Asset Pricing Theories : Comparing And Contrasting Capm, Atp And Fema French Theory

1715 Words7 Pages
Asset Pricing Theories: Comparing and contrasting CAPM, ATP and Fema-French theory 1226340 Contents Introduction Asset pricing theory Capital Asset Pricing Model Arbitrage Pricing Theory Fema and French Model Introduction This report will elaborate and describe the three asset pricing models: Capital asset pricing model, Arbitrage pricing theory and Fema and French factor model. It will compare and contrast these model in…show more content…
http://www3.nd.edu/~zda/COC.pdf Zhi Da , Re-Jin Guo, Ravi Jagannathan (2011) explained that ‘Capital asset pricing model (CAPM) is the workhorse of finance for estimating the cost of capital for project selection. Firms have the options to undertake, reject, or defer a new project, as well as the option to modify or terminate a current project.’ The capital asset pricing model is used to identify these projects using the above formula in which if the result is positive the firm should undertake the project but if the result is negative the firm is eligible to reject the offer. The firm can also try to modify the project in regards to the preference of the given projects. How is CAPM used for evaluating the performance of managed investment portfolios? http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.321.4782&rep=rep1&type=pdf Eugene F. Fama and Kenneth R. French (2004) describes that ‘The Portfolio model provides an algebraic condition on asset weights in means-variance-efficient portfolio.’ CAPM is used to convert this statement into a testable prediction about the

    More about Asset Pricing Theories : Comparing And Contrasting Capm, Atp And Fema French Theory

      Open Document