Value Versus Glamour
- Topics:
- Decision Analysis
- Tags:
- CAPM,
- Strategy,
- Return,
- Managerial Accounting,
- Management,
- Investment,
- Financial Services,
- Finance,
- Equity,
- Tools & Techniques
- Source:
- American Finance Association
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Overview: CAPM is basically a method of decision-making w.r.t. any kind of investment in any asset. The fragility of the CAPM has led to a resurgence of research that frequently uses trading strategies based on sorting procedures to uncover relations between firm characteristics and equity returns. It examine the propensity of these strategies to generate statistically and economically significant profits due to familiarity with the data. Under plausible assumptions, data-snooping can account for up to 50 percent of the insample relations between firm characteristics and returns uncovered using single (one-way) sorts. The debate around the empirical support for the one-factor Capital Asset Pricing Model (CAPM) in explaining the cross-section of expected returns of financial securities has led to resurgence of empirical research aimed at discovering variables that might better explain the behavior of returns. Thus, this concept has played a very instrumental inmaking the decision analysis better.
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Format: PDF | Size: 729KB | Date: Jan 2003 | Pages: 58
