‘The Capital asset pricing model (CAPM) is a very useful model and it is used widely in the
industry even though it is based on very strong assumptions. Discuss in the light of recent
developments in the area.’
Basic Rules for
2
main literature/ideas out there! However, make sure that you also write your own thoughts!
I know what other people say…what I am interested to read is what you think (and why)
about this! So…blend information from other sources with your own work.
8. For the case study part answer all the points listed in the case study.
9. The essay part should have the following elements:
a. Introduction: here you briefly explain what the essay is about and how you intend to
approach the issue – what follows in the essay.
b. Main concepts behind the problem and discussion: Here you have the opportunity
to present the main theory behind the question, the main ideas, or the whole
debate. Then (or along the presentation) you should express your own views, linking
them with the other researchers’ and debate views/elements. In this part you can
get very creative, but make sure the above are definitely included!
c. Conclusions: here you say what the essay’s purpose was and sum up all your
arguments (made in section B above) in order to highlight the fact that you have
addressed the main issues concerned with the essay question.
d. References: Here you should list in Ascending alphabetical order ALL the references
you have used or referred to in the document. Please see published papers on the
style of presenting references (they are always included at the end of journal
papers) and stick with a style. I would suggest the style used in the papers published
in the Journal of Finance.
Marking – Please see the Assessment Rubric in the last page
Useful papers:
Ang, A., R.J Hodrick, Y. Xing and X. Zhang (2006) “The cross section volatility and Expected Returns”,
The Journal of Finance, 61, 1, 259 – 299
Banz, R (1981) ‘The Relation between Return and Market Values of Common Stock’, Journal of
Financial Economics, 9, 3-18
Berk, J.B (1995) ‘A Critique of Size Related Anomalies’, Review of Financial Studies, 8, 275-286
Fama, E. F. and K.R.French (2012) “Size, Value, and Momentum in International Stock Returns”,
Journal of Financial Economics, 105, 3, 457 – 472
Fama, E. F. and K.R.French (2006) “The value premium of CAPM”, The Journal of Finance, 61, 5, 2163
– 2185
3
Fama, E & French, K (1993) ‘Common Risk Factors in the Returns on Stocks and Bonds’, Journal of
Financial Economics, 33, 3-56
Fama, E & Macbeth, J (1973) ‘Risk Return and Equilibrium: Some Empirical Tests’, Journal of Political
Economy, 8, 607-636
Graham, J &Harvey, C (2001) ‘The Theory and Practice of Corporate Finance: Evidence From The
Field’, Journal Of Financial Economics 60, 187-243
Kothari Et Al. (1995) ‘Another Look at the Cross Section of Expected Stock Returns’, Journal of
Finance, 50, 185-224
Lewellen, J and S. Nagel (2006) “The conditional CAPM Does not Explain Asset Pricing Anomalies”,
The Journal of Financial Economics, 82, 2, 289 – 314.
Roll, R (1977) ‘A Critique of the Asset Pricing Theory’s Test’, Journal of Financial Economics, 4, 129-
176
Sharpe, W.F (1964) ‘Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk’,
Journal of Finance 19, 425-442
Handbook of Investors’ Behavior during Financial Crises Edited by Fotini Economou, Konstantinos
Gavriilidis, Greg N. Gregoriou and Vasileios Kallinterakis, Academic Press, 2017 (available in the
library)
Also read chapters 10, 11, 12 and 13 from Corporate Finance by Berk &DeMarzo (2009)