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Developing the inputs required for applying CAPM

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  • 1. DEVELOPING THE INPUTSREQUIRED FOR APPLYING CAPM

2. Determinants Risk Free of CAPM TradeMarket Risk Beta Premium 3. DETERMINANTS OF CAPM Risk free MarketrateRiskPremiumBetaDETERMINATS 4. RISK FREE RATE 5. DETERMINANTS OF CAPMFree from Default Risk &Uncorrelat ed with returnsNature ofRisk FreeRate Return on Structure Zero-Beta Construction Portfolio isis costly &Best complexEstimate 6. DETERMINANTS OF CAPM 7. MARKET RISK PREMIUM 8. DETERMINANTS OF CAPM 9. DETERMINANTS OF CAPM 10. BETA 11. DETERMINANTS OF CAPM The sensitivity of a security to the movement ofthe market is measured by Beta Coefficient() Beta > 1.00 = aggressive security Beta < 1.00 = defensive security Beta of a portfolio is nothing but the weightedaverage of the betas of securities that constitutethe portfolio, the weights being the proportion ofinvestments in the respective securities. 12. THE END