1844 WordsAug 25, 20158 Pages

Abstract: This thesis paper compares the in and out of sample predicative accuracy of 3 CAPM based models, “The Capital Asset Prising model” Sharpe (1964), “The Three Factor Fama-French Model” Fama-French (1993), “The Fama-French Five Factor Model” Fama-French (2013). The relationship of in-sample model strength to out-of-sample predictive accuracy is to be determined, by dividing each models portfolio into four segments, High Adjusted R2 , Medium Adjusted R2, Low Adjusted R2, and a random mixture as the control. The research uses the S&P500 as the “market” portfolio. Using ten years of monthly data from the period between 1st January 2004 to the 31st November 2014, as in sample data. The portfolio returns were then monitored for an*…show more content…*

Literature Review:
Different models are available when determining the discount factor of a company or most any-other security, the most common of which are based on the Capital Asset Pricing Model. First published in 1946 “The Capital Asset Pricing Model”, (CAPM), by William F.Sharpe, described as the “centrepiece of modern financial economics.” is the first model to quantitatively represent the compensation an investor would require for both the time value of the money invested and the level of systematic risk exposure, using a simple yet elegant equation to represent the relationship between required returns and standard deviation. The CAPM is built on the earlier work of Harry Markowitz PAPER NAME AND DATE on diversification and modern portfolio theory, when combined the two theories act as the baes of modern portfolio constructions, with Markovitz measuring risk and how diversification affects risk and CAPM assessing the required rate of return.
The CAPM bases the required rate of return on equity of a company based on an assumption of linearity between the level of risk a security carries and its returns. Variance has been widely used as a measure of risk, usually represented as the standard deviation of the returns of a given security. The relationship of risk and reward is the product of the security’s covariance divided by the covariance of the market,

Related

## Foundations of Management Assignment

6359 Words | 26 Pages1 VMOST ANALYSIS 4 2.2 STAKEHOLDERS ANALYSIS 4 3. EXTERNAL ANALYSIS 5 3.1 PEST ANALYSIS 6 3.2 LIFE CYCLE ANALYSIS 7 3.3 THE MAJOR COMPETITORS 8 3.4 PORTER 'S 5 FORCES MODEL 9 4. INTERNAL ANALYSIS 11 4.1 VALUE CHAIN 11 4.2 MC KINSEY 7S MODEL 15 4.3 FINANCIAL PERFORMANCE 16 4.4 DISTINCTIVE CAPABILITIES, UNIQUE ASSETS AND RESOURCES 17 5. SWOT ANALYSIS AND CONCLUSIONS 17 5.1 SWOT ANALYSIS DISCUSSION 17 5.2 CONCLUSIONS 20 6. OPTIONS AND RECOMMENDATIONS 20 7. REFERENCES/BIBLIOGRAPHY 22

## Pricing for Convenience Goods

12585 Words | 51 Pagesclassification of industrial goods is based on how products are used and product characteristics. Goods that are long-lived and usually involve large sums of money are called capital items. Less costly goods that are consumed within a year are referred to as Source: Courtesy of Sears Roebuck. expense items. Installations are major capital items such as new factories, heavy equipment and machinery, and custom-made equipment. Products perceived to be so Installations are typically used for the production of

### Foundations of Management Assignment

6359 Words | 26 Pages### Pricing for Convenience Goods

12585 Words | 51 Pages

- Evaluation Of Preclinical And Clinical Evidence Of Milk Thistle For Chronic Hepatitis C ( Chc )
- Case Study : The Craft Beer
- What Are Hela Cells And How Were They First Obtained?
- The Effect Of Coffee On The Global Balance Of Power
- Concept Of Operational Art As A Cognitive Process
- Characteristics Of A Servant Leader