Better asset pricing models are some of the most researched topics in finance, with broad applications in risk management, asset allocation, and market valuations. A strategy can use these asset pricing models in many ways, such as building out a long-short equity strategy or hedging an existing portfolio based on factor exposures. This lecture covers the basics of the Capital Asset Pricing Model and looks into its derivation. We examine the trade-off between risk and return in real world applications founded on the premises behind the CAPM. Further, we explore the Arbitrage Pricing model with data-driven examples provided using the Fama-Macbeth regressions.
The lectures on this website are provided for informational purposes only and do not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor do they constitute an offer to provide investment advisory services by Quantopian.
In addition, the lectures offer no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.