The Security Market Line bias online essay editor

International Finance (ECO-M024)

 

 

 

 

Essay Topic:

 

 

The Security Market Line has historically been flatter than the Capital Asset Pricing Model (CAPM) would predict (see Figure  1 below). This means that low beta stocks earn higher abnormal returns (alphas) than high beta stocks. Discuss potential explanations for this finding.

 

 

 

Figure 1: Fama,  E.,  F.,  French,  K.,  R.,  (2004).   The  Capital  Asset Pricing

 

Model:  Theory  and Evidence.  Journal  of Economic  Perspectives, 18, 25-

 

46.

 

 

 

Word Limit:  1300 words (excluding  references)

 

 

Submit electronically to the Learning and Teaching HUB no later than 15.00 on

 

Wednesday 18th March 2015

 

 

 

 

 

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