公司理财第五版高等院校双语教材·金融系列-chapter 11(PPT 27页)

Note that the expected rate of return on any portfolio mixing Treasury bills and the market lies on a straight line. The risk premium is proportional to the portfolio beta.
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How well does the CAPM work?

CAPM is too simple to capture everything that is going on in the market However, the CAPM captures in a simple way two fundamental ideas 1. Almost everyone agrees that investors require some extra return for taking on risk 2. Investors appear to be concerned principally with the market risk that they cannot eliminate by diversification. Financial managers rely on the capital asset pricing model as a good rule of thumb
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Measuring beta
Aggressive stocks have high betas, betas greater than 1.0, meaning that their returns tend to respond more than one for one to changes in the return of the overall market. The betas of defensive stocks are less than 1.0. The returns of these stocks vary less than one for one with market returns. The average beta of all stocks is 1.0 exactly.
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We can measure beta by the slope of a line fitted to the points in the figure
β = 0.8
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We can break down common stock returns into two parts: the part explained by market returns and the firm’s beta, and the part due to news that is specific to the firm. Fluctuations in the first part reflect market risk; fluctuations in the second part reflect unique risk
Beta of portfolio: wenku.baidu.com资组合的贝塔系数
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Content
Measuring market risk Risk and return Capital budgeting and project risk
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(a) Treasury bills (beta = 0) and the market portfolio (beta = 1.0) Assume a Treasury bill rate of 3% and a market return of 10% The market risk premium is 10-3= 7% (b) A portfolio split evenly between Treasury bills and the market will have beta = .5 and an expected return of 6.5%(point X ). A portfolio invested 20 percent in the market and 80 percent in Treasury bills has beta = .2 and an expected rate of return of 4.4% (point Y ).
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Using the CAPM to estimate expected returns
To calculate the returns that investors are expecting from particular stocks, we need three numbers – the risk-free interest rate, the expected market risk premium, and beta
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Content
Measuring market risk Risk and return Capital budgeting and project risk
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Market risk premium: 市场风险溢价 Expected risk premium: 期望风险溢价 Capital asset pricing model (CAPM): 资本 资产定价模型 Security market line: 证券市场线
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The security market line
Security market line: relationship between expected return and beta
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The security market line describes the expected returns and risks from investing different fractions of your funds in the market. It also sets a standard for other investments. Investors will be willing to hold other investments only if they offer equally good prospects. Thus the required risk premium for any investments is given by the security market line: Risk premium on investment = beta × expected market risk premium
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Content
Measuring market risk Risk and return Capital budgeting and project risk
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Market portfolio: portfolio of all assets in the economy. In
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The procedure for measuring companies’ betas
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Observe rates of return, usually monthly, for the stock and the market Plot the observations Fit a line showing the average return to the stock at different market returns Bata is the slope of the fitted line.
A portfolio invested 50-50 in Amazon and ExxonMobil would have a beta of (.5 × 2.49) + (.5 × .41) = 1.45
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Market portfolio: 市场组合 Beta or β: 贝塔系数 Aggressive stock: 进取型股票 Defensive stock: 防守型股票
Chapter 11
Risk, return, and capital budgeting
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Objectives
Measure and interpret the market risk, or beta, of a security 2. Relate the market risk of a security to the rate of return that investors demand 3. Calculate the opportunity cost of capital for a period
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Portfolio betas
Beta of portfolio = (fraction of portfolio in first stock × beta of first stock) + (fraction of portfolio in second stock × beta of second stock)
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Market risk premium: risk premium of market portfolio. Difference between market return and return on risk-free Treasury bills
Beta measures risk relative to the market. Therefore, the expected risk premium equals beta times the market risk premium
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The total expected rate of return is the sum of the risk-free rate and the risk premium
Capital asset pricing model (CAPM): theory of the relationship between risk and return which states that the expected rates of return demanded by investors depend on two things: (1) compensation for the time value of money (the risk-free rate rf) and (2) a risk premium, which depends on beta and the market risk premium.)
practice a broad stock market index is used to represent the market
Beta or β: sensitivity of a stock’s return to the return on
market portfolio
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