Write short notes on the following: a) Capital asset pricing model b) Permanent income hypothesis
a) Capital Asset Pricing Model (CAPM) The Capital Asset Pricing Model (CAPM) is a widely used financial model that explains how assets should be priced based on their risk. It shows the relationship between the expected return of an asset and its risk compared to the overall market. Key Equation: E(Ri) = Rf + βi(Rm […]