BUSF_A01.qxd
Chapter 7 • Portfolio theory and its relevance to real investment decisions 7.8 Tests of CAPM In developing CAPM several assumpt ...
7.9 CAPM – what went wrong? CAPM has been subjected to a large number of empirical tests. Most of these have sought to estimate ...
Chapter 7 • Portfolio theory and its relevance to real investment decisions The invalidity of the last three of these means that ...
Arbitrage pricing model point is selected, for example annual rates of 6.5 per cent in the period 1960 to 1978, 4.5 per cent for ...
Chapter 7 • Portfolio theory and its relevance to real investment decisions that there are four factors that explain the risk/ri ...
Portfolio theory – where are we now? Staunton (2002)), investments made by the business should be expected to generate a higher ...
Chapter 7 • Portfolio theory and its relevance to real investment decisions Mean/variance criterion lMaking certain assumptions, ...
Review questions lManagers diversifying within the business may represent an agency cost to the shareholders. lThe arbitrage pri ...
Chapter 7 • Portfolio theory and its relevance to real investment decisions (Problems 7.1 to 7.4 are basic-level problems, where ...
Appendix: Derivation of CAPM APPENDIX Derivation of CAPM In Figure 7.9: Figure 7.9 The relationship of an individual security iw ...
Chapter 7 • Portfolio theory and its relevance to real investment decisions which equals: × Hence: =E(ri) −E(rm) If we set x to ...
Appendix: Derivation of CAPM or E(ri) =rf+[E(rm) −rf]β where β=Cov(i, M)/σ^2 m. This is the CAPM, which says, in effect, that th ...
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Financing decisions Investment requires finance, and there are many sources available. This part of the book considers how decis ...
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8.1 Introduction In previous chapters we have seen that businesses raise their long-term finance either from equity shareholders ...
Chapter 8 • Sources of long-term finance The primary capital market We shall in fact be considering the capital market in its pr ...
8.2 Ordinary (equity) capital For the business, the position is the opposite of that of the investors: sources of finance that a ...
Chapter 8 • Sources of long-term finance As owners of the business, the ordinary shareholders bear the greatest risk. If the bus ...
Ordinary (equity) capital Young and Co’s Brewery plc, the London-based regional brewer and public house operator, had a four-for ...
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