Portfolio Theory - Part 3

Portfolio Theory - Part 3

Overview

This tutorial introduces two major pricing models, (a) capital asset pricing model (CAPM) and (b) arbitrage pricing theory (APT) model. CAPM is central to portfolio building. Though it has been proposed since mid-1960s, it still has empirical evidence of the validity of the model. APT model was introduced by Stephen Ross in 1976. By comparing the assumptions of the APT model with those of CAPM, this tutorial describes how the arbitrage process works and examines the merits of APT as a capital asset pricing model.

Objective

On completion of this tutorial, you will be able to:

- Understand the derivation of the market portfolio
- Recognize how the security market line differs to the capital market line
- List the assumptions and some of the criticism levelled against them
- Discuss some of the empirical evidence supporting the CAPM
- Compare the assumptions of the APT model with those of CAPM
- Describe how the arbitrage process works to ensure an equilibrium along the arbitrage pricing line
- Evaluate the merits of APT as a capital asset pricing model

Content

Module 1: Capital Asset Pricing Model (CAPM)

Topic 1: Security Market Line
Topic 2: Assumptions & Criticisms of the CAPM
Topic 3: Empirical Evidence for the CAPM


Module 2: APT & Factor Models
Topic 1: Arbitrage Pricing Model
Topic 2: Other Factor Models

Details

Code
TEBIP17000901
Venue
ePlatform
Language
English
Level
Introductory
Hours
SFC:2.0, PWMA:2.0
Fees
All Member: HK$520
Non-Member: HK$740
Staff of Corporate Member: HK$520