02-04 The Capital Assets Pricing

资本资产定价模型
:portion of funds in asset i

Assume:
stock A +1%,=75%, stock B - 2%,=-25%
=1%75% + (-2%)(-25%)=1.25%

the market portfolio
Cap weighted

The CAPM equation:

particular stock return = market + residual

CAPM says:

CAPM vs Active managment

passive: buy index and hold
active: pick stocks, buy underweight, sell overweight

for :

1. CAPM says is random, and
2. however, active managers believe they can predict

CAPM for portfolios

[CAPM]
[Active]

Implications of CAPM

• Expected value of
• Only way to beat market is choose
• Choose high in up markets
• choose low in down markets
• Efficent Market Hypothesis(EMH)
  says you can't predict the market, so CAPM says you can't beat market.

Arbitrage Pricing Theory (APT, 套利定价理论)

• Stephen Rors, 1976
  
  CAPM = Ocean
  项可以分解为finance, tech等