Capital asset pricing model (CAPM, FRM T1-9)

The CAPM is a ex ante single-factor model where the single-factor is the market's excess return: it says that we should expect an excess return that is proportional to the stock's beta, which is the stock's exposure to market's excess return, as measured by the stock's beta. Beta can be retrieved by regressed the stock's excess returns against the market's excess return; beta is correlation to the market but scaled by cross volatility (beta increases with both higher correlation and higher stock volatility). From the perspective of factor theory, the higher expected return that accrues to higher beta stocks is compensation for higher risk; specifically, this is the risk that the stock performs worse when the market's return is negative. [My XLS is here trtl.bz/2z0vCwo]
💡 Discuss this video here in our FRM forum: trtl.bz/2ORAMGv
👉 Subscribe here / bionicturtl. .
to be notified of future tutorials on expert finance and data science, including the Financial Risk Manager (FRM), the Chartered Financial Analyst (CFA), and R Programming!
❓ If you have questions or want to discuss this video further, please visit our support forum (which has over 50,000 members) located at bionicturtle.com/forum
🐢 You can also register as a member of our site (for free!) at www.bionicturtle.com/register/
📧 Our email contact is [e-mail] (I can also be personally reached at [e-mail])
For other videos in our Financial Risk Manager (FRM) series, visit these playlists:
▶️ Texas Instruments BA II+ Calculator
• Texas Instruments BA I...
1️⃣ Risk Foundations (FRM Topic 1)
• Risk Foundations (FRM ...
2️⃣ Quantitative Analysis (FRM Topic 2)
• Quantitative Analysis ...
3️⃣ Financial Markets and Products: Intro to Derivatives (FRM Topic 3, Hull Ch 1-7)
• Financial Markets and ...
4️⃣ Financial Markets and Products: Option Trading Strategies (FRM Topic 3, Hull Ch 10-12)
• Financial Markets and ...
▶️ FM&P: Intro to Derivatives: Exotic options (FRM Topic 3)
• FM&P: Intro to Derivat...
4️⃣ Valuation and Risk Models (FRM Topic 4)
• Valuation and RIsk Mod...
5️⃣ Market Risk (FRM Topic 5)
• Market Risk (FRM Topic 5)
Coming Soon ....
6️⃣ Credit Risk (FRM Topic 6)
7️⃣ Operational Risk (FRM Topic 7)
8️⃣ Investment Risk (FRM Topic 8)
9️⃣ Current Issues (FRM Topic 9)
▶️ For videos in our Chartered Financial Analyst (CFA) series, visit these playlists:
Chartered Financial Analyst (CFA) Level 1 Volume 1
• Level 1 Chartered Fina...
#bionicturtle #risk #financialriskmanager #FRM #finance #expertfinance
Our videos carefully comply with U.S. copyright law which we take seriously. Any third-party images used in this video honor their specific license agreements. We occasionally purchase images with our account under a royalty-free license at 123rf.com (see www.123rf.com/license.php); we also use free and purchased images from our account at canva.com (see about.canva.com/license-agree.... In particular, the new thumbnails are generated in canva.com. Please contact [e-mail] or [e-mail] if you have any questions, issues or concerns.

[@marcelmir2692]

I just love your channel and your videos!
So much useful finance stuff!!

[@bionicturtle]

Thank you! We are happy to hear that our videos have been helpful to you and appreciate your feedback!

[@MikFrey]

It's very helpful. Excellent for a revision for me. Thanks.

[@bionicturtle]

Thank you, that's great for us to hear!

[@tictoc5443]

A lot to understand
Thanks for sharing

[@Mike-cp1tj]

again, great illustration! In the workbook, if you press Ctrl+F3 in Excel, I can see a lot of external named ranges that is not going to work for others, maybe they should be removed

[@drockccc5633]

LOVE IT

[@lyntonbr]

How do you get the correlation between the market and the asset?