Analysis on CAPM and Sharpe Ratio in Market Investment

Yang, Zhou

doi:10.2991/aebmr.k.210319.002

Cited by 3 publications

(2 citation statements)

References 3 publications

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“…In cases where investors have experienced big profits or losses, it is likely they are willing to take more risks to, for example, win back losses. All of these factors and variables will cause assumptions to differentiate from reality, which means the market portfolio is not chosen by everyone [22]. Furthermore, the main limitation of the FF3 Model is similar to CAPM's.…”

Section: Limitations and Prospectsmentioning

confidence: 99%

Comparison and Analysis of the Effectiveness of the State-of-the-Art in Option and Financial Pricing Models

2023

HBEM

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Contemporarily, various models have been developed and used to price the returns of an asset or an option for decades. This paper will discuss and compare two option pricing models (the BSM model and the Monte Carlo Simulation) and three financial pricing models (the CAPM, the FF3 Model, and the FF5 Model). It will start with discussing the history, assumptions, and formulae of each model. Then, it will lead into how each model has changed over time, whether that be changes from the researchers themselves or other researchers within the community. Additionally, specifics of the change will be addressed, and the paper will outline what the new model has done to improve upon those concerns. Eventually, an empirical comparison will contrast the effectiveness and accuracy of each model. Ultimately, it will be seen that the BSM model and the MCS are useful in different time frames and the FF5 model is superior to the original financial pricing models as it builds on the original models’ limitations. Even so, the BSM model, MCS, and the FF5 model still have their own limitations that vary from reality and can be improved on in future research. These results shed light on guiding further exploration of newer and more refined models, methodologies, and approaches aimed to enhance our ability to make informed decisions and manage risks with greater precision.

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Section: Limitations and Prospectsmentioning

confidence: 99%

Comparison and Analysis of the Effectiveness of the State-of-the-Art in Option and Financial Pricing Models

2023

HBEM

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“…It would be better to invest in the portfolio which has the higher Sharpe ratio, since this kind of portfolio has the higher return when taking the same risk compared with the portfolios that have lower Sharpe ratio. Then, according to Yang's paper [11], each portfolio has a capital market line that illustrates the link between expected return and volatility. And the capital market line is tangent to efficient frontier.…”

Section: Introductionmentioning

confidence: 99%

Portfolio Construction and Analysis Based on the Hang Seng Index from 2009 to 2021

Nie

2023

AEMPS

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Maximizing returns at a low risk is a popular goal for investors. The Hang Seng Index (HSI) is a significant indicator of Hong Kong stocks, which is made up of 66 stocks traded on the Hong Kong stock market. This study aims to analyze and the find optimum portfolio based on the Hang Seng index. For this purpose, Fama experiment are applied firstly to evaluate the systematic risk and the idiosyncratic risk. But for convenience, three stocks from three different companies, Tencent, BYD and the CITIC are chosen to construct the portfolio. Then R is used in this study to analyze the portfolio. The minimum variance portfolio, Sharpe ratio and the tangency portfolio are all calculated by R then. The results show that the weights of the tangency portfolio are -200% for Tencent, 42% for BYD and 258% for CITIC, which may be helpful to make the investment decision.

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Assessing the Market Risk on the Government Debt of Kazakhstan and Bulgaria in Conditions of Turbulence

Georgiev

Radukanov

et al. 2022

Risks

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The purpose of this publication is to quantify and compare the market risk on the external government debt of Kazakhstan and Bulgaria in the conditions of COVID-19, the emerging energy crisis, and the coup attempt in the first country. In particular, the authors invest the market risk of sovereign bonds issued on global financial markets. Market risk is assessed both as a single issue and at a portfolio level using the Value-at-risk approach. Sixteen samples with historical observations of all issues of Kazakhstan’s and Bulgarian Sovereign Bonds issued on the international financial markets were formed. The duration method was used in the calculation of Delta normal bond VaR and CVaR. It was found that with the same credit rating, similar portfolio duration levels, similar GDP per capita, Debt (% of GDP), and Debt Per Capita, the market risk on their portfolio differed significantly. The comparison of risk levels between the two portfolios was made by six indicators–two indicators measuring linearly the sensitivity of bond prices to changes in market interest rates (Weighted average Macaulay duration and Weighted average modified duration) and four downside indicators (Undiversified VaR, Diversified VaR, Undiversified CVaR, amd Diversified CVaR). The return/risk performance of both portfolios was assessed by the Sharpe ratio in three variants (SR Undiversified VaR, SR Diversified VaR, and SR Diversified CVaR). When evaluating the bond portfolio VaR and CVaR, a practical version of the Duration method was proposed, which allows the use of an unlimited number of assets, taking into account the correlations between yield returns and historical price volatility.

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Analysis on CAPM and Sharpe Ratio in Market Investment

Cited by 3 publications

References 3 publications

Comparison and Analysis of the Effectiveness of the State-of-the-Art in Option and Financial Pricing Models

Comparison and Analysis of the Effectiveness of the State-of-the-Art in Option and Financial Pricing Models

Portfolio Construction and Analysis Based on the Hang Seng Index from 2009 to 2021

Assessing the Market Risk on the Government Debt of Kazakhstan and Bulgaria in Conditions of Turbulence

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