The Experts below are selected from a list of 18456 Experts worldwide ranked by ideXlab platform
Ravi Jagannathan - One of the best experts on this subject based on the ideXlab platform.
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CAPM for estimating the cost of equity capital interpreting the empirical evidence
Journal of Financial Economics, 2012Co-Authors: Zhi Da, Ravi JagannathanAbstract:We argue that the empirical evidence against the Capital Asset Pricing Model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Since stocks are backed not only by projects in place, but also the options to modify current projects and undertake new ones, the expected returns on stocks need not satisfy the CAPM even when expected returns of projects do. We provide empirical support for our arguments by developing a method for estimating firms' project CAPM-betas and project returns. Our findings justify the continued use of the CAPM by firms in spite of the mounting evidence against it based on the cross-section of stock returns.
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the CAPM debate
The Quarterly review, 1995Co-Authors: Ravi Jagannathan, Ellen R McgrattanAbstract:This article describes the academic debate about the usefulness of the capital asset pricing model (the CAPM) developed by Sharpe and Lintner. First the article describes the data the model is meant to explain?the historical average returns for various types of assets over long time periods. Then the article develops a version of the CAPM and describes how it measures the risk of investing in particular assets. Finally the article describes the results of competing studies of the model's validity. Included are studies that support the CAPM (Black; Black, Jensen, and Scholes; Fama and MacBeth), studies that challenge it (Banz; Fama and French), and studies that challenge those challenges (Amihud, Christensen, and Mendelson; Black; Breen and Korajczyk; Jagannathan and Wang; Kothari, Shanken, and Sloan). The article concludes by suggesting that, while academic debate continues, the CAPM may still be useful for those interested in the long run.
Alina F Klein - One of the best experts on this subject based on the ideXlab platform.
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currency risk premia and uncovered interest parity in the international CAPM
Journal of International Money and Finance, 2014Co-Authors: Ronald J Balvers, Alina F KleinAbstract:Zero-investment uncovered interest parity (UIP) portfolio positions provide perfect factor-mimicking portfolios for currency risk in the International CAPM context. Their returns are the currency risk premia. Since the UIP positions on average provide low returns, the currency risk premia must be low so that currency risk appears not to be priced in an unconditional model. However, previous research has shown that UIP returns are predictable and may be quite substantial conditionally. We use this observation to generate a specific conditional version of the International CAPM. A GMM approach shows that the conditional model performs well, while the unconditional International CAPM is (marginally) rejected. The paper thus argues that previous rejections of the International CAPM stem from the fact that currency risk premia are by nature low over extended periods of time and do not provide evidence against the International CAPM.
Vinny Cahill - One of the best experts on this subject based on the ideXlab platform.
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An Empirical Study of the Potential for Context-Aware Power Management
UbiComp 2007: Ubiquitous Computing, 2007Co-Authors: Colin Harris, Vinny CahillAbstract:Context-aware power management (CAPM) uses context (e.g., user location) likely to be available in future ubiquitous computing environments, to effectively power manage a building’s energy consuming devices. The objective of CAPM is to minimise overall energy consump- tion while maintaining user-perceived device performance. The principal context required by CAPM is when the user is not using and when the user is about to use a device. Accurately inferring this user context is challenging and there is a balance between how much energy additional context can save and how much it will cost energy wise. This paper presents results from a detailed user study that investigated the potential of such CAPM. The results show that CAPM is a hard problem. It is possible to get within 6% of the optimal policy, but policy performance is very depen- dent on user behaviour. Furthermore, adding more sensors to improve context inference can actually increase overall energy consumption.
David T Ng - One of the best experts on this subject based on the ideXlab platform.
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the international CAPM when expected returns are time varying
Journal of International Money and Finance, 2004Co-Authors: David T NgAbstract:This paper derives a dynamic version of the international CAPM. The exchange-rate risk factors and intertemporal hedging factors are derived endogenously in a model that builds upon Campbell (1993). We provide a theoretical foundation for empirical risk factors often used in international asset pricing, including dividend yields, forward premia and, especially, exchange-rate indices. The model nests the standard CAPM, the international CAPM and the dynamic CAPM. Empirically, the model performs quite well in explaining average foreign-exchange and stock market returns in the US, Japan, Germany and the UK, and exchange-risk and intertemporal hedging factors play some role in pricing these assets. However, while derived in a theoretically sound fashion, these new factors are proportional to covariances with the world market portfolio. Hence, for practical purpose, the model does not perform better than the standard CAPM model. We apply the model to explain returns on portfolios of high book-to-market stocks across countries, and nd that the exchange rate and intertemporal hedging factors do not help to predict these returns. Hence, they cannot account for the two-factor model proposed in Fama and French (1998).
Ronald J Balvers - One of the best experts on this subject based on the ideXlab platform.
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currency risk premia and uncovered interest parity in the international CAPM
Journal of International Money and Finance, 2014Co-Authors: Ronald J Balvers, Alina F KleinAbstract:Zero-investment uncovered interest parity (UIP) portfolio positions provide perfect factor-mimicking portfolios for currency risk in the International CAPM context. Their returns are the currency risk premia. Since the UIP positions on average provide low returns, the currency risk premia must be low so that currency risk appears not to be priced in an unconditional model. However, previous research has shown that UIP returns are predictable and may be quite substantial conditionally. We use this observation to generate a specific conditional version of the International CAPM. A GMM approach shows that the conditional model performs well, while the unconditional International CAPM is (marginally) rejected. The paper thus argues that previous rejections of the International CAPM stem from the fact that currency risk premia are by nature low over extended periods of time and do not provide evidence against the International CAPM.
