Proceedings of the 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021)

Analysis on CAPM and Sharpe Ratio in Market Investment

Authors
Zhou Yang
Corresponding Author
Zhou Yang
Available Online 22 March 2021.
DOI
https://doi.org/10.2991/aebmr.k.210319.002How to use a DOI?
Keywords
CAPM, Sharpe ratio, market investment, risk management
Abstract

Market investment is always a popular method to make a profit. With different investment means, there are tens of thousands of portfolios in the market for investors to choose and combine. In order to maximize profit and minimize risk, some evaluation must be done to those portfolios. Many capital asset pricing models are used in calculating the present value and expected value of the portfolios, and one of the most popular is the model called CAPM (this refer in particular to the model from William Sharpe and John Lintner) The Sharpe ratio is also a necessary index in evaluating the value of the portfolios, which indicates the rate of the expected return against an extra unit of risk taken. The analysis on CAPM are mainly theoretical, and the core function of CAPM will be introduced. Through collecting data from The Morning Star website(cn.morningstar.com), three funds are analyzed to explain the characteristic of Sharpe ratio, which will lead to a persuative conclusion. The conclusion shows that these two models are simple and easy to understand, which means they are very popular, but they have made many assumptions that are not according with the real market environment and they made too many simplifications, which may lead to inaccurate results.

Copyright
© 2021, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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Volume Title
Proceedings of the 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021)
Series
Advances in Economics, Business and Management Research
Publication Date
22 March 2021
ISBN
978-94-6239-354-7
ISSN
2352-5428
DOI
https://doi.org/10.2991/aebmr.k.210319.002How to use a DOI?
Copyright
© 2021, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

TY  - CONF
AU  - Zhou Yang
PY  - 2021
DA  - 2021/03/22
TI  - Analysis on CAPM and Sharpe Ratio in Market Investment
BT  - Proceedings of the 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021)
PB  - Atlantis Press
SP  - 5
EP  - 8
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.210319.002
DO  - https://doi.org/10.2991/aebmr.k.210319.002
ID  - Yang2021
ER  -