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A New Statement of the Extended Capital Asset Pricing Model

Author

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  • Tony van Zijl

    (Victoria University of Wellington.)

Abstract

A fundamental feature of the CAPM is that the investor holds individual assets within a portfolio which is mean variance efficient. In the basic CAPM of Sharp, Lintner, and Mossin, this aspect is acknowledged by stating risk margins relative to an efficient portfolio. This paper proposes a similar statement for the extended CAPM. It is shown that the proposed statement leads to a generalised form of the risk decomposition associated with the basic model, and also facilitates development of a Capital Market Line for the extended model.

Suggested Citation

  • Tony van Zijl, 1984. "A New Statement of the Extended Capital Asset Pricing Model," Australian Journal of Management, Australian School of Business, vol. 9(2), pages 67-86, December.
    • Handle: RePEc:sae:ausman:v:9:y:1984:i:2:p:67-86
    DOI: 10.1177/031289628400900207
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    References listed on IDEAS

    as
    1. Roll, Richard, 1978. "Ambiguity when Performance is Measured by the Securities Market Line," Journal of Finance, American Finance Association, vol. 33(4), pages 1051-1069, September.
    2. Turnbull, Stuart M & Winter, Ralph A, 1982. "An Alternative Test of the Capital Asset Pricing Model: Comment," American Economic Review, American Economic Association, vol. 72(5), pages 1194-1195, December.
    3. Ben-Horim, Moshe & Levy, Haim, 1980. "Total Risk, Diversifiable Risk and Nondiversifiable Risk: A Pedagogic Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(2), pages 289-297, June.
    4. Roll, Richard, 1977. "A critique of the asset pricing theory's tests Part I: On past and potential testability of the theory," Journal of Financial Economics, Elsevier, vol. 4(2), pages 129-176, March.
    5. Cheng, Pao L & Grauer, Robert R, 1982. "An Alternative Test of the Capital Asset Pricing Model: Reply," American Economic Review, American Economic Association, vol. 72(5), pages 1201-1207, December.
    6. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    More about this item

    Keywords

    CAPM; GLOBAL MINIMUM VARIANCE PORTFOLIO;

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