Capital asset pricing model (CAPM, FRM T1-9)

The CAPM is a ex ante single-factor model where the single-factor is the market's excess return: it says that we should expect an excess return that is proportional to the stock's beta, which is the stock's exposure to market's excess return, as measured by the stock's beta. Beta can be retrieved by regressed the stock's excess returns against the market's excess return; beta is correlation to the market but scaled by cross volatility (beta increases with both higher correlation and higher stock volatility). From the perspective of factor theory, the higher expected return that accrues to higher beta stocks is compensation for higher risk; specifically, this is the risk that the stock performs worse when the market's return is negative. [My XLS is here trtl.bz/2z0vCwo]
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[@marcelmir2692]

I just love your channel and your videos! So much useful finance stuff!!

[@bionicturtle]

Thank you! We are happy to hear that our videos have been helpful to you and appreciate your feedback!

[@MikFrey]

It's very helpful. Excellent for a revision for me. Thanks.

[@bionicturtle]

Thank you, that's great for us to hear!

[@tictoc5443]

A lot to understand Thanks for sharing

[@drockccc5633]

LOVE IT

[@Mike-cp1tj]

again, great illustration! In the workbook, if you press Ctrl+F3 in Excel, I can see a lot of external named ranges that is not going to work for others, maybe they should be removed

[@lyntonbr]

How do you get the correlation between the market and the asset?