This paper deals with the use of the CAPM for capital budgeting purposes. Four different measures are deductively drawn …

This paper deals with the CAPM-derived capital budgeting criterion, and in particular with Rubinstein’s (1973 …) criterion, according to which a project is profitable if the project rate of return is greater than the risk-adjusted cost of … capital, where the latter depends on the project’s disequilibrium systematic risk. It is shown that the disequilibrium net …

, the development of risk budgeting techniques marked an important milestone in the deepening of the relationship between … risk and asset management. Risk parity then became a popular financial model of investment after the global financial … and the redefinition of long-term investment policies. Introduction to Risk Parity and Budgeting provides an up …

This note contains two remarks on the traditional capital asset pricing model (CAPM) with one risk-free asset. Firstly … the risk aversion is generally necessary to guarantee existence of an equilibrium in the CAPM with one risk-free asset …

This paper shows that (i) project valuation via disequilibrium NPV+CAPM contradicts valuation via arbitrage pricing …, (ii) standard CAPM-minded decision makers may fail to profit from arbitrage opportunities, (iii) standard CAPM …-based valuation violates value additivity. As a consequence, the standard use of CAPM for project valuation and decision making should …

This paper uses counterexamples and simple formalization to show that the standard CAPM-based Net Present Value may not … be used for investment valuations. The reason is that the standard CAPM-based capital budgeting criterion implies a … descriptions of the same problem lead to different choices. As a result, the CAPM-based NPV as a tool for valuing projects and …

This paper tests the hypothesis that portfolio diversification can increase the threat of systemic financial risk. The … paper provides first a theoretical rationale for the possibility that systemic risk may be increased by the proliferation of … diversification may result in increasing systematic risk, by analyzing the portfolio dynamics of some of the major world open funds. …

Emerging markets like Pakistan confront with the problem to validate the CAPM in its original form. Since standard form …. This paper also introduces a non-standardized form of CAPM to validate whether it is applicable in Pakistan. The data of 20 … sector is linearly related to its beta risk while other sectors have volatile results. …

This paper shows that a decision maker using the CAPM for valuing firms and making decisions may contradict Modigliani … and Miller’s Proposition I, if he adopts the widely-accepted disequilibrium NPV. As a consequence, CAPM-minded agents … disequilibrium NPV for decision-making is deductively drawn from the CAPM, its use for both valuation and decision should be rejected. …