An Arbitrary Benchmark CAPM: One Additional Frontier Portfolio is Sufficient
AbstractThe benchmark CAPM linearly relates the expected returns on an arbitrary asset, an arbitrary benchmark portfolio, and an arbitrary MV frontier portfolio. The benchmark is not required to be on the frontier and may be non-perfectly correlated with the frontier portfolio. The benchmark CAPM extends and generalizes previous CAPM formulations, including the zero beta, two correlated frontier portfolios, riskless augmented frontier, and inefficient portfolio versions. The covariance between the off-frontier benchmark and the frontier portfolio affects the systematic risk of any asset. Each asset has a composite beta, derived from the simple betas of both the asset and the benchmark.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2008/24.
Length: 18 pages
Date of creation: 17 Oct 2008
Date of revision:
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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
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Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Benchmark; CAPM; non-frontier portfolio; zero beta portfolio; composite beta;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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