The Arbitrage Pricing Theory As An Approach To Capital Asset Valuation

Author : Christian Koch
Publisher : GRIN Verlag
Page : 81 pages
File Size : 47,8 Mb
Release : 2009-03
Category : Electronic
ISBN : 9783640277858

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The Arbitrage Pricing Theory as an Approach to Capital Asset Valuation by Christian Koch Pdf

Diploma Thesis from the year 1996 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, European Business School - International University Schlo Reichartshausen Oestrich-Winkel, 160 entries in the bibliography, language: English, abstract: A "few surprises" could be the trivial answer of the Arbitrage Pricing Theory if asked for the major determinants of stock returns. The APT was developed as a traceable framework of the main principles of capital asset pricing in financial markets. It investigates the causes underlying one of the most important fields in financial economics, namely the relationship between risk and return. The APT provides a thorough understanding of the nature and origins of risk inherent in financial assets and how capital markets reward an investor for bearing risk. Its fundamental intuition is the absence of arbitrage which is, indeed, central to finance and which has been used in virtually all areas of financial study. Since its introduction two decades ago, the APT has been subject to extensive theoretical as well as empirical research. By now, the arbitrage theory is well established in both respects and has enlightened our perception of capital markets. This paper aims to present the APT as an appropriate instrument of capital asset pricing and to link its principles to the valuation of risky income streams. The objective is also to provide an overview of the state of art of APT in the context of alternative capital market theories. For this purpose, Section 2 describes the basic concepts of the traditional asset pricing model, the CAPM, and indicates differences to arbitrage theory. Section 3 constitutes the main part of this paper introducing a derivation of the APT. Emphasis is laid on principles rather than on rigorous proof. The intuition of the pricing formula and its consistency with the state space preference theory are discussed. Important contributions to the APT are classified and br

Author : Eleftherios Giovanis
Publisher : GRIN Verlag
Page : 101 pages
File Size : 49,5 Mb
Release : 2010-03
Category : Electronic
ISBN : 9783640576593

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Application of Capital Asset Pricing (CAPM) and Arbitrage Pricing Theory (APT) Models in Athens Exchange Stock Market by Eleftherios Giovanis Pdf

Seminar paper from the year 2007 in the subject Business economics - Investment and Finance, grade: 90.0%, language: English, abstract: This paper examines the estimating and forecasting performance of the different and various Generalized Autoregressive Conditional Heteroscedasticity-GARCH's models in relation to Capital Asste Pricing Model (CAPM) model. We apply the CAPM model with ordinary least squares (OLS) method to investigate if an ARCH (Autoregressive Conditional Heteroscedasticity) is presented and we are trying to decide and to analyze which GARCH model is the most appropriate and the best fitted for the financial time series that we have chosen. We apply CAPM model in the financial time series of the share prices of Technology-Software Sector in Athens Exchange stock market for the period January 1st of 2002 to October 30th of 2007 for the enterprises "Unibrain" "MLS Informatics" and "Dionic" respectively, from April 2nd of 2002 to 30th October of 2007 for the enterprise "Compucon", from August 2nd of 2002 to 30th October of 2007 for the enterprise "Centric", and finally from February 2nd of 2004 to 30th October of 2007 for the enterprise "Ilyda". Additionally, we apply roiling regressions, where the full programming routines in EVIEWS and MATLAB are described detailed. We conclude that the slope β coefficient of CAPM model is not constant through the time period of rolling regressions we apply. In the final part we examine a simple Arbitrage Pricing Theory (APT) model.

Author : Anonim
Publisher : Bookboon
Page : 57 pages
File Size : 52,7 Mb
Release : 2024-06-29
Category : Electronic
ISBN : 9788776817121

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The Capital Asset Pricing Model by Anonim Pdf

Author : James W. Kolari,Wei Liu,Jianhua Z. Huang
Publisher : Springer Nature
Page : 326 pages
File Size : 41,6 Mb
Release : 2021-03-01
Category : Business & Economics
ISBN : 9783030651978

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A New Model of Capital Asset Prices by James W. Kolari,Wei Liu,Jianhua Z. Huang Pdf

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.

Author : Manuel Kürschner
Publisher : GRIN Verlag
Page : 81 pages
File Size : 43,9 Mb
Release : 2008-07
Category : Electronic
ISBN : 9783640099252

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Limitations of the Capital Asset Pricing Model (CAPM) by Manuel Kürschner Pdf

Research Paper (undergraduate) from the year 2008 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, University of Cooperative Education, 31 entries in the bibliography, language: English, abstract: The objective of this paper is to give an overview of the most important movements of the complex area of asset pricing. This will be tried by logically structuring and building up the topic from its origins, the Capital Asset Pricing Model, and then over its main points of critique, in order to arrive at the different options developed by financial science that try to resolve those problematic aspects. Due to the complexity of this subject and the limited scope of this paper, obviously it will not be possible to discuss each model or movement in depth. Coherently, the aim is to point out the main thoughts of each aspect discussed. For further information, especially concerning the deeper mathematical backgrounds and derivations of the models, the author would like to refer the reader to the books mentioned in this paper. Many of those works, finance journal publications and the literature on asset pricing in general, set their focus on different parts of this paper, which again underlines the complexity in terms of scientific scope and intellectual and mathematical intricacy of this topic.

Author : Diana R. Harrington
Publisher : Prentice Hall
Page : 242 pages
File Size : 51,7 Mb
Release : 1987
Category : Business & Economics
ISBN : UOM:39076000519178

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Modern Portfolio Theory, the Capital Asset Pricing Model, and Arbitrage Pricing Theory by Diana R. Harrington Pdf

Author : James W. Kolari,Seppo Pynnönen
Publisher : Springer Nature
Page : 247 pages
File Size : 42,5 Mb
Release : 2023-01-01
Category : Business & Economics
ISBN : 9783031167843

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Investment Valuation and Asset Pricing by James W. Kolari,Seppo Pynnönen Pdf

This textbook is intended to fill a gap in undergraduate finance curriculums by providing an asset pricing text that is accessible for undergraduate finance students. It offers an overview of original works on foundational asset pricing studies that follows their historical publication chronologically throughout the text. Each chapter stays close to the original works of these major authors, including quotations, examples, graphical exhibits, and empirical results. Additionally, it includes statistical concepts and methods as applied to finance. These statistical materials are crucial to learning asset pricing, which often applies statistical tests to evaluate different asset pricing models. It offers practical examples, questions, and problems to help students check their learning and better understand the fundamentals of asset pricing., alongside including PowerPoint slides and an instructor’s manual for professors.

Author : Robert A. Jarrow
Publisher : Springer
Page : 457 pages
File Size : 45,6 Mb
Release : 2018-06-04
Category : Mathematics
ISBN : 9783319778211

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Continuous-Time Asset Pricing Theory by Robert A. Jarrow Pdf

Yielding new insights into important market phenomena like asset price bubbles and trading constraints, this is the first textbook to present asset pricing theory using the martingale approach (and all of its extensions). Since the 1970s asset pricing theory has been studied, refined, and extended, and many different approaches can be used to present this material. Existing PhD–level books on this topic are aimed at either economics and business school students or mathematics students. While the first mostly ignore much of the research done in mathematical finance, the second emphasizes mathematical finance but does not focus on the topics of most relevance to economics and business school students. These topics are derivatives pricing and hedging (the Black–Scholes–Merton, the Heath–Jarrow–Morton, and the reduced-form credit risk models), multiple-factor models, characterizing systematic risk, portfolio optimization, market efficiency, and equilibrium (capital asset and consumption) pricing models. This book fills this gap, presenting the relevant topics from mathematical finance, but aimed at Economics and Business School students with strong mathematical backgrounds.

Author : Cleveland S. Patterson
Publisher : Bloomsbury Publishing USA
Page : 342 pages
File Size : 52,6 Mb
Release : 1995-04-30
Category : Business & Economics
ISBN : 9780313035715

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The Cost of Capital by Cleveland S. Patterson Pdf

Knowledge about the magnitude of the cost of capital invested in an asset and its determinants is essential for the analysis of corporate investment decisions and for assessing profitability. This book provides a clear conceptual understanding of the cost of capital, the characteristics of an asset that influence it, and a critical, comprehensive, and up-to-date evaluation of practical means for estimating its magnitude. It is intended primarily for use by professional managers, but will also be valuable to future managers in advanced capital budgeting courses. The focus of the discussion is on estimation methods that are theoretically sound and consistent with a corporate goal of value creation. Three methods are analyzed in depth: the discounted cash flow model, the capital asset pricing model, and arbitrage pricing theory. For each method, the basic theory is set out in a nontechnical manner and empirical evidence in support of the model is critically reviewed. The bulk of the discussion then focuses on practical means for implementing the methods for decision-making purposes. Later chapters focus on the effects of the debt-supporting characteristics of assets, on the valuation of options embedded in securities, and on the estimation of the cost of capital for evaluating international investments. The final chapter discusses certain aspects of the use of cost of capital in public utility regulation. Care is taken to separate out key issues from more peripheral material through a comprehensive set of supplementary notes.

Author : Bing Cheng
Publisher : World Scientific
Page : 91 pages
File Size : 50,6 Mb
Release : 2008
Category : Business & Economics
ISBN : 9789812832504

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Asset Pricing by Bing Cheng Pdf

Modern asset pricing models play a central role in finance and economic theory and applications. This book introduces a structural theory to evaluate these asset pricing models and throws light on the existence of Equity Premium Puzzle. Based on the structural theory, some algebraic (valuation-preserving) operations are developed in asset spaces and pricing kernel spaces. This has a very important implication leading to practical guidance in portfolio management and asset allocation in the global financial industry. The book also covers topics, such as the role of over-confidence in asset pricing modeling, relationship of the portfolio insurance with option and consumption-based asset pricing models, etc.

Author : Robert A. Korajczyk
Publisher : Unknown
Page : 424 pages
File Size : 46,7 Mb
Release : 1999
Category : Business & Economics
ISBN : NWU:35556025544081

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Asset Pricing and Portfolio Performance by Robert A. Korajczyk Pdf

A comprehensive reference work presenting an original framework for evaluating observed differences in returns across assets.

Author : Sudipto Bhattacharya,George M. Constantinides
Publisher : World Scientific Publishing Company Incorporated
Page : 371 pages
File Size : 50,8 Mb
Release : 2005-01-01
Category : Business & Economics
ISBN : 9789812563743

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Theory of Valuation by Sudipto Bhattacharya,George M. Constantinides Pdf

Author : Leonard C. MacLean,William T. Ziemba
Publisher : World Scientific
Page : 941 pages
File Size : 42,6 Mb
Release : 2013
Category : Business & Economics
ISBN : 9789814417358

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Handbook of the Fundamentals of Financial Decision Making by Leonard C. MacLean,William T. Ziemba Pdf

This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).

Author : Jochen E.M. Wilhelm
Publisher : Springer Science & Business Media
Page : 124 pages
File Size : 49,9 Mb
Release : 2012-12-06
Category : Business & Economics
ISBN : 9783642500947

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Arbitrage Theory by Jochen E.M. Wilhelm Pdf

The present 'Introductory Lectures on Arbitrage-based Financial Asset Pricing' are a first attempt to give a comprehensive presentation of Arbitrage Theory in a discrete time framework (by the way: all the re sults given in these lectures apply to a continuous time framework but, probably, in continuous time we could achieve stronger results - of course at the price of stronger assumptions). It has been turned out in the last few years that capital market theory as derived and evolved from the capital asset pricing model (CAPM) in the middle sixties, can, to an astonishing extent, be based on arbitrage arguments only, rather than on mean-variance preferences of investors. On the other hand, ar bitrage arguments provided access to a wider range of results which could not be obtained by standard CAPM-methods, e. g. the valuation of contingent claims (derivative assets) Dr the_ investigation of futures prices. To some extent the presentation will loosely follow historical lines. A selected set of capital asset pricing models will be derived according to their historical progress and their increasing complexity as well. It will be seen that they all share common structural properties. After having made this observation the presentation will become an axiomatical one: it will be stated in precise terms what arbitrage is about and what the consequences are if markets do not allow for risk-free arbitrage opportunities. The presentation will partly be accompanied by an illus trating example: two-state option pricing.

Author : Attiya Y. Javed
Publisher : Unknown
Page : 48 pages
File Size : 43,8 Mb
Release : 2000
Category : Capital assets pricing model
ISBN : STANFORD:36105111190745

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Alternative Capital Asset Pricing Models by Attiya Y. Javed Pdf