Project valuation and investment decisions: CAPM versus arbitrage
This study shows that (a) project valuation via CAPM contradicts valuation via arbitrage pricing, (b) CAPM-minded decision makers may fail to profit from arbitrage opportunities, (c) Standard CAPM-based valuation violates value additivity. As a consequence, the use of CAPM for project valuation and decision making should be reconsidered.
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Volume (Year): 3 (2007)
Issue (Month): 2 ()
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References listed on IDEAS
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- Brounen, D. & de Jong, A. & Koedijk, C.G., 2004. "Corporate Finance In Europe Confronting Theory With Practice," ERIM Report Series Research in Management ERS-2004-002-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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