Search results
Results from the WOW.Com Content Network
The consumption-based capital asset pricing model (CCAPM) is a model of the determination of expected (i.e. required) return on an investment. [1] The foundations of this concept were laid by the research of Robert Lucas (1978) and Douglas Breeden (1979). [2] The model is a generalization of the capital asset pricing model (CAPM). While the ...
Financial analysts use CAPM to estimate the fair value of a stock by considering factors such as the stock’s volatility , the risk-free interest rate and the equity risk premium – the premium ...
An estimation of the CAPM and the security market line (purple) for the Dow Jones Industrial Average over 3 years for monthly data.. In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.
See: Financial modeling § Accounting, and Valuation using discounted cash flows. (Note that an alternate, although less common approach, is to apply a "fundamental valuation" method, such as the T-model, which instead relies on accounting information, attempting to model return based on the company's expected financial performance.)
The capital asset pricing model (CAPM) is an earlier, (more) influential theory on asset pricing. Although based on different assumptions, the CAPM can, in some ways, be considered a "special case" of the APT; specifically, the CAPM's security market line represents a single-factor model of the asset price, where beta is exposure to changes in ...
The underlying idea is that investors require a rate of return from their resources – i.e. equity – under the control of the firm's management, compensating them for their opportunity cost and accounting for the level of risk resulting. This rate of return is the cost of equity, and a formal equity cost must be subtracted from net income.
Using these figures, your return for the first sub-period is: HP1 = ($10,500 - $10,000) / $10,000 = 5% You decide to invest $5,000 more, bringing the value to $15,500.
In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, [ 1 ] it is widely believed to be an improved alternative to its predecessor, the capital asset pricing model (CAPM ...