Standard CAPM
About the Lecture
The lecture Standard CAPM by Edu Pristine is from the course Archiv - Foundation of Risk Management. It contains the following chapters:
- Assumption of CAPM
- Security Market Line: Basics
- Capital Asset Pricing Model
- Security Market Line: Application
Author of lecture Standard CAPM
Edu Pristine
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Excerpts from the accompanying material
... a risk-free asset. Borrower and lenders are easy to find and they do so at risk-free rate (no counterparty risk). Investors consider only mean and variance to choose a portfolio and ...
... the stock market and investors’ degree of risk aversion. A measure of market risk: Beta: •The tendency of a stock to move up or down with the market is ...
... As per CAPM, stock’s required rate of return = risk-free rate ...
... is plotted versus its security's risk: •If it is above SML, stock is undervalued because market expects higher return. •If it is below SML, ...
