appraisal proceedings for the courts to adjust discount rates downward by the projected rate of inflation and GDP growth so as to reflect the prospect of higher future returns because of these factors. Since the value of a business varies inversely with the discount rate, the result of applying lower discount rates is that appraisal plaintiffs enjoy larger awards. But these adjustments to discount rates determined under the capital asset pricing model (CAPM) are wholly erroneous. They reflect a basic misunderstanding of CAPM as well as the discounted cash flow (DCF) method of valuation.First, these adjustments ignore the fact that returns from both inflation and growth are already built into the market rate of return as determined under CAPM since that rate is derived from historical averages that include both inflation and growth. Thus, to subtract these components of the required rate of return from the discount rate is to negate the model itself.Second, to adjust the discount rate because of the prospect of growth reflects a misunderstanding of cash flow as a measure of return. Ordinarily, growth requires reinvestment of some portion of available cash. But cash flow is a measure of the potential for distributions to investors. If cash is used to grow the business, it cannot also be distributed to investors. Thus, it is wrong to adjust the discount rate for growth without also adjusting return (as measured by cash flow) for capital spending. If both such adjustments are made, the resulting valuation is unaffected (except where growth opportunities offer rates of return higher than the cost of capital).The result of these errors is to increase values found in appraisal proceedings, to raise deal prices, and to encourage litigation, all to the ultimate detriment of stockholder wealth. The simple solution is to require appraisal plaintiffs to demonstrate - by company-specific evidence - that the subject company has identified and can exploit investment opportunities that will yield returns in excess of its cost of capital - economic rents - for some determinable period of time. But it is never appropriate to adjust for growth or inflation in perpetuity as many courts have recently ruled.
Author :Gregory W. Huffman Publisher :London : Department of Economics, University of Western Ontario ISBN 13 :9780771406140 Total Pages :22 pages Book Rating :4.4/5 (61 download)
Book Synopsis Adjustment Costs and Capital Asset Pricing by : Gregory W. Huffman
Download or read book Adjustment Costs and Capital Asset Pricing written by Gregory W. Huffman and published by London : Department of Economics, University of Western Ontario. This book was released on 1985 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Inflation Risk and Capital Asset Pricing by : Chi-cheng Hsia
Download or read book Inflation Risk and Capital Asset Pricing written by Chi-cheng Hsia and published by . This book was released on 1974 with total page 364 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Capital Asset Prices Under Uncertain Inflation by : Elaine Tren-Yu Chen
Download or read book Capital Asset Prices Under Uncertain Inflation written by Elaine Tren-Yu Chen and published by . This book was released on 1976 with total page 442 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Strategic Asset Allocation and International Capm by : Philipp Kowollik
Download or read book Strategic Asset Allocation and International Capm written by Philipp Kowollik and published by GRIN Verlag. This book was released on 2012-03 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2004 in the subject Business economics - Investment and Finance, grade: 1,3, European Business School - International University Schlo Reichartshausen Oestrich-Winkel, 28 entries in the bibliography, language: English, abstract: The decision as to which Assets should be included in a portfolio is first addressed in a Strategic Asset Allocation policy. The determination of the Strategic Asset Allocation is one of the most important factors that influences a portfolio's performance. The process of defining a policy within the Strategic Asset Allocation should be done by both the portfolio manager and the potential investor. Together with the International Capital Asset Pricing Model the Strategic Asset Allocation tries to find an optimal portfolio which maximizes return and, at the same time, tries to minimize the possible risk. Due to currency and inflation risk, hedging should be considered as crucial point during the Strategic Asset Allocation. 1 2 Strategic Asset Allocation under consideration of the International Capital Asset Pricing Model decides to which asset classes a portfolio should be divided. Factors which determine the decision are expected returns, variances and covariances as well as the degree of risk aversion. The analysis of mean-variance which was mostly developed by Harry Markowitz gave portfolio advice until the early eighties concerning the optimal asset allocation. The aims of this approach were to minimize risk while receiving the highest possible return. Over the years the method was critized several times because of a lack of decisive factors. Markowitz only assumed a one period model and permanent income, currency and inflation risk were also ignored.3 Strategic Asset Allocation is much more than investing short- term. Investors care about inflation and currency risk. Hedging is particularly needed.
Book Synopsis Capital Asset Pricing Models Under Uncertain Inflation by : Kamalakar Vinayak Pradhan
Download or read book Capital Asset Pricing Models Under Uncertain Inflation written by Kamalakar Vinayak Pradhan and published by . This book was released on 1978 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Inflation and Security Returns in the Context of the Capital Asset Pricing Model by : Lucian Uri Dothan
Download or read book Inflation and Security Returns in the Context of the Capital Asset Pricing Model written by Lucian Uri Dothan and published by . This book was released on 1976 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A New Model of Capital Asset Prices by : James W. Kolari
Download or read book A New Model of Capital Asset Prices written by James W. Kolari and published by Springer Nature. This book was released on 2021-03-01 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book proposes a new capital asset pricing model dubbed the ZCAPM that outperforms other popular models in empirical tests using US stock returns. The ZCAPM is derived from Fischer Black’s well-known zero-beta CAPM, itself a more general form of the famous capital asset pricing model (CAPM) by 1990 Nobel Laureate William Sharpe and others. It is widely accepted that the CAPM has failed in its theoretical relation between market beta risk and average stock returns, as numerous studies have shown that it does not work in the real world with empirical stock return data. The upshot of the CAPM’s failure is that many new factors have been proposed by researchers. However, the number of factors proposed by authors has steadily increased into the hundreds over the past three decades. This new ZCAPM is a path-breaking asset pricing model that is shown to outperform popular models currently in practice in finance across different test assets and time periods. Since asset pricing is central to the field of finance, it can be broadly employed across many areas, including investment analysis, cost of equity analyses, valuation, corporate decision making, pension portfolio management, etc. The ZCAPM represents a revolution in finance that proves the CAPM as conceived by Sharpe and others is alive and well in a new form, and will certainly be of interest to academics, researchers, students, and professionals of finance, investing, and economics.
Book Synopsis The Capital Asset Pricing Model in the 21st Century by : Haim Levy
Download or read book The Capital Asset Pricing Model in the 21st Century written by Haim Levy and published by Cambridge University Press. This book was released on 2011-10-30 with total page 457 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Capital Asset Pricing Model (CAPM) and the mean-variance (M-V) rule, which are based on classic expected utility theory, have been heavily criticized theoretically and empirically. The advent of behavioral economics, prospect theory and other psychology-minded approaches in finance challenges the rational investor model from which CAPM and M-V derive. Haim Levy argues that the tension between the classic financial models and behavioral economics approaches is more apparent than real. This book aims to relax the tension between the two paradigms. Specifically, Professor Levy shows that although behavioral economics contradicts aspects of expected utility theory, CAPM and M-V are intact in both expected utility theory and cumulative prospect theory frameworks. There is furthermore no evidence to reject CAPM empirically when ex-ante parameters are employed. Professionals may thus comfortably teach and use CAPM and behavioral economics or cumulative prospect theory as coexisting paradigms.
Book Synopsis Asset Prices, Financial Liberalization, and the Process of Inflation in Japan by : Mr.Alexander W. Hoffmaister
Download or read book Asset Prices, Financial Liberalization, and the Process of Inflation in Japan written by Mr.Alexander W. Hoffmaister and published by International Monetary Fund. This book was released on 1994-12-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Book Synopsis The Capital Asset Pricing Model Inflation and the Investment Horizon by : Haim Levy
Download or read book The Capital Asset Pricing Model Inflation and the Investment Horizon written by Haim Levy and published by . This book was released on 1979 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Inflation and Capital Asset Pricing Determination by : Cheng F. Lee
Download or read book Inflation and Capital Asset Pricing Determination written by Cheng F. Lee and published by . This book was released on 1982 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Empirical Investigation of the Intertemporal Capital Asset Pricing Model Under Expected Inflation by : Ching-Hsing Fan Loo
Download or read book An Empirical Investigation of the Intertemporal Capital Asset Pricing Model Under Expected Inflation written by Ching-Hsing Fan Loo and published by . This book was released on 1984 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Capital Asset Pricing under inflation by : Myron J. Gordon
Download or read book Capital Asset Pricing under inflation written by Myron J. Gordon and published by . This book was released on 1975 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :Independent Pricing and Regulatory Tribunal of New South Wales Publisher : ISBN 13 :9781921328770 Total Pages :34 pages Book Rating :4.3/5 (287 download)
Book Synopsis Adjusting for Expected Inflation in Deriving the Cost of Capital by : Independent Pricing and Regulatory Tribunal of New South Wales
Download or read book Adjusting for Expected Inflation in Deriving the Cost of Capital written by Independent Pricing and Regulatory Tribunal of New South Wales and published by . This book was released on 2009 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In its pricing determinations, IPART uses a real rate of return to determine the cost of capital allowance of its building blocks model. This cost of capital allowance forms a substantial part of the annual revenue requirement of utilities. IPART is currently reviewing how it adjusts for expected inflation in deriving the cost of capital. This discussion paper considers a new methodology that can be used to adjust the cost of capital for inflation using the Australian zero coupon inflation-indexed bond market"--IPART website abstract.
Book Synopsis An Information Adjusted Capital Asset Pricing Model by : Dieter Alfons Dorp
Download or read book An Information Adjusted Capital Asset Pricing Model written by Dieter Alfons Dorp and published by . This book was released on 1989 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt: