2. a) Consider the Single Index Model. Discuss and explain the assumptions, main results, empirical applications,...

 

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2. a) Consider the Single Index Model. Discuss and explain the assumptions, main results, empirical applications, and the issue on estimating beta. [10 marks] b) Consider the Capital Asset Pricing Model (CAPM). Briefly explain the difference between beta as a measure of risk and variance as a measure of risk. [5 marks] c) Consider the Arbitrage Pricing model (APT) - multifactor model. Discuss and explain the assumptions, the pricing equation, how investors can exploit riskless arbitrage opportunities, and empirical examples of indexes. [10 marks] 2. a) Consider the Single Index Model. Discuss and explain the assumptions, main results, empirical applications, and the issue on estimating beta. [10 marks] b) Consider the Capital Asset Pricing Model (CAPM). Briefly explain the difference between beta as a measure of risk and variance as a measure of risk. [5 marks] c) Consider the Arbitrage Pricing model (APT) - multifactor model. Discuss and explain the assumptions, the pricing equation, how investors can exploit riskless arbitrage opportunities, and empirical examples of indexes. [10 marks]

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Single Index Model CAPM and APT 2 a Single Index Model The Single Index Model SIM is a foundational model used in asset pricing to explain the relationship between an individual securitys return and t... View the full answer