If prices move almost at random, then why should we place any value on the CAPM, which

Question:

If prices move almost at random, then why should we place any value on the CAPM, which makes predictions about expected asset returns?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Introduction to Corporate Finance

ISBN: 978-0324657937

2nd edition

Authors: Scott B. Smart, William L Megginson

See More Books

Question Posted: May 13, 2015 05:54 AM

See More Questions

Why are Alta Ind.s returns expected to move with the economy whereas Repo Mens are expected to move counter to the economy?
Why are High Techs returns expected to move with the economy, whereas Collections are expected to move counter to the economy?
Why should stock betas and expected returns be related, while no such relationship exists between stock standard deviations and expected returns?
Suppose you come from a part of the world that is blessed with abundant water. Demand never comes close to the available amount. Should you be careful about the amount you use or should you simply...
Consider the FI in problem (6). a. What additional risk exposure problems does the FI face? b. What are some possible solutions to the duration mismatch and the illiquidity problems? c. What...
Which of the following queries identifies customers who have ordered the same books as customers 1001 and 1005? a. SELECT customer# FROM orders JOIN books USING (isbn) WHERE isbn = (SELECT isbn FROM...
Use stepwise regression to build a model for the home rental prices and home sales data in Table B.24. Perform a residual analysis on the final model. Compare this model to the all possible...
MSIs educational products are currently sold without any supplemental materials. The company is considering the inclusion of instructional materials such as an overhead slide presentation, potential...
The market price of a semi-annual pay bond is $964.02. It has 10.00 years to maturity and a coupon rate of 7.00%. Par value is $1,000. What is the yield to maturity?
Rest Easy produces two types of mattresses: Regular and Heavenly. Budgeted and actual data for 2018 were as follows: Market Data for 2019: Expected total market unit sales of mattresses: Regular...
What is the difference between assets expected return and its actual return? Why are expected returns so important to investors and managers?
Contrast the historical approach to estimating expected returns with the probabilistic approach.
Taxable incomes for Pub Corporation and Sew Corporation, its 70 percent-owned subsidiary, for 2011 are as follows (in thousands): ADDITIONAL INFORMATION1. Pub acquired its interest in Sew at a fair...
Asian financial crisis and the Thai baht. On July 3, 1997, the Thai baht was unpegged from the U.S. dollar and promptly depreciated from THB 25 = US$1 to THB 60 = US$1. What was the bahts percentage...
Salgacoar Shippings CEO expressed reservations about the equity financing recommendation that the firms CFO was finalizing for presentation to the board (see problems 6 and 7). He generally agreed...
The CFA franc and the birth of the euro. In 1999, the launch of the euro buried the French franc to which the CFA franc was pegged: the CFA franc would now be convertible into euros () rather than...
Hong Kong currency board and the Chinese yuan. For the past 25 years Hong Kong has relied on a currency board to peg its currency against the U.S. dollar at HK$7.80 = US$1. Since 2005, the Chinese...
If the dollar price of one Russian ruble (RUB) is US$0.03282 = RUB 1 in New York City and at the same time the Russian ruble price of one dollar is 30. 469 in Moscow, show how arbitrageurs could take...
What can a systems analyst do to facilitate future maintenance?
Quadrilateral EFGH is a kite. Find mG. E H <105 G 50 F
Complete the following table. The underlying asset is ounces of gold. Assume noarbitrage. Cost 1-vear forwar price 1-year interest rate Annual storage cost Spotof carry 4% of spot 2% of spot 3% of...
The Health Bracelet Company will need 1,000 kg of copper in one year and is trying to decide between buying the copper on the spot market and using a forward contract. The spot price of copper is $15...
Suppose the spot exchange rate is C$1.4665 per 1, while the six-month forward rate is C$1.50 per euro. Suppose a firm has to pay a foreign supplier 100,000 in six months and decides to eliminate its...
If a set of m+1 data points (x,y) are to be represent by a least squares fit of y=c logx derive an expression for c in terms of x and y.
5 If 0 = then 4 cos(0) = sin(0) =
Determine the reactions of the given beam using slope deflection method. P = 25 kN, P2 = 25 kN, and w = 25 kN/m P1 P2 2m B 2m C 4m 21 Numerical answer in 4 decimal places and positive values only: RA...

If prices move almost at random, then why should we place any value on the CAPM, which

Question:

Step by Step Answer:

The CAPM is designed to establish a link between the risk of an asset and its expected re...View the full answer

Introduction to Corporate Finance

Students also viewed these Corporate Finance questions