The purpose of empirical asset pricing project is to predict the future returns of a portfolio based on its historical data. For this purpose, the historical data of 7 years is employed and via two different approaches three time series models are formed. Portfolio returns for the first ten months of 2012 – months between 1 January 2012 and 1 November 2012- are predicted using these models. Two different econometric approaches that are compared in the scope of this analysis consist of one structural multi-variate model and two uni-variate models. In this study, the predictive powers of these three models are investigated and the aim of detecting the best fitting model to the reality is carried out throughout the analysis. Initially, monthly stock price data of eight growth stock companies that generates our portfolio was downloaded from the WRDS database with the months ranging of January 2005 to December 2011 (Raw_Data_Stocks sheet in Excel). The companies that constitute the portfolio are; Apple, Inc. (AAPL), Apollo Investment Corporation (AINV), ArthroCare Corporation (ARTC), Atwood Oceanics, Inc. (ATW), B&G Foods, Inc. (BGS), BlackRock, Inc.(BLK), Cerner Corporation (CERN), CoBiz Financial, Inc.(COBZ), Copano Energy LLC (CRNO). Stock price data of Copano Energy for given dates was not available on the database, therefore it was excluded from the analysis. Besides, monthly Fama-French 3 factor data was downloaded for the same period. However, three factors data for November of 2012 were not available on Kenneth French’s website. For this reason; the analysis is conducted for the first ten months of 2012, until November. In order to compare our models in Stata, equally-weighted returns (EWR) and value-weighted returns (VWR) of the portfolio were calculated (Portfolio Returns sheet in Excel). Thus, all of the necessary data to form the models to be used in the analysis – the monthly portfolio returns and the monthly Fama and French 3 factors; market, size and...

...ECONM2035: AssetPricing
Evarist Stoja (2B7, x10603)
e.stoja@bristol.ac.uk
Outline: This course runs over the autumn term and aims to provide a thorough grounding in the pricing of financial securities. The lectures start with some quantitative review material before moving on to bond pricing. Equity markets and determination of equity prices are treated next before students are introduced to the theory behind and testing procedures for informational efficiency in financial markets. Finally, students are given an introduction to derivative securities and derivatives pricing.
Teaching
Arrangements:
There are 2 hour lectures and a 1 hour exercise lecture for this course in weeks 2 to 10 of the autumn term. Problems to be completed by students prior to each week's exercise lecture will be distributed in advance.
Lectures:
During the lectures, I will discuss the theory on the AssetPricing topics outlined below and give illustrative examples. Students will of course be expected and welcome to contribute.
Exercise lectures:
For the exercise lecture, students should allocate themselves into Consultancy Teams of around four people (final confirmation of the number in each team to be given after student enrolment). Choose a unique business name for your team. In the tutorials, we will listen to student presentations.
Course assessment
Team Presentations...

...Running head: PRICING MODELS
Pricing Models
Adam F. Thornton
FIN 501 – 3
TUI University
Dr. William Anderson
Chipotle Mexican Grill (CMG) is one of the fastest growing restaurant chains in the United States. Self proclaimed as “fast-casual,” CMG offers a dining experience that is unique, organic, and which draws from the local economy. For the investor, CMG is a wise investment for the aggressive and fast growing portion of a portfolio. When determining an appropriate model to evaluate CMG’s potential, the Capital AssetPricing Model (CAPM) is the best choice. This model offers the best amount detail while maintaining the simplicity needed for a model outlining investment decisions in CMG.
The Pricing Models
There are three pricing models to discuss when evaluating CMG: dividend growth, CAPM, and the Arbitrage Pricing Theory (APT). Each of these models has both advantages and disadvantages, easily tailoring one model to different situations. However, the CAPM is best suited for this case with CMG. Below is a further review on each of models’ advantages and disadvantages, and applicability to CMG’s market position and financial situation.
The Gordon Growth Model
The Gordon Growth Model (GGM) is a very simple model for estimating the value of a stock. This equation works by calculating the stock value from...

...Capital AssetPricing Model
The Capital AssetPricing Model otherwise know as CAPM defines the relationship between risk and return for individual securities. William Sharpe published the capital assetpricing model in 1964. CAPM extended Harry Markowitz's portfolio theory to introduce the notions of systematic and specific risk. For his work on CAPM, Sharpe shared the 1990 Nobel Prize in Economics with Harry Markowitz and Merton Miller
CAPM assumes the concept of a logical investor, assumes a perfect market, and uses a measure of investment risk known as a Beta. When CAPM assumes these three concepts above there has to be a definition to describe the assumptions.
Therefore when we assume a logical investor we are actually referring to an investor that makes his or her investments based upon the expectation of a return. Investors will anticipate their return by analyzing the stock market's average rate of return and that will be their expectation when looking into a specific security. If they are not going to anticipate their return to equal the markets average rate of return then there will be no reason to invest. You invest to make a profit. Investors invest to make a profit. Furthermore a logical investor accepts the market rate of risk. Since they are anticipating the average market rate of return they also have to be willing to accept the market rate of risk. Logical...

...1. For each of the scenarios below, explain whether or not it represents a diversifiable or an undiversifiable risk. Please consider the issues from the viewpoint of investors. Explain your reasoning
Undiversifiable (market )risk:
Market risk is the variability in all risky assets caused by macroeconomic variables. This risk cannot be avoided, regardless of the amount of diversification. Systematic risk (Market risk) factors are those macroeconomic variables that affect the valuation of all risky assets such as variability in the growth of the money supply, interest rate volatility, variability in aggregate industrial production, and natural shocks like drought, earth quake, hurricane, etc.
Diversifiable (unique )risk:
Many of the risks faced by an individual company are peculiar to its activity, its management, etc. These are the unique risks and can be diversified away. Examples of unique risks are a company winning a large contract, wildcat strikes hitting a company, litigation hitting a company or the company facing a governmental investigation.
a. A large fire severely damages three major U.S. cities.
Diversifiable risk
The entire economy will not be affected by a large fire in three major US cities. In fact some companies in cities not affected by fire will benefit as they will meet the demand not being met by companies in the three cities that are...

...CHAPTER 9
THE CAPITAL ASSETPRICING MODEL
9.1 THE CAPITAL ASSETPRICING MODEL
1. The CAPM and its Assumptions
The capital assetpricing model (CAPM) is a set of predictions concerning equilibrium expected re¬turns on risky assets. Harry Markowitz laid down the foundation of modern portfolio man¬agement in 1952. The CAPM was developed 12 years later in articles by William Sharpe (1964), John Lintner (1965), and Jan Mossin (1966). The time for this gestation indicates that the leap from Markowitz's portfolio selection model to the CAPM is not trivial.
We summarize the simplifying assumptions that lead to the basic version of the CAPM in the following list. The trust of these assumptions is that we try to assure that individuals are as alike as possible, with the notable exceptions of initial wealth and risk aversion. We will see that conformity of investor behaviour vastly simplifies our analysis.
1. There are many investors, each with an endowment (wealth) that is small compared to the total endowment of all investors. Investors are price-takers, in that they act as though security prices are unaffected by their own trades. This is the usual perfect competition assumption of microeconomics.
2. All investors plan for one identical holding period. This behavior is myopic (short¬-sighted) in that it ignores everything that might happen after the end of the...

...Chapter 9: Multifactor Models of Risk and Return. (QUESTIONS)
1. Both the capital assetpricing model and the arbitrage pricing theory rely on the proposition that a no-risk, no-wealth investment should earn, on average, no return. Explain why this should be the case, being sure to describe briefly the similarities and differences between CAPM and APT. Also, using either of these theories, explain how superior investment performance can be establish.
Answer:
Both the Capital AssetPricing Model and the Arbitrage Pricing Model rest on the assumption that investors are reward with non-zero return for undertaking two activities:
(1) committing capital (non-zero investment); and (2) taking risk. If an investor could earn a positive return for no investment and no risk, then it should be possible for all investors to do the same. This would eliminate the source of the “something for nothing” return.
In either model, superior performance relative to a benchmark would be found by positive excess returns as measured by a statistically significant positive constant term, or alpha. This would be the return not explained by the variables in the model.
2. You are the lead manager of a large mutual fund. You have become aware that several equity analysts who have recently joined your management team are interested in understanding the differences between the capital asset...

...ANNEXTURE
Questionnaire
Dear respondent,
I m a student of “Bhagwan mahavir college of business administration, surat” conducting a survey for my project preparation, as the requirement of partial fulfilment of subject project in third year(semester-VI) BBA in surat city of a study on “A COMPARATIVE STUDY ON BRITANNIA AND PARLE COMPANY IN SURAT CITY (A SURVEY ON BISCUIT )” I assure that the information given by you are strictly used for academic purpose only. I request you to help me in gathering information by filling up yhe following information.
Thank you,
Abhishek sojitra
Bhagwan mahavir business administration
Top of Form
1) Do you eat biscuit?
Yes
No
2) Select your likely tastes for biscuit?
Sweet
Salty
Sweet & Salty
Cream biscuit
Others
3) What type of biscuit you normally prefer?
Branded
Bakery product
4) How often do you eat biscuit?
Once in a week
Once in a month
Once in a fortnight
Alternate days
Every day
5) When do you have biscuit?
At breakfast time
At evening
Any time
6) Which brand you normally buy?
Britannia
Parle
Both
Other:
7) From where do you buy biscuit?
Provisional store
Hawkers
Convenience store
Other:
8) Out of the following brand which...