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What are the advantages and disadvantages of capital asset pricing model?

Craig Stewart

in Student Loans

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Roger Moore on April 13, 2018

It\nconsiders only systematic risk, reflecting a reality in which most investors\nhave diversified portfolios from which unsystematic risk has been essentially\neliminated. It is generates a theory derived from the relationship between\nreturn and systematic risk which has been subject to frequent empirical research\nand of the test. He is generally seen as a better method of calculation of the\ncost of the equity that the model of growth of dividends (DGM) in that it explicitly takes\ninto account of a company’s level of systematic risk relative to the stock market\nas as a whole. It is clearly superior to the WACC in providing discount rates for\nuse in the valuation of the investment.


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