THE CAPITAL ASSET PRICING MODEL: A “Multi-Beta” Interpretation
1977; Elsevier BV; Linguagem: Inglês
10.1016/b978-0-12-445850-5.50011-8
Autores Tópico(s)Financial Reporting and Valuation Research
ResumoIn recent years, considerable attention has been accorded the capital asset pricing model. It suggests that in equilibrium the expected excess return on a security over and above the pure interest rate equals some constant times its ex ante risk, measured by the security's so-called beta coefficient. The beta coefficient equals the covariance of the security's return with that of the market portfolio divided by the variance of the return on the market portfolio, where all measures refer to ex ante probability distributions. Many have used these ideas for practical investment policies. Moreover, a number of tests have been performed to determine the extent to which ex post results conform to the relationships predicted by the theory for ex ante values. A security's beta relative to the market portfolio can be expressed as a weighted average of beta values relative to any desired number of portfolios, the collection of which equals the market portfolio.
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