How do I look at the market model vs. CapM? They have a very similar equation for R. When would I use one or the other?
Market model is a regression on individual stock to generate beta that are used as inputs into MVO to generate the efficient frontier. It calculates historical beta, which aren’t necessarily good future betas…which is why we adjust them using that mean reverting level thing. The beta from the market model or adjusted beta can be plugged into CAPM. That is my understanding. It could be wrong…as is most of my knowledge in PM.
mwvt9 Wrote: ------------------------------------------------------- > Market model is a regression on individual stock > to generate beta that are used as inputs into MVO > to generate the efficient frontier. > > It calculates historical beta, which aren’t > necessarily good future betas…which is why we > adjust them using that mean reverting level > thing. > > The beta from the market model or adjusted beta > can be plugged into CAPM. > > That is my understanding. It could be wrong…as > is most of my knowledge in PM. mwvt9 - Duuuuuude, you nailed it. I got schooled on this in Book6 3PM. Couldnt figure what the hell they were doing.
That is exactly what I was looking for. Thanks, mwv.
Will you give me 5% points from your scores now. I need them.
dude i am only running on a 4% cushion!
I am running -8% cushion.
Dude no you are not, i saw your scores you are in LOCK mode… what we need to do is pool all the cushons together and anyone with over 70 should distribute the rest to someone w/ less. Marx was right, RED POWER