Capital asset pricing model

Inflation Risk (Purchasing Power Risk) The ability to purchase goods or services is dependent on the value of assets and whether or not the inflation has increased or decreased the value of the country’s currency. 2. Interest Rate Risk Depending on the Federal Reserve and monetary policies affect the interest rate could increase or decrease the value of bonds and…

Kenkel, Kerins, Kruse, Seifert 1 I. Introduction Kimi Ford, a portfolio manager at NorthPoint Group, was reviewing the financials of Nike Inc. to consider buying shares for the fund she managed, the NorthPoint Large-Cap Fund. A week before Kimi Ford began her research, Nike Inc. held an analysts’ meeting to reveal their 2001 fiscal results and for management to communicate a strategy to revitalize the company. Nike’s revenues since 1997 had ceased to grow from $9.0 billion, and net income had…

10 Marriott Corporation: The Cost of Capital 298-101 Exhibit 5 Spreads between S&P 500 Composite Returns and Bond Rates, 1926-1987 Arithmetic Average Geometric Average Standard Deviation Spread between S&P 500 Composite Returns and Short-Term Treasury Bill Returns 1926-1987…

included justifications for the stocks we chose, an analysis of the portfolio’s overall performance, and the associated risk characteristics. Furthermore, we examine Golar LNG Partners LP (GMLP) to better understand and compute a stock’s dividend growth model, CAPM, and P/E analysis. Discussion and Analysis Strategy When we began our…

Valuation models are used to disclose (reveal) the mispricing of securities. These models are exhibited(used) by fundamental(financial) analysts, who use information regarding the current and potential profitability of a company to measure its fair market value. Based on the results of analysis, financial analysts can then make informed, accurate decisions on whether to sell, hold or buy a stock. There are alternative measures on how to value a company. Quantitative tools such as the dividend…

GROWTH MODEL INTRODUCTION The Gordon Growth Model also known as the Dividend Discount Model includes a methodology for computing the intrinsic value of stocks. It equates present value of the stock to the future value of dividends. FORMULA & EXPLANATION There are two basic forms of this model namely: • Stable Model Value of stock = D1 / (k-g) Whereby D1 = Expected dividend per share for the next year k = Required rate of return (can be estimated using the CAPM or Dividend Growth Model)…

The diversification of investment and elimination of unsystematic risk can be achieved first by measuring the level of diversification needed. Diversification can be computed through correlation between returns and of the portfolio and the market portfolio. An absolutely diversified portfolio will correlate accurately with completely diversified market portfolio since only has a systematic risk. Portfolio performance measures are the most important aspects of the investment process. Performance…

How does perfect competition explain a fair and efficient allocation of resources and products? Perfect competition is a type of theoretical market structure that focuses on the relationship between the producer and the consumer. In this model, it is assumed that the goods offered for sale are all equal in quality and that the market itself sets the price. Since there is a large number of buyers and sellers, neither party has total influence or control over the market price. Welfare economics…

The most widely accepted conceptualization of the customer satisfaction concept is the Expectancy Confirmation Theory (alternatively ECT or expectation disconfirmation theory). The structure of this theory was developed in a series of two papers written by Richard L. Oliver in 1977 and 1980. Expectation confirmation theory is a cognitive theory which seeks to explain post purchase or post-adoption satisfaction as a function of expectations, perceived performance, and disconfirmation of beliefs.…

important models from researchers will be useful in this study Pastor, L. & Stambaugh, R. F. (2003), was used those variables to investigate the liquidity risk and expected stock returns, also realized that the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low sensitivities in the year 1966 until 1999. According to Pastor, L. & Stambaugh, R. F., they are used stock return to measure the market-wide is a state variable important for asset pricing as…