How to Find Alpha and Plot The Security Market Line (SML) on Excel

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5 жыл бұрын

How to Find Alpha and Plot The Security Market Line (SML) on Excel
The security market line is a visual representation of CAPM. By plotting a managers performance on the SML we are able to easily compare how a manager performed vs the expected value of a stock.
Definitions:
Security market line is the representation of the capital asset pricing model. It displays the expected rate of return of an individual security as a function of systematic, non-diversifiable risk
In finance, the capital asset pricing model is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.
Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index.
AJL Investing

Пікірлер: 21

@marvinlock98789 Жыл бұрын

Hey great video! An easier way to find beta is to apply the excel in built function SLOPE(), where the known y's is the array of stock returns and known x's is the array of the market return.

@ahmetaydogan5291 3 жыл бұрын

great work sir helped a lot for my mba finals

@mmoazx 4 жыл бұрын

dude u r a life saver

@AnnabelleYen 2 жыл бұрын

Thank you for your vid it really helps a lot for my final project in FM!

@BRANDYMCMB 5 жыл бұрын

Thanks this was really helpful for my project

@BRANDYMCMB 5 жыл бұрын

One correction though, at 5:19 you added by beta which was correct in the formula but you mentioned "times by beta" which could confuse people.

@heyimaaron2972 5 жыл бұрын

Not a problem man :)

@vdim2360 Жыл бұрын

Just with your annualised return, do you multiply the average return by the trading days despite not looking at a full year of returns? or should I just multiply the average return by the amount of trading days I'm looking at?

@artificalintelligance_videos 4 жыл бұрын

thanks dear. great work this was very helping for my project

@Eckartoon 2 жыл бұрын

What is the trading days? 252 -Is it different for different countries?

@chenling6262 3 жыл бұрын

In the video, there is only half year data (from 1/3 to 6/29). Should we still times 252 for the annual return?

@deezus1750 Жыл бұрын

legend

@leoducreuzet 3 жыл бұрын

Thanks a lot, very useful video :)

@rabiulali7641 3 жыл бұрын

how do you know which risk-free rate to use, for example, if I have monthly data for 5 years on two stocks traded on FTSE 100, would I have to use 1-year GILT, 5-year GILT or 10-year GILT as the risk-free rate?

@ehibble 2 жыл бұрын

5 year. The gov-bond is only considered risk-free if it's held until maturity. Otherwise you'd have to sell the bond within the maturity date which has risk.