tailieunhanh - Lecture Investment analysis & portfolio management - Chapter 30

After studying this chapter you will be able to understand: Capm – alpha va values continued, advnatges and disadvantages of capm, to apply the adjusted present value approach to decision making, risk adjusted WACC, chossing a discount rate, mergers and acquisiitions, venture capital. | Investment Analysis and Portfolio management Lecture: 30 Course Code: MBF702 Outline RECAP CAPM – ALPHA VA VALUES CONTINUED ADVNATGES AND DISADVANTAGES OF CAPM TO APPLY THE ADJUSTED PRESENT VALUE APPROACH TO DECISION MAKING RISK ADJUSTED WACC CHOSSING A DISCOUNT RATE MERGERS AND ACQUISIITIONS VENTURE CAPITAL Alpha factor - CONTINUED When shares yield more or less than their expected return (based on the CAPM), the difference is an abnormal return. This abnormal return might be referred to as the alpha factor. The alpha factor for a security is simply the balancing figure in the following formula: α values are temporary values as arbitrage gain opportunities / speculation will over a long period of time cause securities to offer the same return as that offered by a market portfolio (become inline with market). For projects with similar investment requirements & expected returns than the project with lowest β should be selected Example The return on shares of company A is 11%, but . | Investment Analysis and Portfolio management Lecture: 30 Course Code: MBF702 Outline RECAP CAPM – ALPHA VA VALUES CONTINUED ADVNATGES AND DISADVANTAGES OF CAPM TO APPLY THE ADJUSTED PRESENT VALUE APPROACH TO DECISION MAKING RISK ADJUSTED WACC CHOSSING A DISCOUNT RATE MERGERS AND ACQUISIITIONS VENTURE CAPITAL Alpha factor - CONTINUED When shares yield more or less than their expected return (based on the CAPM), the difference is an abnormal return. This abnormal return might be referred to as the alpha factor. The alpha factor for a security is simply the balancing figure in the following formula: α values are temporary values as arbitrage gain opportunities / speculation will over a long period of time cause securities to offer the same return as that offered by a market portfolio (become inline with market). For projects with similar investment requirements & expected returns than the project with lowest β should be selected Example The return on shares of company A is 11%, but its normal beta factor is . The risk-free rate of return is 5% and the market rate of return is 8%. There is an abnormal return on the shares: Illustration An investor tries to buy shares or bonds for his portfolio that provide a positive abnormal return. He is considering two shares and two bonds for adding to his portfolio. The required return on shares is measured by the Capital Asset Pricing Model (CAPM). The required return for bonds is measured using a model similar to the CAPM, except that the ‘beta’ for a bond is measured as the ratio of the duration of the bond in years to the duration of the bond market as a whole. The first step is to calculate beta factors for the shares and the similar factors for the bonds. For shares, the beta factor is calculated as the correlation coefficient multiplied by the standard deviation of returns for the share, divided by the standard deviation of market returns. We can now calculate the required return for each security (using the CAPM) .

• Tài chính doanh nghiệp
• Investment analysis
• Portfolio management
• Investment management
• Investment theory
• Investment environment
• Investment analysis
• Investment companies
• Time value of money
• Characteristics of investment
• Investment portfolio management
• Investment analysis & portfolio management
• Investment background
• Developments in investment theory
• Management of common stocks