CAPM(资本资产定价模型英文教程)

Stocks Expected Return Beta A 16% 1.2 B 19% 1.3 C 13% 0.75 E(rm) = 18% rf = 14% Which of these stocks is correctly priced?
Example of CAPM
Interpretation of the Numerical Value of Beta
Interpretation of the Numerical Value of Beta
Beta < 1.0 Stock's return is less
volatile than the market return
Low Beta Stocks
Less systematic market risk
May be appropriate for low-risk
tolerant (defensive) investors
Individual Stock Betas
May change over time
Given the following security market line
E(ri) = 0.07 + 0.09I What must be the returns for two stocks assuming their betas are 1.2 and 0.9?
Interpretation of the Numerical Value of Beta
High Beta Stocks
More systematic market risk
May be appropriate for high-risk
tolerant (aggressive) investors
The variability of the market return The correlation between
– the stock's return and – the market return
Beta Coefficients
Beta coefficients are the slope of
Tendency to move toward 1.0, the
market beta
Portfolio Betas
Weighted average of the individual
asset's betas
May be more stable than
individual stock betas
The Capital Asset Pricing Model (CAPM)
The CAPM has
– A macro component explains risk and return in a portfolio context – A micro component explains individual stock returns – The micro component is also used to value stocks
Beta Coefficients and The Security Market Line
The figure relating systematic risk
(beta) and the return on a stock
Beta Coefficients and The Security Market Line
Characteristic line for the ith asset is: ri,t = ai + birm,t + ei,t OR ri,t = birm,t + ai + ei,t
Take Variance of both sides of Equation
VAR (ri,t) = VAR(birm,t ) +VAR(ai) + VAR(ei,t) VAR(birm,t ) = VAR (ri,t) - VAR(ei,t) OR VAR(ei,t) = VAR(ri,t) - VAR(birm,t )
Interpretation of the Numerical Value of Beta
Beta = 1.0 Stock's return has
same volatility as the market return
Beta > 1.0 Stock's return is more
volatile than the market return
How Characteristic Line leads to CAPM?
The characteristic regression line of an
asset explains the asset’s systematic variability of returns in terms of market forces that affect all assets simultaneously The portion of total risk not explained by characteristic line is called unsystematic risk
Capital Asset Pricing Model (CAPM)
For a very well-diversified portfolio, beta
is the correct measure of a security’s risk. All investments and portfolios of investments must lie along a straight-line in the return-beta space Required return on any asset is a linear function of the systematic risk of that asset E(ri) = rf + [E(rm) – rf] i
CAPM and the Characteristic Line
The Characteristic Line
Total risk of any asset can be assessed by measuring variability of its returns Total risk can be divided into two parts— diversifiable risk (unsystematic risk) and nondiversifiable risk (systematic risk) The characteristic line is used to measure statistically the undiversifiable risk and diversifiable risk of individual assets and portfolios
Assets with high degrees systematic
risk must be priced to yield high returns in order to induce investors to accept high degrees of risk that are undivesifiable in the market CAPM illustrates positive relationship between systematic risk and return on an asset
CAPM can be used to price any asset
provided we know the systematic risk of that asset In equilibrium, every asset must be priced so that its risk-adjusted required rate of return falls exactly on the straight line If an investment were to lie above or below that straight line, then an opportunity for riskless arbitrage would exist.
the regression line relating – the return on the market (the independent variable) to – the return on the stock (the dependent variable)
Beta Coefficients
Beta Coefficients
An index of risk
Measures the volatility of a stock (or
portfolio) relative to the market
Beta Coefficients Combine
The variability of the asset’s return
Beta Coefficients and The Security Market Line
The return on a stock depends on
– the risk free rate (rf) – the return on the market (rm) – the stock's beta – the return on a stock: k= rf + (rm - rf)beta