Capital asset pricing model and SDG 8: Difference between pages

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imported>Doug Williamson
m (Amend Ke to Re.)
 
imported>Doug Williamson
(Create page - source - UN - https://sdgs.un.org/goals/goal8)
 
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(CAPM).  
''Sustainability - United Nations - Sustainable Development Goals.''


The capital asset pricing model links the expected rates of return on traded assets with their relative levels of market risk (beta).
Abbreviation for the UN's Sustainable Development Goal 8,


The model’s uses include estimating a firm’s market cost of equity from its beta and the prevailing theoretical market risk-free rate of return.
"Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all".


The CAPM assumes a straight-line relationship between the beta of a traded asset and the expected rate of return on the asset.


== See also ==
* [[SDG 1]]
* [[SDG 2]]
* [[SDG 3]]
* [[SDG 4]]
* [[SDG 5]]
* [[SDG 6]]
* [[SDG 7]]
* [[SDG 9]]
* [[SDG 10]]
* [[SDG 11]]
* [[SDG 12]]
* [[SDG 13]]
* [[SDG 14]]
* [[SDG 15]]
* [[SDG 16]]
* [[SDG 17]]
* [[Sustainability]]
* [[Sustainability Accounting Standards Board]]
* [[Sustainable Development Goals]]
* [[United Nations]]
* [[United Nations Department of Economic and Social Affairs]]
* [[United Nations Global Compact]]
* [[World Business Council for Sustainable Development]]


Expressed as a formula:
Re = Rf + beta x [Rm-Rf]
Where:
Re = return on security.
Rf = theoretical [[risk free rate of return]].
Beta = relative market risk.


Rm = average expected rate of return on the market.
==External link==
[https://sdgs.un.org/goals/goal5 United Nations Sustainable Development Goal 8]


 
[[Category:Accounting,_tax_and_regulation]]
For example where:
[[Category:The_business_context]]
 
Rf = theoretical risk free rate of return = 4%;
 
Beta = relative market risk = 1.2; and
 
Rm = average expected rate of return on the market = 9%.
 
 
Ke = 4% + 1.2 x [9% - 4% = 5%]
 
= <u>10%.</u>
 
This investment requires an expected <u>rate of return</u> of 10%, higher than average rate of return on the market as a whole of only 9%, because its market <u>risk</u> (measured by Beta = 1.2) is greater than the average market risk of only 1.0.
 
 
Under the capital asset pricing model only the (undiversifiable) market risk of securities is rewarded with additional returns, because the model assumes that rational market participants have all fully diversified away all specific risk within their investment portfolios.
 
 
== See also ==
* [[Beta]]
* [[Business risk]]
* [[Capital gain]]
* [[Cost of equity]]
* [[Equity beta]]
* [[Equity risk]]
* [[Equity risk premium]]
* [[Financial risk]]
* [[Market risk]]
* [[Market risk premium]]
* [[Modern Portfolio Theory]]
* [[Risk]]
* [[Security Market Line]]
* [[Specific risk]]
* [[Systematic risk]]

Revision as of 13:33, 6 October 2021

Sustainability - United Nations - Sustainable Development Goals.

Abbreviation for the UN's Sustainable Development Goal 8,

"Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all".


See also


External link

United Nations Sustainable Development Goal 8