Sharpe ratio

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 evidence supporting the hypothesis that average stock returns are predictable in the cross-section. The predictive factors include firm size, book-to-market ratio,…

beginning of the period, the price of Computers, Inc. divided by the industry index was 0.39; by the end of the period, the ratio had increased to 0.50. As the ratio increased over the period, it appears that Computers, Inc. outperformed other firms in its industry. The overall trend, therefore, indicates relative strength, although some fluctuation existed during the period, with the ratio falling to a low point of 0.33 on day 19. 18. Five day moving averages: Days 1 – 5: (19.63 + 20 + 20.5 +…

empirical part. Section 2.1 reviews the theoretical literature and section 2.2 will provide an insight on the various empirical literatures of the CAPM and the APT. 2.1 Theoretical literature review The Capital Asset Pricing Model (CAPM) was formulated by Sharpe (1964) as well as Lintner (1965) following the work of Markowitz (1959). Since then it has produced amazing achievement because its simplified approach attracted many researchers. In spite of numerous criticisms concerning the validity…

Business Issue: The Asset Management Industry There are two general approaches to investment management – either utilizing active investment management or passive investment management. An active investment managers’ goal is to outperform a specific benchmark index by identifying mispriced securities. A passive managers’ goal is to closely track or replicate the return pattern of a specified benchmark index at a low cost. A passive manager does not make any attempt to seek out mispriced…

In other words, the return of the portfolio with timberland investment is higher than the return of the portfolio without timberland investment at any given risk level. Besides, the Sharpe ratios of the portfolio with timberland investment also are greater then the ones of the portfolio without timberland investment, which means this new asset class, timberland investment, clearly adds additional return per unit risk. It is obvious that…

“The relationship between the propertied and the laboring classes changed dramatically after the mid-sixteenth century” Lawson (1986). Sharpe (1982) identified that historically the lower class committed crime in order to eat and live, whereas upper class committed because of greed. Pearson (1987) found that drug offences occur in all three of the social classes; lower class, working class…

Adding the risk-free government securities would result in a lower beta for the new portfolio. The new portfolio beta will be a weighted average of the individual security betas in the portfolio; the presence of the risk-free securities would lower that weighted average. q. The comment is not correct. Although the respective standard deviations and expected returns for the two securities under consideration are equal, the covariances between each security and the original portfolio…

My internship provided me with a crash course on how the market operates. I worked as a credit analyst in our leveraged finance office. My supervisor encouraged me to watch a weekly telecast online called Commodities Countdown on Stocksharts.com. This is where my interest in commodities and the risk associated with them began. I watched how certain positions traded throughout the summer, but I mainly focused in on Gold and Silver. At the start of the game the first few stocks I invested in were…

i. Abstract The objective of this paper is to construct and analyse the Fama and French three-factor model for the UK market. We will then be comparing the three-factor model to the slightly modified; Fama-French and Carhart’s four-factor model. The purpose of this paper is to find evidence, if any, of the validity of these multifactor models in the UK market. Previous research suggests that the search for a more convincing asset pricing model remains (Gregory, Tharyan and Christidis, 2011).…

Introduction So what is GGT? GGT stands for Gamma-glutamyl Transferase, it is found on the cell surface that contribute to the extracellular catabolism of glutathione (GSH). The most GGT serum is derived from the liver, but it is also produced in many other tissues. GGT is primarily carried with lipoproteins and albumin in serum. The levels of GGT is determined by various factors such as alcohol intake, body fat content, plasma lipid/ lipoproteins and glucose levels, and also various medications…