文本说明讲稿jonathan的bf nbs8015-lect11.pptxVIP

1 Capital Asset Pricing Model Fabrizio Casalin © NBS8015 Lecture 11 2 Seminars commence on next week Seminars scheduled on weeks 6 (i.e. w/c 5/3), 7, 8 (w/c 16/4) and 9 The timetable is as follows:  Group 1 - Mon 1.30-2.30 - NUBS 2.08 Group 2 - Tue 10.30-11.30 - NUBS 1.11 Group 3 - Fri 13.30 - 14.30 - NUBS 2.08 Group 4 - Fri 14.30 - 15.30 - NUBS 2.08 Group 5 - Tue 9.30 - 10.30 - NUBS 1.11 Group 6 - Fri 3.30-4.30 - NUBS 2.08 Please note that seminar groups are different from those of Term 1. Please check email from Susanne sent on wed 25/1 Fabrizio Casalin © 3 Learning Objectives: 1 – Assumptions on which CAPM is built 2 – derivation of the CAPM 3 – beta coefficient of an individual asset 4 – CAPM and Single Index Model 5 – interpretation of the SML under the CAPM 6 – properties of the CAPM 7 – CAPM with restricted borrowing Fabrizio Casalin © NBS8015 – FT CP – Material: Bodie, Kane and Marcus, Investments, McGraw Hill, Ch. 9 (pp. 279 - 301) and Casu Girardone and Molineux “Introduction to Banking”, FT Prentice, Ch. 8, pag. 219. – Please click here and answer the MCT 4 CAPM is cornerstone of modern financial economics Describes structure of expected rates of return on risky assets when the market is in equilibrium Sheds light on the theoretical relationship than should occur between risk of assets and their expected returns Widely used despite empirical evaluations do not support it 1 – Assumptions on which CAPM is built Investors price-takers with endowment small compared to total endowment of the market Investors with single-period horizon (myopic behaviour) Available investments are stocks, bonds and risk-free borrowing and lending. Non-traded assets not available No tax and no transaction costs Fabrizio Casalin © NBS8015 – FT CP 5 e) Investors are mean-variance optimizers, i.e. use Markowitz Portfolio Selection Model seen in Lecture 10 f) Investors share same information (i.e. we assume rational expectations) and derive same input list to feed in