Neutrality (Modigliani et Miller, 1958, 1961,1963) • Efficient Markets (Fama, 1965, 1970) • Options Pricing Theory (Black & Scholes, 1973, Myers, 1977) • Agency Theory (Jensen, Meckling, 1976) • Efficient Markets II (Fama, 1991) • Behavioural Finance (Kahneman & Tversky, 1979, Shiller, 1981, 2000) Portfolio Selection • Investors are rationals and risk averse • Diversification lowers specific risk • Any portfolio is a combination of the market portfolio and the riskless asset The CAPM Capital Asset Pricing
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Market Beta (β) and Stock Returns - An Analysis of Select Companies I INTRODUCTION During the past three decades, CAPM (Capital Asset Pricing Model) has been studied in great depth and is used as the standard risk-return model by various researchers and academicians. The basic premise of CAPM is that the stocks with a higher beta yield higher returns for the investors. One of the conditions stipulated in the model is that the said return should be higher than the return of the risk-free
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list of Frequently Used Symbols and Notation A text such as Intermediate Financial Theory is, by nature, relatively notation intensive. We have adopted a strategy to minimize the notational burden within each individual chapter at the cost of being, at times, inconsistent in our use of symbols across chapters. We list here a set of symbols regularly used with their specific meaning. At times, however, we have found it more practical to use some of the listed symbols to represent a different concept
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In CAPM, the calculation of beta requires significant judgment. Industry data is used to calculate the beta, but such data is not available for one of the divisions where an alternative method is applied. There is also some controversy in using the market risk premium: the historical risk premium for US stocks significantly differs from the risk premium used in the industry. By making certain assumptions about these variables, four separate costs of capital are estimated for Midland and its three divisions
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the entire history of the stock market from 1926 through the late 1970s. The second academic strategy DFA used was the Book to-Market effect based on the finds of Fama/French1992 paper titled “The Cross-Section of the Expected Stock Returns”. In 1993 Fama/French expanded the research in the a titled “Common Factors in the Expected Returns of Stocks and Bonds” that is known as the “Fama-French Three-Factor Model” Studying the company’s size or the book-to-market ratio may shed light on exposure
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systematic risk and unsystematic risk In finance, systematic risk, sometimes called market risk, aggregate risk, or undiversifiable risk, is the risk associated with aggregate market returns. By contrast, unsystematic risk, sometimes called specific risk, idiosyncratic risk, residual risk, or diversifiable risk, is the company-specific or industry-specific risk in a portfolio, which is uncorrelated with aggregate market returns. Unsystematic risk can be mitigated through diversification, and systematic
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Studies Vol. I No. 1 Dec. 2004 Growth and Performance of Securities Market in Nepal Jas Bahadur Gurung* ABSTRACT Securities Board, Nepal, an apex regulator and facilitator of capital market, and Nepal Stock Exchange Ltd., only a single stock market, are the main constituents of securities market in Nepal. This paper attempts to study the growth trend and analyze the performance of Nepalese securities market. Likewise, the variables such as number of listed and traded companies and their
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2012 New Setbacks, Further Policy Action Needed In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness. Financial market and sovereign stress in the euro area periphery have ratcheted up, close to end-2011 levels. Growth in a number of major emerging market economies has been lower than forecast. Partly because of a somewhat better-than-expected first quarter, the revised baseline projections in this WEO Update suggest that these
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Financial management * Finance:- Finance may be defined as that administrative area which is concerned with arrangement of cash and credit effectively. * Business finance:- Business finance is the process of determining the required amount of fund, finding available sources of fund, calculating the nominal and effective cost of each sources of fund, conservating the collected funds properly and allocate the optimally in order to achieve the goal of an organization or a business firm.
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J O I N T C E N T E R AEI-BROOKINGS JOINT CENTER FOR REGULATORY STUDIES The Antitrust Economics of Two-sided Markets David S. Evans Related Publication 02-13 September 2002 David Evans is Senior Vice President, NERA Economic Consulting. The author is extremely grateful to Howard Chang, George Priest, Jean-Charles Rochet, Richard Schmalensee, and Jean Tirole for many helpful comments and suggestions and Irina Danilkina, Anne Layne-Farrar, Daniel Garcia Swartz, Bryan Martin-Keating, Nese Nasif
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