Capital Assets Pricing Model (CAPM), referred to Arbitrage Pricing Theory (APT) is an equilibrium model of asset pricing but assumes that the returns are generated by a factor model. Its assumption vis-a-vis those of CAPM are set out first: APT: i. Investors do not look at expected returns and standard deviations. ii. Risk Return Analysis is not the basis. Investors [...]
In this article we will discuss about:- 1. Introduction to Random Walk Hypothesis 2. Random Walk Assumptions 3. Schematic Presentation 4. Test 5. Essence 6. Limitations. Introduction to Random Walk Hypothesis: There are theoretically three approaches to market valuation, namely, efficient market hypothesis, fundamental analysis and technical analysis. Under fundamental analysis, the share value depends on the intrinsic worth of [...]
In this article we will discuss about:- 1. Introduction to Markowitz Theory 2. Assumptions of Markowitz Theory 3. Diversification 4. Criteria of Dominance 5. Measurement of Risk. Contents: Introduction to Markowitz Theory Assumptions of Markowitz Theory Diversification of Markowitz Theory Criteria of Dominance Measurement of Risk 1. Introduction to Markowitz Theory: Harry M. Markowitz is credited with introducing new concepts [...]