1 / 12

Comprehensive Analysis of Zero-Beta Portfolio & Arbitrage Pricing Theory

Explore the zero-beta portfolio model & empirical tests of CAPM, Roll's critique, APT, empirical results, and implications for investors. Delve into differences with CAPM, well-diversified portfolios, and single/multiple-factor APT.

wyazzie
Download Presentation

Comprehensive Analysis of Zero-Beta Portfolio & Arbitrage Pricing Theory

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 19EXTENSIONS OF CAPITAL ASSET PRICING THEORY • What is the zero-beta portfolio model? • What are some results of empirical tests of the capital asset pricing model? • What is Roll’s critique of the capital asset pricing model? • What is the arbitrage pricing theory? Contemporary Investments: Chapter 19

  2. Modifications of the CAPM • Zero-Beta Portfolio. • Zero-Beta Portfolio Model. Contemporary Investments: Chapter 19

  3. Figure 19.1 – Zero-Beta Portfolio Model Contemporary Investments: Chapter 19

  4. Figure 19.2 – Risk/Return Relationship for Zero-Beta Portfolio Model Contemporary Investments: Chapter 19

  5. Empirical tests and critique of the CAPM • Empirical tests • Joint hypothesis testing • Procedure of empirical tests • Empirical results Contemporary Investments: Chapter 19

  6. Empirical tests and critique of the CAPM-Cont. • Critique of the CAPM • Limits on tests • Linear risk/return relationship • Market portfolio composition • Range of SMLs • Market efficiency effects • Conflicts between proxies Contemporary Investments: Chapter 19

  7. Figure 19.3 – Empirical Findings for the CAPM Contemporary Investments: Chapter 19

  8. Figure 19.4 – Empirical Findings for the CAPM: Apr 1957-Dec 1965 Contemporary Investments: Chapter 19

  9. Figure 19.5 – Different Well-Diversified Portfolios and Their Corresponding SMLs Contemporary Investments: Chapter 19

  10. Arbitrage Pricing Theory • Concept of Arbitrage • Single-Factor APT • Single-factor APT for a well-diversified portfolio • Example of Exhibit 19.6 • Development of the single-factor APT Contemporary Investments: Chapter 19

  11. Arbitrage Pricing Theory – Cont. • Differences between the single-factor APT and the CAPM • APT with multiple factors • Two-factor APT • N-factor APT • Final synopsis of APT • Implications for Investors Contemporary Investments: Chapter 19

  12. Figure 19.6 – Arbitraging Portfolio K Using Portfolio CD Contemporary Investments: Chapter 19

More Related