Explain why it is important to assume that investor's already hold the value- weighted market, or...
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Explain why it is important to assume that investor's already hold the value- weighted "market", or tangency, portfolio in order to apply the Capital Asset Pricing Model (CAPM). b. Does the risk-free asset need to exist in order for us to derive the CAPM? If not, how do investors achieve 2-fund separation? (Hint: Your textbook can help with this.) Explain why it is important to assume that investor's already hold the value- weighted "market", or tangency, portfolio in order to apply the Capital Asset Pricing Model (CAPM). b. Does the risk-free asset need to exist in order for us to derive the CAPM? If not, how do investors achieve 2-fund separation? (Hint: Your textbook can help with this.)
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a The Capital Asset Pricing Model CAPM is a widely used tool for calculating expected returns on assets and portfolios and it assumes that investors h... View the full answer
Related Book For
Microeconomics Theory and Applications
ISBN: 978-1118758878
12th edition
Authors: Edgar K. Browning, Mark A. Zupan
Posted Date:
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