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Noelle Laing
"The Capital Asset Pricing Model:
The Mathematics Behind Choosing Portfolios"
ABSTRACT: Hoping to beat the stock market? That may seem optimistic
and trying may seem too risky in these times. The Capital Asset Pricing
Model (CAPM), developed in 1964, was a breakthrough in mathematical finance.
Although the CAPM cannot tell you how to beat the market, it can help give
a fair assessment of potential returns. One goal of the CAPM is to
help organize a portfolio that maximizes the return for a given level of
risk or minimizes risk for a specific return. The second use is to estimate
expected returns on specific investments, both existing securities and
new issues that have not yet been traded. This presentation will
outline how the CAPM works, its applications and some mathematical ideas
on which it is based. |