投资学chap010-7thed.docVIP

CHAPTER 10: ARBITRAGE PRICING THEORY AND MULTIFACTOR MODELS OF RISK AND RETURN 1 a. If there are an infinite number of assets with identical characteristics, then a well-diversified portfolio of each type will have only systematic risk since the non-systematic risk will approach zero with large n. The mean will equal that of the individual (identical) stocks. c. There is no arbitrage opportunity because the well-diversified portfolios all plot on the security market line (SML). Because they are fairly priced, there is no arbitrage. 2. The expected return for Portfolio F equals the risk-free rate since its beta equals 0. For Portfolio A, the ratio of risk premium to beta is: (12 ? 6)/1.2 = 5 For Portfolio E, the ratio is lower at: (8 – 6)/0.6 = 3.33 This implies that an arbitrage opportunity exists. For instance, you can create a Portfolio G with beta equal to 0.6 (the same as E’s) by combining Portfolio A and Portfolio F in equal weights. The expected return and beta for Portfolio G are then: E(rG ) = (0.5 ? 12%) + (0.5 ? 6%) = 9% ?G = (0.5 ? 1.2) + (0.5 ? 0) = 0.6 Comparing Portfolio G to Portfolio E, G has the same beta and higher return. Therefore, an arbitrage opportunity exists by buying Portfolio G and selling an equal amount of Portfolio E. The profit for this arbitrage will be: rG – rE =[9% + (0.6 ? F)] ( [8% + (0.6 ? F)] = 1% That is, 1% of the funds (long or short) in each portfolio. 3. Substituting the portfolio returns and betas in the expected return-beta relationship, we obtain two equations with two unknowns, the risk-free rate (rf ) and the factor risk premium (RP): 12 = rf + (1.2 ? RP) 9 = rf + (0.8 ? RP) Solving these equations, we obtain: rf = 3% and RP = 7.5% 4. Equation 10.9 applies here: E(rp ) = rf + ?P1 [E(r1 ) ( rf ] + ?P2 [E(r2 ) – rf ] We need to find the risk premium (RP) for each of the two factors: RP1 = [E(r1 ) ( rf ] and RP2 = [E(r2 ) ( rf ] In order to do so, we solve the following system of two equations w