The reasons why the market portfolio is efficient as per the capital asset pricing model (CAPM). Introduction: CAPM describes the relationship between the projected return for assets and systematic risk mainly for the stocks. It is utilized to compute the required rate of return for a risky asset. Portfolio refers to a set of financial investments owned by the investor. The portfolio of investments includes debentures, stocks, bonds, and mutual funds.

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Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11.7, Problem 1CC

Summary Introduction

To discuss: The reasons why the market portfolio is efficient as per the capital asset pricing model (CAPM).

Introduction:

CAPM describes the relationship between the projected return for assets and systematic risk mainly for the stocks. It is utilized to compute the required rate of return for a risky asset.

Portfolio refers to a set of financial investments owned by the investor. The portfolio of investments includes debentures, stocks, bonds, and mutual funds.

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Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11.7, Problem 1CC

Summary Introduction

To discuss: The reasons why the market portfolio is efficient as per the capital asset pricing model (CAPM).

Introduction:

CAPM describes the relationship between the projected return for assets and systematic risk mainly for the stocks. It is utilized to compute the required rate of return for a risky asset.

Portfolio refers to a set of financial investments owned by the investor. The portfolio of investments includes debentures, stocks, bonds, and mutual funds.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11.7, Problem 1CC

Summary Introduction

To discuss: The reasons why the market portfolio is efficient as per the capital asset pricing model (CAPM).

Introduction:

CAPM describes the relationship between the projected return for assets and systematic risk mainly for the stocks. It is utilized to compute the required rate of return for a risky asset.

Portfolio refers to a set of financial investments owned by the investor. The portfolio of investments includes debentures, stocks, bonds, and mutual funds.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 11.7, Problem 1CC

Summary Introduction