Beta Definition Risk Premium 
Musings on Markets
FEBRUARY 8, 2022
Investors all talk about risk, but there seems to be little consensus on what it is, how it should be measured, and how it plays out in the short and long term. In closing, I will talk about some of the more dangerous delusions that undercut good risk taking.
Valutico
FEBRUARY 27, 2024
Capital Asset Pricing Model (CAPM): According to CAPM, the expected return on a stock has two main components: the risk-free rate and a risk premium. The risk-free rate represents the return an investor can get without taking on any risk, typically derived from government bonds.
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Andrew Stolz
AUGUST 5, 2020
Definition of Capital Asset Pricing Model. It helps an investor understand what to expect to earn in relation to the risk-free rate and the market return. CAPM assumes that the minimum a rational investor would earn is the risk-free rate by buying the risk-free asset. beta of a stock). E(r) = Rf + ??(Rm
Andrew Stolz
AUGUST 6, 2020
Definition of the Arbitrage Pricing Theory. It is a model based on the linear relationship between an asset’s expected risk and return. The return on assets is determined by systematic factors such as changes in inflation , risk premiums, interest rates, etc. What Impacts the Arbitrage Pricing Theory? ER(x) = Rf + ??1
Musings on Markets
FEBRUARY 10, 2021
There are multiple definitions that you will see offered, from it being the cost of raising capital for that business to an opportunity cost , i.e., a return that you can make investing elsewhere, to a required return for investors in that business. What is a hurdle rate for a business? More on that issue in a future data update post.)
Musings on Markets
JANUARY 6, 2023
When valuing or analyzing a company, I find myself looking for and using macro data (risk premiums, default spreads, tax rates) and industry-level data on profitability, risk and leverage. I do report on a few market-wide data items especially on risk premiums for both equity and debt. Cost of Equity 1.
Musings on Markets
JANUARY 12, 2021
If it looks like I am over reaching, I start my corporate finance class with the simple proposition that any decision that involves money is a corporate finance decision, and by that definition everything that businesses do falls under its umbrella. The links to all of these classes are at the end of this post.
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