Swot Analysis Asset Pricing - 1818 Words

Introduction: Asset pricing takes a vital role in the literature of finance. It forms a cornerstone for participants trying to manifest intrinsic/predicted values/prices for assets. Since 1965, when Sharpe introduced his CAPM formula, the field of asset pricing had shifted to a new paradigm. The model of Sharpe suggested that market beta as a variable is sufficient to explain stock returns. Sharpe’s work was preceded by Markowitz (1959) portfolio theory, where the lack of computer power at that time makes the calculations of huge set of covariance between stocks an inflexible approach. From this perspective, accompanied with simple and strong theoretical grounds, the CAPM gained high credit. A number of studies had provided support to the CAPM at the beginning (see King 1966, Brennan 1970, Levy 1997). However, a couple of method flaws were apparent with regard to the CAPM. First, the dependency on equity market indices as a proxy for market return. And here is where Roll (1976) argued that CAPM would not hold unless broad categories of assets are considered in the proxy. Roll’s argument implies misleading risk measurements for money managers if they apply that particular market beta. Second, the unrealistic assumption of one time period horizon of the investments decision was a critical issue. Thereafter, a major development arises when Merton (1973) relaxed that assumption by inventing the Intertemporal CAPM (ICAPM), which allows for changing portfolio componentsShow MoreRelatedSwot Analysis1077 Words   |  5 PagesSWOT Analysis The SWOT analysis is very important especially in the hotel industry. When it comes to tourism, the hotel industry is very important. In fact, it is a supporting service that affects the presence of tourists in a certain place. The SWOT analysis is vital to determine if the industry is helping in the achievement of tourism goals. SWOT analysis is a tool for auditing an organization and its environment. 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