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

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

Step by Step Solution

★★★★★

3.30 Rating (174 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

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

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

453-B-C-F-R-A-R (767).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

Q:

Why are Alta Ind.s returns expected to move with the economy whereas Repo Mens are expected to move counter to the economy?

Q:

Why are High Techs returns expected to move with the economy, whereas Collections are expected to move counter to the economy?

Q:

Why should stock betas and expected returns be related, while no such relationship exists between stock standard deviations and expected returns?

Q:

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

Q:

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

Q:

Efficient Markets: An efficient market is one in which security prices fully reflect all available information. New information is information that investors did not previously have and could not...

Q:

Efficient Markets: An efficient market is one in which security prices fully reflect all available information. New information is information that investors did not previously have and could not...

Q:

Requested to do an integrated summary of these paper by reflecting to the local (Malaysian) Corporate Financial Scenarios. Three views on stock markets and corporate behavior: Tobin, Veblen, and Marx...

Q:

I would like someone to help me to write up with impression and thoughts in half page or more for this article please please do not summarize it Financial Analysts Journal Volume 68 Number 6 2012 CFA...

Q:

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

Q:

True or False: 1. T F Once you have purchased a CD and copied it onto your iPod, it is legal to give the CD to a friend. 2. A provisional patent lasts until the product is used in interstate...

Q:

Ray Flagg took out a 60-month fixed installment loan of $12,000 to open a new pet store. He paid no money down and began making monthly payments of $232. Ray's business does better than expected and...

Q:

Cystic fibrosis. Cystic fibrosis is a lung disorder that often results in death. It is inherited but can be inherited only if both parents are carriers of an abnormal gene. In 1989, the CF gene that...

Q:

a. The financial analysts at Lexmark have eval- uated five major projects. Each project, if it actu- ally goes forward, will be financed by going to a bank to borrow the money. They've calculated a...

Q:

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...

Q:

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...

Q:

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...

Q:

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The companys planning budget for May appears below: Puget Sound...

Q:

Solve the following problem taken from a thirteenth-century Chinese math book: A ship engaging in trade to the South China Sea return to port. After paying customs duties they have a profit of 5088...

Q:

Sociologists say that90%of married women claim that their husband's mother is the biggest bone of contention in their marriages (sex and money are lower-rated areas of contention). Suppose...