How to calculate the expected return on the market in CAPM model?
959582
The site below may help...;
1183281
There r many types of models. AR, MA, ARMA, ARIMA, ARCH, GARCH, and lots of other which names I cannot recall. For the prediction to be of any use, the correct model must be used.\n\nAssume u have decided which model to use, u now need to estimate the parameters. The idea is simply to choose the parameter to produce the smallest possible deviation of the model and the data.\n\nYou said u used Excel. so, i guess the method u used is simply trial and error. u try a range of values for the parameters and then pick the best one.\n\nYou want to do it by hand. This is extremely tedious. One way to do it is simply to do the thousands of calculations by hand and compare. Another way to do it is by taking derivatives.\n\nThe idea is simple. u have a model with certain parameter. Say, X(t+1)=aX(t)+et is your model where e is the random component with E(e)=0. So, your forecast of X(t+1) given information up to time t is X(t+1, forecast)=aX(t). The error of your forecast is know when at time t+1 when X(t+1) happens. So, the forecast error is X(t+1, real)-X(t+1, forecast)=(aX(t)+et) - aX(t) = et\n\nYou do this for a few t's and u collect a bunch of et's for these t's. You then square the et's and sum them and call it S.\n\nSt=(e1)^2 +(e2)^2 +e3)^2 +....+(et)^2\n=(X(1)-aX(0))^2 +(X(2)-aX(1))^2+.....\n\n (squaring them is simply to remove the sign of the et's. There r other ways, for example, |et|). You want to pick an 'a' that minimise S. To get this a, take the first derivative of S wrt a and equate it to 0.\n\ndS/da = 0\n\nSolve the equation to find possible values of a.\n\nTake the second derivative of S,\n\nd(dS/da)/da. Substitute possible values of 'a' into it. Those 'a' that make d(dS/da)/da<0 is the local point of maximum. To get the largest maximum, simply substitute these a into St to to find the one that gives the lowest St. This will be your best estimate of parameter.\n\nHowever, when u have more than 1 parameter, thing can get complicated. u would have more than 1 equation to solve and sometimes, u need to use numerical methods to solve them.... which will require the use od Excel again!\n\n\nAs for forecasting... it depends on what model u r using. Generally, for those values u have not observe, u simply use the forecast.\n\nSay, you have a model that uses t-1, t-2 and t-3 to forecast t.... the history for past 3 periods. So, at time t, if u want to forecast X(t+1), u simply pluck in the observed X(t), X(t-1) and X(t-2): {Forecast of X(t+1) at time t }=F{X(t), X(t-1), X(t-2)}...where F denotes a function.\n\nSimilarly, if u want to forecast X(t+3) at time t, u have {Forecast of X(t+3) at time t} = F{X(t+2,forecast), X(t+1, forecast), X(t)}. Or u want to forecast, say, t+100, {Forecast of X(t+100) at time t} = F{X(t+99,forecast), X(t+98, forecast), X(t+97, forecast)}. Hope u know what I mean.\n\nThe difference between a forecast X(t, forecast) and a realisation in the real world X(t) is the random conponent. Without much information, all I can do is to use my best knowledge(the parameter and correct model) to forecast ahead. But as time goes by and i gather more data, I'll reset and improve my prediction everytimes I get more info. So, to predict how long u will need for the process to reach a certain level, u simply use the model(the formula), substitute the X(t) with data u observed(if it's observed already) and forecasted(if has not happened). Let the model evolve until it reach your required level, N. Then look at what the t is.. then this is the best estimate of how long it takes.\n\nIf u make assumption about the distribution(s) of et's, the random conponent, u can even predict probabilities of the accuracy of your predictions. And also, the estimated parameters has uncertainty in them too, and taking these into account, u can calculate the probability of your forecast being right, allowing for the random fluctuation et and sampling error of estimating parameters.
1097780
The rating is based on the market capitalisation (in monetary terms) of companies listed on the exchange..\n\nMarket capitalisation (M-cap) = no. of shares listed X share price
550682
Oy that is a great question.  I take it you taking a risk managment or a derivative course! ;)  Basically you would have to put in functions (functions of interest and volatility variations) for both and then evaluate it accordingly.  It is nearly impossible to do by hand but computer can provide you with some good insight :).  That's when 3D probability that engineers love so much kicks in.  \n\nRival
356413
There are two ways to do this. One is to actually go to the dow jones website where they break out the information or two, is to take an arithmeetic average of the P/E of all 30 components (IBM, MSFT, WMT, DELL, etc)
1126078
1) Go to your local library and borrow a basic "investing" book.\n2) For practice, go to www.finance.yahoo.com/\n3)  Enter common symbols such as GM (General Motors), GE (General Electric)\n4) Examine various numbers, as defined in your book\n5)  Also use <HELP> on that page.  Good Luck
916455
1) Over 75% of professional money managers underperform the average of the entire market!!! So, do NOT follow the lead of the "big-boys" because you will lag their underperforming results leading to horrible returns not worth the risk.\n\n2) Due Dilligence---Don't directly invest into anything someone else recommends unless you did your own research and believe in the company as well (unless that person is Warren Buffet :) )\n\n3) To actually answer your question unlike the previous 2.... my personal picks are as follows (still do your own research to confirm my thoughts)\n\nAKAM (49.25) A great technology company. Current quarter growth is estimated at over 60%, while the industry is -4%. Even though this year is outpacing the market growth by about 50%, it is expected to again outpace market growth by about 30% next year. Fiscal year 06 earnings are expected to gain 67% over 2005's numbers, while Fiscal year  07 is expected to gain 38% over 2006. My personal target for the short-term is $60 (3 month time frame). As for long-term prospects, I expect the stock to hit at least 70 in one year's time.\n\nIf you want something more risky and having more reward potential, go with FRPT (11.83). The stock is under tremendou accumulation and could very well reach $15 by Christmas.
152072
The answer is by using simple mathematics.\n\nFirst you need to decide how much of each stock you are going to buy - since not all stocks are priced equally some would be $20, other $400 and some 0.05 cents.\n\n$100,000 over ten stocks... Decide what ratio you will hold of each stock. E.g. 6:3:4:1:9:4:3:7:9:2\n\nSo totalling the ratio is 48. Now you can use a combination of the ratios and fractions to find out how much stock you can hold with your $100,000.\n\nI may have left you out on a limb there - but this calculation is uneccessary. Why don't you just buy your stock one by one until you run out of money? :P\n\nOK Lets try the example with 2 stocks and $100K\nyou want the weighting to be 3:4\nso you want \n3/7ths of your money to go to 1 stock\n4/7ths of your money to go to 1 stock\n\n3/7*100K=$42857.14\n4/7*100K=$57142.85\n\nNow say stock ZXC was $5 each and stock ABC was $67\n\nNow you go:\n$57142.85/$67=852.88 Stocks\n$42857.14/$5=8571.43 Stocks\n\nThere you go. Now do the similar calculation with your ten stocks! Haha!\n\nGood Luck!
251685
First things first:\nyou MUST  know what are you going to solve for. Do you want to maximise return given a threshold for variance? Do you want to maximise financial results or mark-to-market results?\n\nIn either case, do you have a set of future value expectations? Do you have a covariance-matrix.\nYou should do the following:\n1) Specify (model) your problem\n2) See what data you can count on. If necessary, go to step \n3) research what methods are there available for solving your problem\n4) ONCE YOU GET THERE research software that allows your desired method, complexity and size.\nSmall problems, no matter how "complex" they are, can be solved by Excel.\nHowever, even simple problem, if large enough, need specialised software.
318123
You can find a lot of past performance of mutual funds on this web site.     http://www.micropal.com/\nalthough past return is no guarantee of future results - still, it could be used as an estimate.\n\nIf you want to calculate what an investment of $37,940 would add up to if it grew at 5% per year, just type this formula into an excel sheet:\n  =FV(0.05,30,,-37940)\nA whopping $163,974!
809669
Use this formula:\n\nWACC = We*Re + Wp*Rp +Wd*Rd*(1-t)\n\nwhere We is the weight of equity (8MM/16MM = 0.5)\nwhere Wp is the weight of preferred (1MM/16MM)\nwhere Wd is the weight of debt (7MM/16MM)\n\nRe is the return on equity\nRp is the return on preferred stock\nRd is the return on debt\n\nt is the tax rate = 0.4
5705
The performance measures of portfolios (sharpe & treynor) are all determined as comparisons against the tax-free rate of return generated by 30-day treasuries which has the least market risk.  Any %age point of return higher than this rate of return typically comes with additional risk.  The more risk, the higher the return.  \n\nIf you look at the Ibbottson return studies, you'll see that in order to garner an AFTER-TAX return of 10% you'll need to put the risk of small-cap stocks heavily into your portfolio mix over a long period of time, otherwise 10% is quite difficult to attain.\n\nRules are great and assumption return rates are also great -- as long as you can actually achieve those returns.\n\nThe best way to achieve this type of return is to look to get a mixture of capital gains plus dividends into your portfolio return mix -- this way you're not reliant on the market shooting up 10% to get that return.  An appreciation of 6% with dividends of 4% would do the trick for you, this is typically a more established company, not a 'small cap' company.
401395
Way to go Arbitrage!  Oh to funny guy- yeah we get that E=MC2  IS a formula- but if you really want to "get it" Check out Maxwells equations. It's a great time to be a science nerd with all this info pouring in now! Figure it out & go up one on Albert!
796222
http://uk.finance.yahoo.com/q/cp?s=%5EFTSE
197791
Reinvesting dividend is like purchasing new units at their market value. Most of the people use this option to save tax on long term capital gains that they would incur in growth option. \n\nTo calculate the returns, the simplest and the most logical way is to compare the market value of your investment incl that of the newly purchased units through dividend reinvestment while ignoring the dates of reinvestment. Further, if you wish to, you can annualize the returns and/or use appropriate inflation deflator to calculate the real returns.
1146224
OK, let's put some numbers on the problem.  We have an asset with monthly volatility of about 10% and a near-zero expected return in the long run. How likely is it that its price will increase by 70% in five months?  If I am doing my math correctly, this would be a 3.17 standard deviation event, meaning that the likelihood of that happening is about 0.08%. \n\nIf you built an ARMA model, you could probably get a higher likelihood estimate though...  I'd run one out of curiosity, but I don't have eViews handy...
297329
one formula you can use is\n\nF = P(1 + i)^n\nwhere,\n\nF = future worth of the money\nP = present worth of the money\ni = interest rate\nn = number of years\n\nsince the future worth of the money will be twice of the present worth, then we can say that,\n\nF = 2P\n\nusing this in the formula you'll come up with,\n\n-> 2P = P(1 + i)^n  \n(divide the whole equation by P)\n-> 2 = (1 + i)^n \n(n is 20 years)\n-> 2 = (1 + i)^20\n(raising the whole equation by 1/20)\n-> 2^(1/20) = 1 + i\n-> 1.035264 = 1 + i\n-> i = 0.035264\n-> i = 3.5264%