Capital asset

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  • The Capital Asset Pricing Model

    Variations in the cross-sectional stock returns drive abnormal returns from momentum investments (Choi & Kim, 2014). The Capital Asset Pricing Model explains such variations (Alhenawi, 2015). In the method of constructing momentum portfolios, past stock performance and expected average returns were found positively correlated (Jegadeesh & Titman, 1993, 2001). The correlation between winner returns and loser returns resulted in momentum profits (Alphonse & Nguyen, 2013). This section is an overview of related literature for this research. We group the related literature into the following categories: 1) Sources of momentum returns, 2) Various methods and negative and inconsistent findings, 3) Behavioral vs risk factors, 4) Momentum and efficient market hypothesis, and 5) Momentum and liquidity. Sources of Momentum Returns Asset classes. Majority of the past research on price momentum focused on the stocks and found momentum effects (e.g., Haga, 2015; Jegadeesh & Titman, 1993, 2001; Shynkevich, 2012; Jiang, Li, D., & Li, G., 2012; Tekçe & Yılmaz, 2015). Momentum profits were found in…

    Words: 772 - Pages: 4
  • Importance Of Capital Asset Pricing Theory

    Capital market theory is a description and the prediction of the progression of the capital. Capital market theory is used to measure the returns wanted by investors and the intrinsic risks involved; it is model that is used to price assets and most commonly used is to price shares. It is most definitely important response to financial judgment making. Besides that, Capital market theory develops a model for all unsafe assets and ads on the portfolio theory. For the development of capital market…

    Words: 815 - Pages: 4
  • Advantages Of The Capital Asset Pricing Model

    proxies of risk. Accordingly, the TFM cannot be utilised to explicate the return of stocks. They tested the stock returns for five years by utilising the NYSE stocks imported from the COSTAT and the CRSP. They discovered that the best returns on value stocks were caused by increasing amendments in predicting the rate of future growth. The authors explicated that the BTMR and the size of the firm impacts were the result of the systematic error of the method that practitioners utilised to…

    Words: 2540 - Pages: 11
  • Pros And Cons Of Capital Asset Pricing Model

    Capital asset pricing model According to Ross, Westerfield and Jordan (2008) capital asset pricing model is the equation of the security market line showing the relationship between expected return and beta. It is use to calculate the rate of return for risky asset. CAPM state that expected return of a security or a portfolio equals the rate on a risk free security plus a risk premium. Formula for CAPM E(Ri)=Rf + [{E(Rm) - Rf}] βi Where, E(Ri)= return required on financial asset I, Rf= risk…

    Words: 1175 - Pages: 5
  • The Arbitrage Pricing Theory And Capital Asset Pricing Theory

    Asset pricing theories help us to find out risks of assets and provide us with a framework to associate risks of assets with their expected returns. A large number of theories and models have been prevailed to relate the risk and return of various assets to aid practitioners in selecting investment portfolio. These theories include Arbitrage Pricing Theory (APT) and the Capital Assets Pricing Model (CAPM). The Arbitrage Pricing Theory is a theory developed by Stephen Ross (1976) and was later…

    Words: 1508 - Pages: 7
  • An Analysis Of Merton's Intertemporal Capital Asset Pricing Model

    Merton 's (1973) intertemporal capital asset pricing model (ICAPM) was developed to capture this multi-period aspect of financial market equilibrium. We still don 't know exactly how many factors there are, but the ICAPM at least gives us some guidance. Consumption-Oriented Capital Asset Pricing Model The consumption-based model of Breeden (1979) provides a logical extension of the previous work in asset pricing. Based on this "diminishing marginal utility of consumption," securities that have…

    Words: 1070 - Pages: 4
  • The Capital Asset Pricing Model

    Understanding the cross-section of equity market returns has been one of the most researched topics in finance for many years. The Capital Asset Pricing Model (CAPM), introduced by Sharpe (1964), Lintner (1965) and Black (1972), states that there is a linear relation between beta (systematic risk) and expected stock returns and that beta is sufficient to explain the variation in expected returns. The validity of the CAPM, however, has been questioned by many empirical studies which have provided…

    Words: 920 - Pages: 4
  • ACCG 924: Case Study Questions And Answers

    me know if any issues we could discuss further. Regards! Yuehting Lai A. Entering into the agency contract Issue: What is the tax consequences? Conclusion: The contract is a CGT asset and the payment of $205,000 is capital expense to Bronx. Analysis: Even though the payment is paid to Bronx’s supplier and could be seen as an outflow from business to generate income under s8-1ITAA971, the aim of the payment is to maintain the advantage of being the unique agent;…

    Words: 1490 - Pages: 6
  • Internal Revenue Code Section 1221 Case Study

    also states that a capital asset is property held by a taxpayer, whether or not connected with the taxpayer’s trade or business and lists exclusions from the general definition. IRC § 1221(a). Code section 163 states that all interest paid or accrued within the taxable year on indebtedness shall be allowed as a deduction. IRC § 163(a). Interest paid on a mortgage upon real estate of which the taxpayer is the legal owner, even if the taxpayer is not directly liable to such mortgage, can be…

    Words: 854 - Pages: 4
  • The Dynamic Capabilities Frameworks In The Industrial Economy

    and Shuen (1997), dynamic capabilities is “the firm 's ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments,” (p. 516). The Dynamic Capabilities Framework provides a “comprehensive” and “multidisciplinary” approach which is essential in managerial decision-Making. It is the aim of this paper to identify and demonstrate how the dynamic capabilities help to achieve a firm’s competitive advantage with a particular focus on Apple as…

    Words: 905 - Pages: 4
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