Week 6 review questions
金融quiz代考 Thinking about the key assumptions underpinning CAPM, which do you consider to be contentious and what reservations if any would you
Define in words the expression:
Draw the CML in CAPM. Identify and explain the slope of the line
Find an expression for the determinants of the expected return of an asset j, predicted by CAPM
Define the characteristic line in CAPM and explain how it may be estimated in practice.
What is the difference between CAPM and the ‘market model’?
What is the slope of the security market line?
How would an underpriced asset appear relative to the SML? How might an investor exploit this situation?
Why is the standard deviation of an asset an incomplete measure of risk in CAPM?
What is meant by ‘idiosyncratic risk’?
Explain how portfolio diversification can mitigate and possibly eliminate idiosyncratic risk?
Thinking about the key assumptions underpinning CAPM, which do you consider to be contentious and what reservations if any would you highlight about the use and application of CAPM?