EC4024 Lecture 10: CAPM
Introduction
We’ve looked at portfolio analysis, now it’s time to take a crack at the first big model of the course., the Capital Asset Pricing Model, (CAPM), developed by Sharpe, Lintner, and others.
In this lecture, then, We’ll derive the CAPM from first principles, then show a few examples of the model in action, look at it’s history, and then ask whether CAPM is still useful.
Length: 50 mins.
Click below for slides, handouts, an excel spreadsheet to use the model, and links to further reading.
Slides
Handout
Excel Sheet
Sheet is from here.
Further Reading
Pilbeam, Chapter 8
André F. Perold, The Capital Asset Pricing Model The Journal of Economic Perspectives, Vol. 18, No. 3. (Summer, 2004), pp. 3-24.
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