Derivation of capm Assumption There are two dates: today and tomorrow Individual investors are price takers a Investments are limited to traded financial assets No taxes and transaction costs There is a riskless asset: paying interest rate r In zero net supply a Information is costless and available to all Investors All investor have homogeneous expectations All investors hold efficient frontier portfolios Demand of assets equals supply in equilibrium
INVESTMENTS Derivation of CAPM Derivation of CAPM Assumption: There are two dates: today and tomorrow; Individual investors are price takers Investments are limited to traded financial assets No taxes, and transaction costs There is a riskless asset: paying interest rate in zero net supply. Information is costless and available to all investors All investor have homogeneous expectations.. All investors hold efficient frontier portfolios. Demand of assets equals supply in equilibrium. fr
INVESTMENTS implications I every investor put their money into two parts:(a) the riskless asset; (b a single portfolio of risky assets-the tangency portfolio a2. All investors hold risky assets in the same proportion: according to the tangency portfolio 3 the tangency portfolio is market portfolio
INVESTMENTS implications implications 1 every investor put their money into two parts: (a) the riskless asset; (b) a single portfolio of risky assets—the tangency portfolio. 2. All investors hold risky assets in the same proportion: according to the tangency portfolio. 3 the tangency portfolio is market portfolio