chap011 - Chapter 11 AN ALTERNATIVE VIEW OF RISK AND RETURN...

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Chapter 11 AN ALTERNATIVE VIEW OF RISK AND RETURN THE ARBITRAGE PRICING THEORY SLIDES CHAPTER ORGANIZATION 11.1 Factor Models: Announcements, Surprises, and Expected Returns 11.2 Risk: Systematic and Unsystematic 11.3 Systematic Risk and Betas 11.1 Key Concepts and Skills 11.2 Chapter Outline 11.3 Arbitrage Pricing Theory 11.4 Factor Models: Announcements, Surprises, and Expected Returns 11.5 Factor Models: Announcements, Surprises, and Expected Returns 11.6 Risk: Systematic and Unsystematic 11.7 Risk: Systematic and Unsystematic 11.8 Systematic Risk and Betas 11.9 Systematic Risk and Betas 11.10 Systematic Risk and Betas: Example 11.11 Systematic Risk and Betas: Example 11.12 Systematic Risk and Betas: Example 11.13 Systematic Risk and Betas: Example 11.14 Systematic Risk and Betas: Example 11.15 Portfolio and Factor Models 11.16 11.17 11.18 11.19 Portfolios and Diversification 11.20 Portfolios and Diversification 11.21 Portfolios and Diversification 11.22 Betas and Expected Returns 11.23 11.24 11.25 The Capital Asset Pricing Model and the Arbitrage Pricing Theory 11.26 Empirical Approaches to Asset Pricing 11.27 Quick Quiz
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11.4 Portfolios and Factor Models Portfolios and Diversification 11.5 Betas and Expected Returns The Linear Relationship The Market Portfolio and the Single Factor 11.6 The Capital Asset Pricing model and the Arbitrage Pricing Theory Differences in Pedagogy Differences in Application 11.7 Empirical Approaches to Asset Pricing Empirical Models Style Portfolios ANNOTATED CHAPTER OUTLINE Slide 11.0 Chapter 11 Title Slide Slide 11.1 Key Concepts and Skills Slide 11.2 Chapter Outline Slide 11.3 Arbitrage Pricing Theory Arbitrage, by definition, is a situation in which an investor can create a zero investment portfolio that generates a positive profit. This chapter introduces the Arbitrage Pricing Theory (APT) as an alternative asset-pricing model to the CAPM. The APT relies on fewer assumptions than the CAPM and allows for multiple systematic influences on security returns. The APT is derived using portfolios, not individual securities. 11.1. Factor Models: Announcements, Surprises, and Expected Returns Slide 11.4 – Slide 11.5 Factor Models: Announcements, Surprises, and Expected Returns Any announcement, such as an earnings or dividend announcement, will have a part that is expected and a part that is unexpected (called the “innovation” or “surprise”). Security prices react to new information, i.e., the surprise. Current security prices already reflect the expected part of an
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This note was uploaded on 12/21/2011 for the course NIKA 101 taught by Professor Temur during the Spring '11 term at Acton School of Business.

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chap011 - Chapter 11 AN ALTERNATIVE VIEW OF RISK AND RETURN...

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