Comparison of CAPM Model and APM

Comparison of CAPM Model and APM Title: Is the CAPM model a better asset-pricing model than the APM (arbitrage pricing model)? The following is a brief literature overview and literature review of the economics books and journal articles used in the writing of this dissertation. The dissertation’s objective was to evaluate the relative strengths of the Capital Asset Pricing Model (CAPM) as a pricing model, when it is compared to the most viable alternative, the Arbitrage Pricing Theory model. Various factors and influences that impact upon the pricing of certain goods and products, specifically oil -based products, as will be demonstrated in the dissertation is actually or potentially able to affect both these models and their relative effectiveness. The literature mentioned here was used to research and understand the concepts that underpin the CAPM and APT models, such as minimising the risk of loses and maximising the prospects of handsome profits from financial investments. The objective of these models is to be the most effective predictors of risks, changes, success, or failure. This literature review is a summary of the merits and the usefulness of the sources used during the research and completion of my dissertation; all views expressed below are my own. Sharpe, Alexander, and Bailey in their book ‘Investment’ provide useful background information with regard to the economic theories relating to the comparative merits of the CAPM and APT pricing models. The main points that Sharpe, Alexander, and Bailey make that is of relevance to the dissertation was about the origins of the CAPM which economists developed as a variant of the APT price modelling theories. They point out that the main difference between the two models is that the CAPM pricing model considers a single factor (the market portfolio), whilst the APT model considers a few factors such as financial risks, future prospects, and the causes of inflation. The usefulness of each model can depend upon the depth of research needed and the scope of the analysis that is required. If a limited study is all that is needed then CAPM is probably the best option, if a more extensive study is needed then APT is more likely to be a better option. The basic assumption of Shar pe, Alexander, and Bailey is that each model has it own strengths and weaknesses, which means that the effectiveness of each model can vary greatly due to variations within the market portfolio. Fluctuations and market trends are probably the best means of demonstrating that the two models work properly or if they do not (Sharpe et al, 1995). Sharpe, Alexander, and Bailey was a helpful source to use for this dissertation as they put forward the influences that affect pricing decisions, and the perspective profits of any company. Amongst these influences are the industrial growth rate, the rate of price inflation, variations in the short or long time interest rates, and the performance of financial bonds. Pricing models are needed to predict risks due to the variation in all those factors or influences which can make all the difference between a sound financial investment and, a disastrous financial investment. Sharpe, Alexander, and Bailey help to explain how a company’s rate of growth just like that of its competitors can be highly dependent upon price fluctuations in commodities such as crude oil and natural gas, as well as whether those increased costs can be recuperated from the company’s customers. Any worthwhile pricing model such as CAPM and APT needs to take inflation and its causes into account. Thi s book is a highly convenient source of information on many different aspects concerning portfolio investments and the theoretical and practical considerations that students and praticioners of financial investments and bond markets would find very useful (Sharpe et al, 1995). Bower, Bower, and Logue’s journal article from the September 1984 issue of the Journal of Finance provided invaluable background information concerning the APT system, and how its linked up with the measurement of the utility stock returns. The article was entitled ‘Arbitrage Pricing Theory and utility stock returns.’ The journal article by Bower, Bower, and Logue contains the formulas that the APT system utilises to analysis the relevant data relating to issues of pricing theories and, allows economists to check upon their accuracy or relevance. The formula that was cited in this journal article was used to analysis the data from the oil companies that was the main research focus for the dissertation, and its results were invaluable for the formulation of conclusions and arguments. Knowing how the formulas of the modelling theories are formed and how effective those formulas are in predicting events, variants, and success or failure cannot be realistically achiev ed without knowing the exact formula that the respective pricing models are based upon. This article not unsurprisingly concentrates upon the strong points that the APT system has to offer in comparison to the CAPM system. Bower, Bower, and Logue are arguably advocates of investors using the APT system ahead of the CAPM pricing theory due to providing more accurate forecasts. Their article is certainly a useful means to further understand how the APT allows a highly accurate prediction of pricing trends, as well as a sound understanding of the variants that can ruin the accuracy of any pricing model if not predicted or evaluated correctly. This article was available online which made it easier to access and is indeed where it was obtained from (Bower et al, 1984). Brennan and Schwartz’s article from the October 1989 issue of the Journal of Businesses, ‘Portfolio and Financial Equilibrium’ was another useful source of information for carrying out the data analysis using both pricing models to allow an accurate and realistic comparison between the CAPM and APT models. This article gave an improved understanding of how the balance of potential profits, investment risks, and loses that can influence the decisions that potential investors make can be formed, changed, and also how they can operate within any given market portfolio, such as leading oil companies like Royal Dutch Shell. As far as Brennan and Schwartz are concerned the key for any pricing theory to be a successful and effective model is being able to point towards the factors, influences, and behaviours that establish or maintain portfolio and financial equilibrium. There may be variants within any given market portfolio yet the most effective pricing theories are t hose models that take into account the actual or potential variants that will alter the market portfolio from time to time. The article discussed the strong points and the weak points of both the CAPM and APT pricing models that helped develop a personal understanding of the differing criteria for assessing which, of the two pricing models was the most cost effective, or reliable. It also assists developing an understanding how accurate predictions of pricing changes or variations in profitability are going to be (Brennan and Schwartz, 1989). Goetzman’s ‘An Introduction to Investment Theory’, is a sound source of information that was used in the dissertation to assist the comparison between the CAPM and APT pricing models. It is a more recent source of information about pricing models than some of the other sources mentioned in this literature review that were used for researching and writing the dissertation. Therefore it was a means of obtaining more up to date academic opinions, arguments, and practical examples of real life changes of market portfolios, investment variants, and the ability to detect, predict, or even avert risks to investments and profitability. Goetzman provides an invaluable insight into the way that investment theory has developed and its comparative strengths and weakness, or whether the best one to use depends on circumstances (Goetzman, 2007). The main use of Terregrossa’s ‘Accounting for Estimation Risk in CAPM-generated forecasts’ for the dissertation was to assist in the formation of the arguments in favour or against the idea that the CAPM pricing model is more or less useful and accurate than the APT model. Terregrossa’s article provides a relevant and easily understandable guide to the estimating of the financial risks that are a component element of the risk profiles and forecasts that are generated by the CAPM pricing theory. Besides describing the way in which the CAPM pricing model estimates investment and business risks the article discusses the theoretical and practical strengths or weaknesses of the risks that are estimated, and whether those risks are realistically forecast. Terregrossa’s article was a highly relevant one for gaining a stronger grasp of how the CAPM pricing theory can be used to forecast changes to the market portfolio. A model that adapts to those predicted changes to enhance profitability and prevent unnecessary risks being taken that damage company performance and investments (Terregrossa, 2004). Cagnetti’s ‘Capital Asset Pricing Model and Arbitrage Pricing Theory in the Italian Stock Market: An Empirical Study’, was a relevant source of information as it is also a comparison of the two pricing models in operation. Whilst the dissertation is primarily aimed towards using oil companies as the basis for the comparison between the CAPM and the APT pricing models. Whilst Cagnetti’s article was based upon a study of the Italian stock market it still provided a useful guide as to the time period of the data to be analysed. It is guide of how to evaluate and analyse the ways in which the two pricing models succeed or fail in predicting market trends and prices as well as noticing when variants can be detrimental or advantageous to the over all market portfolio, or any company’s profitability (Cagnetti, 2002).

Gettysburg

Charles Esquivel Pritchett History 1301 Nov. 25th 2010 Civil War Project Located 50 miles northwest of Baltimore, the small town of Gettysburg, Pennsylvania was the site of the largest battle ever waged during the American Civil War. Fought in the first three days of July 1863, the Battle of Gettysburg resulted in a hallmark victory for the Union â€Å"Army of the Potomac† and successfully ended the second invasion of the North by General Robert E. Lee's â€Å"Army of Northern Virginia†. Historians have referred to the battle as a major turning point in the war, the â€Å"High Water Mark of the Confederacy†.It was also the bloodiest single battle of the war, resulting in over 51,000 soldiers killed, wounded, captured or missing(Coddington 21). On July 1, Confederate forces converged on the town from west and north, driving Union defenders back through the streets to Cemetery Hill. During the night, reinforcements arrived for both sides. On July 2, Lee attempted t o envelop the Federals, first striking the Union left flank at the Peach Orchard, Wheatfield, Devil’s Den, and the Round Tops with Longstreet’s and Hill’s divisions, and then attacking the Union right at Culp’s and East Cemetery Hills with Ewell’s divisions.By evening, the Federals retained Little Round Top and had repulsed most of Ewell’s men. During the morning of July 3, the Confederate infantry were driven from their last toe-hold on Culp’s Hill. In the afternoon, after a preliminary artillery bombardment, Lee attacked the Union center on Cemetery Ridge. | | The Pickett-Pettigrew assault momentarily pierced the Union line but was driven back with severe casualties(Bachelder 47) . Stuart’s cavalry attempted to gain the Union rear but was repulsed. On July 4, Lee began withdrawing his army toward Williamsport on the Potomac River.His train of wounded stretched more than fourteen miles. | Gettysburg Campaign (June-August 1863) Battle: July 1-3, 1863 Principal Commanders: Maj. Gen. George G. Meade, US; Gen. Robert E. Lee, CS Forces Engaged: 158,300 total (US 83,289; CS 75,054) Estimated Casualties: 51,000 total (US 23,000; CS 28,000) The Battle of Gettysburg began on July 1, 1863, when a Confederate brigade searching for a badly needed supply of shoes in the small town of Gettysburg, Pennsylvania, ran into Union cavalry(Nielsen 12).After the three days of battle were over, Union forces claimed victory, although both sides suffered heavy casualties. | | While Grant slowly strangled Vicksburg and Rosecrans feinted Bragg halfway across Tennessee, Lee decided to march his troops north toward Pennsylvania. There were several reasons for this bold move. The Confederate government hoped that a decisive victory on Northern soil would win foreign recognition of the Confederacy. In addition, Lee argued that an invasion of the wealthiest urban area of the North would probably lessen the pressure on Confederate force s in Tennessee and at Vicksburg.Perhaps most important, the lush Cumberland Valley would yield food and clothing for Lee's ragged and hungry army(Fransanito 6). On June 3, 1863, Lee began to move his Army of Northern Virginia across the Rappahannock. Hooker, who was aware of Lee's movements, shifted the Army of the Potomac northward, using it as a shield between Lee and the capital at Washington. Late in June, Hooker resigned his command, convinced that he had lost the confidence of the administration. On June 28, General George G. Meade replaced Hooker. Meade had been one of Hooker's corps commanders.On July 1 advance units of the two armies stumbled into each other near the little town of Gettysburg, Pennsylvania, 16 km (10 mi) north of the Maryland border. Both Lee and Meade realized that a battle was unavoidable. Fighting began that day. Union troops, after early reverses, managed to hold a strategic position on Cemetery Hill. The second day, July 2, saw confused fighting on bot h Union flanks. Generals Longstreet and John B. Hood assaulted high ground at the Peach Orchard and Little Round Top, but by night the Federals held key positions.The most dramatic action of the battle came on the third day, when General George E. Pickett led a gallant but hopeless charge against the Union center, â€Å"the bloody angle. † (Nielsen 184) Pickett's drive tried to charge across an open field at Cemetery Ridge, but concentrated Union fire stopped him. The battle was a decisive Union victory, but both armies suffered very heavy losses. Meade's casualties numbered 23,000 and Lee's about 25,000. Lee began his retreat on July 4. | To the great disappointment of President Lincoln, Meade did not pursue the Confederate army and make Lee stand and fight(Coddington 12).By July 14 the Confederate commander had brought the remnant of his army back to the safety of Virginia. Gettysburg had been a severe defeat for the South, both in terms of men lost and the army's morale. I n November 1863 President Lincoln dedicated a national cemetery to those who had died in the Battle of Gettysburg. His speech, known as the Gettysburg Address, became famous as an expression of the democratic spirit and reconfirmed Lincoln's intention to reunite the country.

What Concept Essay Topics Is - and What it Is Not

What Concept Essay Topics Is - and What it Is Not If you discover that the writer did not provide precisely what you expected, request a revision, and we'll make the corrections. You have to pay attention to each detail when you are selecting a topic! Since you're going to be presenting a topic, you should back this up with factual data as well your very own personal judgment of it that will provide much better understanding for those readers. While others wish to just demonstrate a subject. The Downside Risk of Concept Essay Topics It's possible to easily buy unique college essays and don't neglect to tell friends and family about it. Writing is a present that comes naturally. So should you need to employ college essay writer online, we're just the people that you will need to contact. While it's the case that there are a few excellent writers in college some find it extremely difficult to write. You also need to ask your instructor about the essay requirements that you want to follow. In terms of the next step, it's the opportunity to suck this up in addition to getting all academic assignments accomplished on the correct time and in the most effective fashion, in strict accordance with the suggestions of the college or university academic writing instructor. If you've already graduated from college or university and are looking for a great job, you will need to get a persuasive resume to impress your future employer. What Concept Essay Topics Is - and What it Is Not In addition, you present or future. Tell our experts what sort of homework help on the internet you will need to get. Until you won't decide on a purpose, you aren't going to have the ability to get started with your work. Advertisement analysis essay outline to begin with, playing basketball is helpful to the growth of a kid's but it has been utilized for centuries in all english-speaking. Writing an e ssay explaining a concept can be a difficult assignment. Concept papers offer an in-depth analysis of a topic that is significant to the writer. Who knew essay writing may be so tough. Understanding how to begin an essay is even more challenging as you must find the ideal inspiration to write. Such kind of writing does not require a normal thesis. Among the things to take into account in essay writing is to understand how to begin an essay. What the In-Crowd Won't Tell You About Concept Essay Topics There are several strategies to hack your life and minimize the strain your academic routine has on your entire body and mind. To make sure that you will see a complete answer to every question, we've got a support team that's always online. You can select the topic from the recent events which take place in daily life. Instead, you could write about an unfamiliar topic that you've got a desire to find out more about. The Ultimate Concept Essay Topics Trick Shorter essays are going to have an introduction of a single paragraph, then a single paragraph for each major point, followed by a conclusion paragraph. It is pre ferable to steer clear of topics that are overdone. Write 150 words or so on each one of the a couple topics. Concept Essay Topics Fundamentals Explained Attempting to compose a research paper on a topic that doesn't have a lot of research on it's incredibly hard, so before you choose a topic, do a little bit of preliminary searching and be sure you're have all the info you have to compose your paper. There's a sectarian document. Looking at several publications to discover valuable info on your topic provides you with the initial jump-start, but after you have gathered several resources, you'll need to consider how to organize them. It's possible to search on the internet to steer clear of paperwork. Everything you need to watch! You are able to see which ideas are alike and needs to be grouped together. If you would like to pick a very good topic, don't just feel that the topic you're writing should be a hit. Because of the intricacy of some ideas, it is crucial to reco gnize an exceptional region and write about doing it. What Concept Essay Topics Is - and What it Is Not 1 Your essay should reveal the means by which the components of your meaning, just enjoy the elements of a tree, relate and form an entire. Typically, a concept paper discusses a controversial topic which may be interpreted in numerous ways. The next thing to do is to research the idea. You're on the right path.

Essay On No Child Left Behind - 840 Words

No Child Left Behind (NCLB) was produced to make 100% of students’ proficient by 2014. While the idea sounds perfect on paper, it is not the case when it is put into action. NCLB was replaced in 2015 and replaced by the Every Student Succeeds Act. Many students did not use the resource effectively due to the fact that not all children have the same views and desires toward fulfilling their education career. This in turn makes it hard for the teachers to follow the education guidelines while also ensuring that the students who know the material don’t get bored with the class. It is incredibly hard to teach a student who doesn’t want to learn. As stated by Michael Ortiz, â€Å"NCLB was designed to assist students to succeed in the classroom.†¦show more content†¦This changes almost every year. With the standardized tests and regular standards it is becoming increasingly easy for students to fall behind in work and then more so in school. The toll it takes on teachers reflects on the students. Overall, acts that are meant to keep all children equal in passing tests and school adequacy can have damaging effects on both the students and teachers. Forced learning acts can create rebellious and dull-minded children and teens. Laws around schooling are stricter than ever. Young children are starting to rebel against teachers and make destructive decisions. Students of all ages are beginning to ignore their teachers and not care about school. This leads to teachers feeling somewhat defeated and not trying to teach at the level that they should because the students lack of wanting to learn can reflect on how the teacher teaches especially with the switching of classes. As Jennifer Chassman wrote, â€Å"Teachers are expected to teach with students coming in and out ofShow MoreRelatedNo Child Left Behind Essay2629 Words   |  11 PagesNo Child Left Behind; Why we should rethink the current policy. 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