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The Capital Asset Pricing Model: An Application on the Efficiency of Financing Higher Public Education in Egypt

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  • Nevine Mokhtar Eid

    ()
    (Faculty of Management Technology, The German University in Cairo)

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    Abstract

    In the Markowitz (1952) mean-variance model as well as the Capital Asset Pricing Model of Sharpe (1964) and Lintner (1965) agents make their investment decisions based solely on the expected return and variance. On the other hand, human capital theory does not consider uncertainty in its return function except recently initiated by Harmon et al. (2001) who distinguish between the level and the years of education and incorporate uncertainty in Mincer’s Model (1974). This study has twofold objectives: First, estimate the risk-return trade-off of the public higher education capital stock in Egypt to indirectly evaluate the performance of its current financing system, and second, investigate the inter-linkage between real investment (human) and financial investment (lost opportunity or access to funds), then draw the channel through which they can affect the economic growth.

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    File URL: http://mgt.guc.edu.eg/wpapers/008eid2008.pdf
    File Function: First version, 2008
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    Bibliographic Info

    Paper provided by The German University in Cairo, Faculty of Management Technology in its series Working Papers with number 8.

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    Length: 20 pages
    Date of creation: Mar 2008
    Date of revision:
    Handle: RePEc:guc:wpaper:8

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    Web page: http://mgt.guc.edu.eg/economics/RePEc/guc/
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    Keywords: Human capital investment; financial capital investment; capital asset pricing model;

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    1. Weiss, Yoram, 1972. "The Risk Element in Occupational and Educational Choices," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1203-13, Nov.-Dec..
    2. Tao, Hung-Lin & Stinson, Thomas F., 1997. "An Alternative Measure of Human Capital Stock," Bulletins 7466, University of Minnesota, Economic Development Center.
    3. Harmon, Colm & Hogan, Vincent & Walker, Ian, 2003. "Dispersion in the economic return to schooling," Labour Economics, Elsevier, vol. 10(2), pages 205-214, April.
    4. Dale W. Jorgenson & Barbara M. Fraumeni, 1992. "The Output of the Education Sector," NBER Chapters, in: Output Measurement in the Service Sectors, pages 303-341 National Bureau of Economic Research, Inc.
    5. George Psacharopoulos, 1985. "Returns to Education: A Further International Update and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 583-604.
    6. Dagum, Camilo & Slottje, Daniel J., 2000. "A new method to estimate the level and distribution of household human capital with application," Structural Change and Economic Dynamics, Elsevier, vol. 11(1-2), pages 67-94, July.
    7. Graham, John W & Webb, Roy H, 1979. "Stocks and Depreciation of Human Capital: New Evidence from a Present-Value Perspective," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 25(2), pages 209-24, June.
    8. Telhado Pereira, Pedro & Silva Martins, Pedro, 2002. "Is there a return-risk link in education?," Economics Letters, Elsevier, vol. 75(1), pages 31-37, March.
    9. repec:fth:minnde:97-1 is not listed on IDEAS
    10. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March.
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