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Arbitrage Pricing Theory: It's Not Just Fancy Math
What are the main ideas behind arbitrage pricing theory? Find out how this model estimates the expected returns of a well-diversified portfolio.
Capital Market Line (CML) Definition
The capital market line (CML) represents portfolios that optimally combine risk and return.
Comparing CAPM vs. Arbitrage Pricing Theory
The Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) help project the expected rate of return relative to risk, but they consider different variables.
Excess Returns Definition
Excess returns are returns achieved above and beyond the return of a proxy. Excess returns will depend on a designated investment return comparison for analysis.
CAPM Model: Advantages and Disadvantages
The capital asset pricing model (CAPM), while criticized for its unrealistic assumptions, provides a more useful outcome than some other return models. Here is how CAPM works and its pros and cons.
Cost of Capital Definition
Cost of capital is the required return a company needs in order to make a capital budgeting project, such as building a new factory, worthwhile.
Risk-Free Return Definition
Risk-free return is a theoretical return on an investment that carries no risk. The interest rate on a three-month treasury bill is often seen as a good example of a risk-free return.
Explaining The Capital Asset Pricing Model (CAPM)
The capital asset pricing model (CAPM) provides a useful measure that helps investors determine what sort of investment return they deserve for putting their money at risk on a particular stock.
R is a letter addendum to a stock ticker to identify the security as a rights offering. R is also the abbreviation for "return" in formulas.
Penny Stocks to Watch for December 2020
As we wave goodbye to a difficult year, it is likely that the economic and financial roller-coaster ride is only just getting started.