资本资产定价模型(CAPM.pptx

Foundations of Financial Analysis and Investments;Today‘s lecture;The portfolio consists of two risky assets D (debt) and E (equity) Their weights in the portfolio are We construct risky portfolios varying to provide the lowest possible risk for any given level of expected return E(rp) = wD E(rD) + wEE(rE) ;Dr Ekaterina Svetlova;Dr Ekaterina Svetlova;1. Brief revision: Lecture 2;Dr Ekaterina Svetlova;Dr Ekaterina Svetlova;Dr Ekaterina Svetlova;;Unlimited borrowing and lending at a risk-free rate: Riskless asset is an asset with a certain return for the given time horizon. For example: US Treasury bonds that automatically adjust for inflation (TIPS: Treasury inflation protected securities) or short term US Treasury bills (US T-bills) Standard deviation of the return: σ = 0 ;If you invest in asset H and riskless asset: xH and xf = 1 - xH;Dr Ekaterina Svetlova;? ErH - Rf σH ;Sharpe ratio of asset H: (12% - 5%)/ 40% = 0.175;Use of Sharpe ratio in practice: Shape ratio is used to measure the performance of a portfolio Advantage: the risk adjusted performance measurement;Sharpe ratio of H Sharpe ratio of M The combination of risk-free asset and M dominates the combination of risk-free asset and H;How much of each risky asset should one hold in the portfolio?;In case of many risky assets: ;Use of Tobin separation in practice: ;Capital Market Line (CML) = set of potential allocations between a risky asset and a no-risky asset (or a portfolio that contains only risky assets and risk-free assets);?;;; 3. MPT and CAPM: preliminary remarks;The model gives us a precise prediction of the relationship that we should observe between the risk of an asset and its expected return in equilibrium Functions of the CAPM model: To provide a benchmark rate of return for evaluating investments (“fair” return given a risk) To make a guess for new securities (e.g., IPOs) To measure the risk of an indiv