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FIN8330_Chapter8_Slides0

FIN8330_Chapter8_Slides0 - Investment Analysis and...

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Investment Analysis and Portfolio Management by Frank K. Reilly & Keith C. Brown C h a p t e r 8 C h a p t e r 8 An Introduction to Asset Pricing Models Capital Market Theory: An Overview The Capital Asset Pricing Model Relaxing the Assumptions Empirical Tests of the CAPM The Market Portfolio: Theory vs. Practice
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8-2 Capital Market Theory: An Overview Capital market theory extends portfolio theory and develops a model for pricing all risky assets, while capital asset pricing model (CAPM) will allow you to determine the required rate of return for any risky asset Four Areas Background for Capital Market Theory Developing the Capital Market Line Risk, Diversification, and the Market Portfolio Investing with the CML: An Example
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8-3 Background for Capital Market Theory Assumptions of Capital Market Theory All investors are Markowitz efficient investors who want to target points on the efficient frontier Investors can borrow or lend any amount of money
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