CAPM medeb yovans wened. vie Ue Captab Me cohow % war—— eww was te riady pert olo rs are rakonil what pat Abo wy the pees secu chosen ie the Pest place a) uwests P woth thy choose 7 The CAPM model atLungte fo numer tak qushole Capital heeet feicing Medel. Bape we get te Ine CAPM, Le ve Look at tHe Plowing Me mask prt fic (wha ga welt devers heh (Ne will cabt i» that Gonfasio shares f ALL comparten ‘ the Karket Share op UE notahe wb conpors ) jo . Aubpose there QL market goaeudt ? (ws _ =. ny . cure w cbooks that ane achue 0G ,lr 5 - Swasia veces af the CAPM mene a Quoukk |. + Under contact, accwmptionr, ralliondl uwesty 's optimal chore of he noky potplic (f) y te came ao Ne Maker portfolio (M)) Le Me the cherie ander pv 4 Fel plumal ieee Effiued froakier Er) “a B graphical aapreseabahe’ of Leg recut above. Netio (Why + Ha ate 2 he Phone share St fuakay pot plies hb depend osly ow Une varvaaee ole) coverromete Of Up wud’ aloths, fo ¥ alt Ue uvrestors are rohonal, Mean yonnn ce wade . the Lowe the some trformaha re ao gach other, (assumphsse of the CARH makes) , thay wll ve He some EF and ‘thuefae the come ont Lens’ her chor hina be the Same portfeber - “9 “ Sree Be agg “of all Lanesters” inweshneak io 4,ona f oll uveshors Oe phy viet choreto, the chorer oM «Bh ep uslab CkLe CML The CML & the Leni tangent & “ee Uta Uffecunt Fork) mplecalhan of Ure CALM midcl thot PASSIVE INVESTMENT a ue the TSX, exanptr ) v fRerond This & crllea\He MOTUAL FUND THeoRem : al wo ane fone Wes ters, be longer opleunt- (Fee Qaor peloton ) . One moyor 1Read > Ons mayer made of Mie CAPM model 4 io Lat we (an how make predichs'ne Concerning ey wider, tape chil Suluter of tak aaarte vi on Uwresby's? Binal portfilce mw Jao v the Seeunty Horket Line (smu). — Seo Gnaslor tee Market prefile M= (Ww... on) M5 2 = th Ww u2 Weight ow shock Kepresonting the velar on sob Floste fae a Bui prtfla M. aks B's Cobibadan 4e pc date ef H.? (ict ohn 6 67s Contrrbutin & the ruoark 2) Wako B's Cabrbuher tor He overall variance of M Gays 9 a. yD Wy Covey, iD “Me oan (W,- Ye. Wn “oC (ay,%) Gr(6,2). -Gr(r1,4n) ng Cev(e% 1%) Gr(",") - ~ Gv, "m) os Cees lim, ro)Gubcbursy of Bb He VOnance = We 1, Oov(",, 5) + (, Cov "2, 8), Lot dog, Cov (a, 'a)] > toy | Gv (wre, ra) + Gv (wate ,%) € - Cov (up *n , = Wy Cov (XT, te = ip, Cov C™ 5) = Ws Cov (Ru, ke) where Rry= Ta - Tp 4 bs a —"p 2 elim, Gabibubon of B te the nek premumi, : a = wef © (%) - re] Rusord- Lek Rates of sok B - Grabs etl Psek Rertea Gabbuken ® the vanawee: = tig (E('e) “Fe wy Cor(Ty, ) | Gx(, 5) Gov (Keay sy)Ruault: » Ob tguelirrwn, Us Reriard- Rok Ralze of all sbeke ut ae markel, pert ico ar the some: Gane Rook remus Von'ance why? Uf a lock, ws Ba port lae bao a higher R-Kk rakes, ch voll be ub oneal Gemoind Avis, op prices , which weal then Lower ee Flin * the prs will Gnbdnw LAL Ha valios of afl cocks Oe eaeeed The above result onplie that oll Reward - Rook Pts of oU. plac a Hare the come aid should equal the: Rak Remark Palo op M uself. | las E(%™)-re . E(tm) - Fp Cov (Tw 5 rs) Tm > £("%) = tp + Gov Cray") [eCru)- ced i * LC —_— « tie le p+ Gol tate) , a measure ef resk Be chek B UL partfilcc H aoa frachon of the lobe Vorrbrce «Sok Cw be With 20 a FO= er plecw—eJ | - ~~ Hous cxllleck ths mean -Beba sypahn awd the ML (Seon Nave ose) (9) th site of tke SML= (tw )—tpe Rel sremam of The morke - (i) b = musmune of oak of ashok we ons gorefile. tle CML gre a benchmark Kolin take for every Level of ret. qe velahowe bef b Dasaie eed. beri sf pet Babs hy a deck &. The shock according te SML howl howe ow ax pe velurn of > Wwe rs [6% - 0% | = 1FS%; (0) Baking, back ok fo a), & Gy aclial reluin onsha b 20% (nso§ ny w prod) by tle SMU) , kw tee sock peepee hotter ton engecteld : oe Cecltol, return — ferdidod vfacrn veuy SME X70 Shock a ou ferformansy the market ( G+ He whe matt = Gu, Pu) | os pus! _ wo surly Jepreculed we th SML Nv Y Be 2 Pe ©) Qed wha By1 > df & more Volatile thaw Ha markel => U should lave a hugher rlurte Ch eb wih « pct 2 dass vvbetile than U 2) dosser rela Hon Te