Ses 17: The CAPM and APT III & Capital Budgeting I

[@aok1425]

capital budgeting starts around 22:28

[@hetaeramancer]

ok

[@asutepung5516]

Cheers mate

[@AJPWPRFU]

Fantastic. His voice never gets boring to listen to...

[@ElevenKings]

Absolute legend, love his style of lecturing

[@calumreed2861]

Fantastic lecture, covering many aspects of the different concepts presented. It has been a pleasure watching these lecture series so far. However, in min 1:14:10 , I would argue against the line of reasoning presented, because all those oil drilling companies you are getting their betas from may also get into drilling projects very often and average out as part of the core nature of their businesses. In other words, those first-year drilling projects which "can be diversifiable" might be a common risk for that industry and in the long run being captured by the beta value as part of their expected operations which move in a certain way with the overall market risk. For example, maybe if there are financial downturns companies would not risk to drill any more holes because of a lack of access to funding sources in order to cover any of these new projects in addition to the fact of being able to keep solvency to finance their daily operations. Just before anyone jumps into a personal attack, I am not claiming by any means that I know more than the professor in this matter, since he probably has thought of way more things behind this analysis but perhaps he didn't have the time to present them, however, it would have been great to see students challenging this point a bit further and being witness of a deeper discussion over there. Or also having asked if the senior vice-president of Oil exploration Saudi Aramco did finally apply any of these concepts (min 1:12:00), if yes then how, or if not then why. Blessings.

[@mikehall5593]

To the question at 1:04, as long as the proposed investment or project results in positive NPV, it adds value to the firm. If other investments or projects were being considered at the same time, and could only do one, the firm would simply pick the one with the highest calculated NPV.

[@ezekielanderson9055]

I was struggling with my capital budgeting homework and this lecture helped me to understand what I was doing wrong. These lectures are still helping students 13 years later 😁

[@ripon729]

Wow..! This is awesome. I'm gonna write an exam on portfolio and risk theory just 3 days later. This video helped me a lot. Thanks for uploading this lecture.

[@TheCharlie2l]

Thanks so much for making this finance series available. this was so useful for my work. its amazing how so many organisations make decisions based on incorrect understandings of the basic finance theory.

[@TheCharlie2l]

it would be amazing if MIT could upload the more advance courses on capital budgeting as it is super relevant for finance professionals who are involved in selecting projects

[@gauravarora2647]

The way he explained is awesome

[@sagnikm1995]

Great lecture. I have a question on the application of Capital Budgeting though. How do you find the beta of a privately held company? In the example on Bloomberg publishing presented by the professor, he can get the beta of Wiley since it’s publicly traded and we can find the beta. What about private companies though?

[@shubhamjaiswal2337]

1:11:12 Remember Shubham

[@joseleon8235]

Large anomaly of returns of stock could also be explained for diminishing marginal retutns of big investments. After all there is not a lot of huge opportunities right on. Furthermore they need a lot of time to just make them operate. It might be the case?

[@meirbloya635]

russel 2000 didn't make a better return relative to snp500 in the latest decade. how this work with the capm theory?

[@dodgingdurangos924]

Nobody ever said CAPM was reliable or perfect. It has its drawbacks.

[@theYoutubeHandle]

capm assumes everyone is rational and want to hold the tangency portfolio, and therefore the portfolio everyone holds, the market portfolio must be the tangency portfolio. In reality, not everyone is rational or even knows how to workout the tangency portfolio. So the market portfolio is probably not the tangency portfolio, and the theory is completely wrong.

[@mikefasole]

Wheres the APT lecture

[@mitocw]

The CAPM and APT material starts in Lecture 15 about half way through: kzbin.info/www/bejne/sGPSgphsd5aEl5Ym4s

[@narendrarao5607]

hi, will the course called finance theory 2 video lectures will be uploaded? that course page doesnt have the video lectures

[@labmq]

Great content !

[@angelide]

the soft “ok?” always gets me

[@waynevanilla]

How would you fit bitcoin into this model?

[@ApiolJoe]

That's easy: cash flow: {0, 0, 0, 0, ....} Just not the right model for currencies is my guess. As assets, cryptos just seem absolutely worthless.

[@davidepacella1879]

There isn't APT theory. But Andrew Lo is amazing.

[@itseveryday8600]

Other source of betas 15:30

[@blueshadow1996]

This is going to help me finally get my business going,

[@NoahLarch]

Francis Simon did you get it going?

[@enisten]

@@NoahLarch Curiosity killed the cat.

[@duckbubi-l6u]

Did you get it going?

[@blueshadow1996]

@@duckbubi-l6u no i moved on to toothache drop made from cannabis .

[@GMornat]

Such a great teacher

[@SphereofTime]

44:46

[@thedthai1]

Cool

[@pphong]

Awesome!

[@Josh-ge1cr]

imagine if u bought SPY call contracts 15 years out from 08. woulda made millions lol

[@davidjohn9947]

‪Casper the energy efficient blockchain $CSPR‬

[@SmoothSoothingSounds]

My house #mrbeast then my mom a house