The Valuation Of Mutual Fund

1461 Words6 Pages
1. Introduction Since mutual fund has been a primary investment instrument in the U.S. financial market as well as other countries around the world. The valuation of mutual fund’s performance has been drawn enormous attention from both financial practitioners and academics. Financial models have been established and developed in the financial market and these models have the purpose of assessing the expected returns of stocks and evaluating their performance related to the exposure to the market. The exploration for the risk-related asset pricing model that clarifies variations in stock returns is one of the most important issues in finance. Apparently, the capital asset pricing model (CAPM), which is proposed by Sharpe (1964) and Lintner (1965), and the Fama and French three factors model, which is proposed by Fama and French (1992, 1993 and 1995), are relatively significant and conventional finance models. It has been almost fifty years since the CAPM was put forward. The CAPM provides a precise prediction of the correlation between the risk of an asset and its expected return. For participants of the economic activities, especially for investment consultants or academic researchers, this model can be computed as a benchmark rate of return for assessing possible investments and help them to make professional forecasts to the expected return on assets that have not yet been traded in the market. The Fama and French three factors model is another compelling multifactor
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