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Portfolio Performance Residual Analysis And Capital Asset Pricing Model Tests
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Book Synopsis Portfolio Performance, Residual Analysis and Capital Asset Pricing Model Tests by : Edward M. Rice
Download or read book Portfolio Performance, Residual Analysis and Capital Asset Pricing Model Tests written by Edward M. Rice and published by . This book was released on 1979 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent work by Richard Roll has challenged the worth of portfolio performance measures based on the capital asset pricing model. This paper demonstrates that Roll's conclusions are due to his inappropriate use of a 'truly' ex-ante efficient index. Using a choice and information theoretic framework, an appropriate index is shown to be efficient relative to to the probabilities assessed by the 'market.' Residual analyses and portfolio performance tests, using such an index, yield meaningful results for a wide class of information structures. Roll's primary criticisms, however, relate to tests of the model itself. We argue that these criticisms are vastly overstated.
Book Synopsis The Capital Asset Pricing Model, Tests of Portfolios Selected from Stocks with Poor Past Performance and an Investigation of the Acility [sic] of Discriminant Analysis to Differentiate Performance by : Wayne Alan Fairburn
Download or read book The Capital Asset Pricing Model, Tests of Portfolios Selected from Stocks with Poor Past Performance and an Investigation of the Acility [sic] of Discriminant Analysis to Differentiate Performance written by Wayne Alan Fairburn and published by . This book was released on 1975 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Empirical and Theoretical Analysis of Capital Asset Pricing Model by : Mohammad Sharifzadeh
Download or read book An Empirical and Theoretical Analysis of Capital Asset Pricing Model written by Mohammad Sharifzadeh and published by Universal-Publishers. This book was released on 2010-11-18 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: The problem addressed in this dissertation research was the inability of the single-factor capital asset pricing model (CAPM) to identify relevant risk factors that investors consider in forming their return expectations for investing in individual stocks. Identifying the appropriate risk factors is important for investment decision making and is pertinent to the formation of stocks' prices in the stock market. Therefore, the purpose of this study was to examine theoretical and empirical validity of the CAPM and to develop and test a multifactor model to address and resolve the empirical shortcomings of the single-factor CAPM. To verify the empirical validity of the standard CAPM and of the multifactor model, five hypotheses were developed and tested against historical monthly data for U.S. public companies. Testing the CAPM hypothesis revealed that the explanatory power of the overall stock market rate of return in explaining individual stock's expected rates of return is very weak, suggesting the existence of other risk factors. Testing of the other hypotheses verified that the implied volatility of the overall market as a systematic risk factor and the companies' size and financial leverage as nonsystematic risk factors are important in determining stock's expected returns and investors should consider these factors in their investment decisions. The findings of this research have important implications for social change. The outcome of this study can change the way individual and institutional investors as well as corporations make investment decisions and thus change the equilibrium prices in the stock market. These changes in turn could lead to significant changes in the resource allocation in the economy, in the economy's production capacity and production composition, and in the employment structure of the society.
Book Synopsis Static Asset-pricing Models by : Andrew Wen-Chuan Lo
Download or read book Static Asset-pricing Models written by Andrew Wen-Chuan Lo and published by Edward Elgar Publishing. This book was released on 2007 with total page 680 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents a selection of the most important articles in the field of financial econometrics. Starting with a review of the philosophical background, this collection covers such topics as the random walk hypothesis, long-memory processes, asset pricing, arbitrage pricing theory, variance bounds tests, term structure models, and more.
Book Synopsis Capital Asset Pricing Model by : Ali Jahankhani
Download or read book Capital Asset Pricing Model written by Ali Jahankhani and published by . This book was released on 1978 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our research indicated that there is a linear relationship between risk and return and higher risk is associated with higher average return. These results are consistent with the implications of both Sharpe-Lintner version and Black version of the CAPM. Furthermore, our results did not reject the hypotheses that E(Y0)=Rf and E(Y1)=Rm-Rf. therefore, the empirical results of this study supported all the implications of the Sharpe-Lintner CAPM.
Book Synopsis Modern Portfolio Theory, the Capital Asset Pricing Model, and Arbitrage Pricing Theory by : Diana R. Harrington
Download or read book Modern Portfolio Theory, the Capital Asset Pricing Model, and Arbitrage Pricing Theory written by Diana R. Harrington and published by Prentice Hall. This book was released on 1987 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Empirical Asset Pricing by : Wayne Ferson
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Book Synopsis Testing the Linear Relationship of the Capital Asset Pricing Model by : Jad Zouheir Nohra
Download or read book Testing the Linear Relationship of the Capital Asset Pricing Model written by Jad Zouheir Nohra and published by . This book was released on 2007 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main purpose of the project is to relate the risk of assets to their expecte d returns (mainly assets that are traded on a handful of developed markets, incl uding US, Japanese, French, and German exchanges). In order to do so, we refer t o the Capital Asset Pricing Model (CAPM) which consists of relating the risk of an asset to its expected return by comparing it to the overall stock market. Thi s model is based on the existence of a linear relationship between the expected return of a given asset, and the market rate of return. Consequently, any return that is not explained by this linear relationship (abnormal return) will lead u s to reject the theoretical linear relationship stated and formulated in the CAP M. The first chapter will introduce the topic. The second chapter consists of prese nting the CAPM, its critiques and extensions. In the third chapter, a literature review will be conducted. Then, in the fourth chapter I will undertake time ser ies/cross-sectional analyses of the aforementioned equity markets in order to te st the CAPM model itself. The same stocks will be tested using the international version of the model. Finally, in the fifth chapter I will conclude with the im plications of my findings for asset pricing and investment.
Book Synopsis An Empirical Test of the "Capital Asset Pricing Modell" (CAPM) on Current Stock Data by : Lucas Ammelung
Download or read book An Empirical Test of the "Capital Asset Pricing Modell" (CAPM) on Current Stock Data written by Lucas Ammelung and published by . This book was released on 2020-12-30 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2020 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, Munich University of Applied Sciences, language: English, abstract: The goal of this study is thus to determine the best available asset pricing model in Germany and whether the use of pre-existing datasets, with the factors already calculated, brings results as accurate as a custom dataset. This is relevant in Germany as the CAPM is still the most commonly used way to compute the cost of equity with 34% of companies using it. Another 16% of companies are using asset pricing models with additional risk factors. To determine the answer to this, this study will look into the aforementioned three most commonly used models: the CAPM, the Fama and French three-factor model and the Carhart four-factor model. After explaining the background and functioning of the CAPM, this study will show the flaws within the model and how these flaws led to extensions of the CAPM. Each model will then be statistically analyzed with three distinct sets of data. Two of these are publicly available, while the last has been calculated for this study. Lastly, to understand how the difference in data used can influence the results from asset pricing models, the runtime and underlying factor of datasets will be modified, re-analyzed and compared to the initial results.
Book Synopsis Modern Portfolio Theory and Investment Analysis by : Edwin J. Elton
Download or read book Modern Portfolio Theory and Investment Analysis written by Edwin J. Elton and published by John Wiley & Sons. This book was released on 2009-11-16 with total page 748 pages. Available in PDF, EPUB and Kindle. Book excerpt: An update of a classic book in the field, Modern Portfolio Theory examines the characteristics and analysis of individual securities as well as the theory and practice of optimally combining securities into portfolios. It stresses the economic intuition behind the subject matter while presenting advanced concepts of investment analysis and portfolio management. Readers will also discover the strengths and weaknesses of modern portfolio theory as well as the latest breakthroughs.
Book Synopsis Portfolio Theory and Risk Management by : Maciej J. Capiński
Download or read book Portfolio Theory and Risk Management written by Maciej J. Capiński and published by Cambridge University Press. This book was released on 2014-08-07 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: With its emphasis on examples, exercises and calculations, this book suits advanced undergraduates as well as postgraduates and practitioners. It provides a clear treatment of the scope and limitations of mean-variance portfolio theory and introduces popular modern risk measures. Proofs are given in detail, assuming only modest mathematical background, but with attention to clarity and rigour. The discussion of VaR and its more robust generalizations, such as AVaR, brings recent developments in risk measures within range of some undergraduate courses and includes a novel discussion of reducing VaR and AVaR by means of hedging techniques. A moderate pace, careful motivation and more than 70 exercises give students confidence in handling risk assessments in modern finance. Solutions and additional materials for instructors are available at www.cambridge.org/9781107003675.
Book Synopsis Equity Markets and Portfolio Analysis by : R. Stafford Johnson
Download or read book Equity Markets and Portfolio Analysis written by R. Stafford Johnson and published by John Wiley & Sons. This book was released on 2014-06-05 with total page 720 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understand today's investment challenges and the role of the Bloomberg system In recent years, changes have swept through the investment industry like wildfire. Academia has followed along and provided new lenses for viewing this transformation, as well as new strategies for gaining a true understanding and knowledge of investment and financial markets. Now, Equity Markets and Portfolio Analysis has been created to further inform investment professionals and finance students on the basic concepts and strategies of investments, and to provide more detailed discussions on advanced strategies and models. The concepts covered in this book will help readers gain a better understanding of the markets and uses for an increasing number of securities, strategies, and methodologies. Equity Markets and Portfolio Analysis is the only core investment book that covers the functionality of Bloomberg terminals, increasingly critical tools both in the classroom and on the trading floor. As Bloomberg terminals now play a key role in the research, teaching, and managing of student investment funds, understanding the system's information and analytical functions has become more important than ever. In-depth coverage of fundamentals through more detailed concepts for students and professionals who want to better understand the evaluation, selection, and management of securities One-of-a-kind training and instructional course, introduction to Bloomberg investment subjects, and reference for CFA preparation Bloomberg material provided in an appendix accompanying each chapter, a useful option for professors Ideal for finance practitioners, investment bankers, and academics This unique resource will give readers both the foundational knowledge and the analytical tools necessary for investment success, both in the classroom and in the real world.
Book Synopsis Industry Returns, Single and Multifactor Asset Pricing Tests by : Syed I. Hussain
Download or read book Industry Returns, Single and Multifactor Asset Pricing Tests written by Syed I. Hussain and published by . This book was released on 2002 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical tests of the capital asset pricing model (CAPM) have shown that movements in a single factor market index poorly explain returns on individual securities. Assuming that a possible reason is the existence of pricing anomalies, more recent research has extended the model by adding new factors to explain systematic variations in stock returns and achieved significant results. In particular, securities with high book to market ratios (book equity divided by market equity, BE/ME) appear to command a value premium. One suggestion is that the BE/ME premium compensates for the systematic risk associated with financial distress. It has been argued that industries experience periods of growth and financial distress and it has been reported in the US literature that the BE/ME premium is not stationary. To explore this proposition, this paper examines the behaviour of CAPM and three-factor models when tested using portfolios of different industries through time. The results show that the three-factor model provides a better explanation of industry returns than the CAPM. Loadings on the BE/ME premium are not stationary and appear to vary for the different industries through time. Monthly returns in excess of the one month t-bill tend to be generally higher for the Basic industrial sector through time.
Book Synopsis Fundamental Models in Financial Theory by : Doron Peleg
Download or read book Fundamental Models in Financial Theory written by Doron Peleg and published by MIT Press. This book was released on 2014-04-11 with total page 493 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding and applying complex modern financial models in real life scenarios, including the Black-Litterman model for constructing an optimal portfolio while incorporating personal views. This book provides an innovative, integrated, and methodical approach to understanding complex financial models, integrating topics usually presented separately into a comprehensive whole. The book brings together financial models and high-level mathematics, reviewing the mathematical background necessary for understanding these models organically and in context. It begins with underlying assumptions and progresses logically through increasingly complex models to operative conclusions. Readers who have mastered the material will gain the tools needed to put theory into practice and incorporate financial models into real-life investment, financial, and business scenarios. Modern finance's most bothersome shortcoming is that the two basic models for building an optimal investment portfolio, Markowitz's mean-variance model and Sharpe and Treynor's Capital Asset Pricing Model (CAPM), fall short when we try to apply them using Excel Solver. This book explores these two models in detail, and for the first time in a textbook the Black-Litterman model for building an optimal portfolio constructed from a small number of assets (developed at Goldman Sachs) is thoroughly presented. The model's integration of personal views and its application using Excel templates are demonstrated. The book also offers innovative presentations of the Modigliani–Miller model and the Consumption-Based Capital Asset Pricing Model (CCAPM). Problems at the end of each chapter invite the reader to put the models into immediate use. Fundamental Models in Financial Theory is suitable for classroom use or as a reference for finance practitioners.
Book Synopsis Advances in Investment Analysis and Portfolio Management by : Cheng-Few Lee
Download or read book Advances in Investment Analysis and Portfolio Management written by Cheng-Few Lee and published by Elsevier. This book was released on 2002-07-12 with total page 289 pages. Available in PDF, EPUB and Kindle. Book excerpt: Twelve papers focus on investment analysis, portfolio theory, and their implementation in portfolio management
Book Synopsis The Econometric Problems Associated with Size-sorted Portfolios in Empirical Tests of the Capital Asset Pricing Model by : Pierre Henri Hillion
Download or read book The Econometric Problems Associated with Size-sorted Portfolios in Empirical Tests of the Capital Asset Pricing Model written by Pierre Henri Hillion and published by . This book was released on 1988 with total page 574 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Multifactor Models Do Not Explain Deviations from the CAPM by : Archie Craig MacKinlay
Download or read book Multifactor Models Do Not Explain Deviations from the CAPM written by Archie Craig MacKinlay and published by . This book was released on 1994 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: A number of studies have presented evidence rejecting the validity of the Capital Asset Pricing Model (CAPM). This evidence has spawned research into possible explanations. These explanations can be divided into two main categories - the risk based alternatives and the nonrisk based alternatives. The risk based category includes multifactor asset pricing models developed under the assumptions of investor rationality and perfect capital markets. The nonrisk based category includes biases introduced in the empirical methodology, the existence of market frictions, or explanations arising from the presence of irrational investors. The distinction between the two categories is important for asset pricing applications such as estimation of the cost of capital. This paper proposes to distinguish between the two categories using ex ante analysis. A framework is developed showing that ex ante one should expect that CAPM deviations due to missing risk factors will be very difficult to statistically detect. In contrast, deviations resulting from nonrisk based sources will be easy to detect. Examination of empirical results leads to the conclusion that the risk based alternatives is not the whole story for the CAPM deviations. The implication of this conclusion is that the adoption of empirically developed multifactor asset pricing models may be premature.
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