# Questions tagged [capm]

The capital asset pricing model is a model that allows to determine the theoretical rate of asset returns required by an investor, given the asset systematic risk or market risk.

300 questions
Filter by
Sorted by
Tagged with
1 vote
51 views

### CAPM and Marginal Utility: How does this derivation work?

I came across this obstacle in the book Foreign Exchange: Practical Asset Pricing and Macroeconomic Theory by Adam.S.Iqbal(I have attached screenshots below) For 1.40 the author claims that we must ...
• 13
92 views

### Under what circumstances is hedging a portfolio by shorting index futures profitable? (John C. Hull 11e Practice Questions 3.25)

This question is based on a claim made in both practice question 3.25 and section 3.5 of Options, Futures and Derivatives by John C. Hull, 11th edition. The question On July 1, an investor holds 50,...
• 151
1 vote
54 views

### Fama&French models for asset returns applied to European Market

I am trying to use the F&F 3-factor and 5-factor models for the European Market (monthly data frequency). I downloaded the dataset provided by Fama&French and tried to apply the regressions ...
• 21
44 views

• 103
1 vote
83 views

### Discuss how you would allocate your budget between the two assets if their correlation is 1, 0, or -1

An asset A is expected to yield a $2\%$ return with a standard deviation of $1\%$, and another asset B is expected to yield a $1\%$ return with a standard deviation of $1\%$. Discuss how you would ...
• 111
1 vote
70 views

### Risk adjusted returns for a portfolio relative to CAPM

This is very likely a simple question. When following Lewellen (2015) (open access here), how should I compute alphas for portfolio returns relative to the CAPM and FF3? Do we simply subtract the (...
• 165
86 views

### What do the existence and parameters of an efficient investment tell you about the value of a risk-free return?

I'm working on an unassessed course problem, Consider the following risky investments \begin{matrix} \text{name} & \text{expected return} & \text{standard deviation of return} \\ A & 9\% &...
• 105
203 views

1 vote