Work detail

Modern way of calculation of CAPM coefficient: Beta hedging application

Author: Mgr. Daniel Šopov
Year: 2013 - summer
Leaders:
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 92
Awards and prizes:
Link:
Abstract: Capital Asset Pricing Model is considered to be the benchmark when evaluating
the systematic risk of assets and its covariance with market returns. This thesis
uses this framework and by employing various methods, such as Ordinary Least
Square, Dynamic Conditional Covariance Multivariate GARCH and State Space
Formulation is trying to find the most suitable method among these to estimate
the coefficients of systematic risk. These coefficients are then used to hedge
portfolios, which are created from the stocks traded on different stock exchange-
NYSE Composite and NASDAQ Composite. According to the results of the hedge
performance of each portfolio we will be able to evaluate which method is the
most suitable to estimate the systematic risk within CAPM framework.

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