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SIMULATION AND THE CAPITAL ASSET PRICING MODEL: A COMMENT *
Author(s) -
Bacon Peter W.,
Haessler Robert W.
Publication year - 1975
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1975.tb01013.x
Subject(s) - capital asset pricing model , consumption based capital asset pricing model , asset (computer security) , computer science , investment theory , econometrics , index (typography) , arbitrage pricing theory , economics , financial economics , computer security , world wide web
This paper challenges Lewellen and Long's contention that a Hertz‐type simulation generates irrelevant data for the evaluation of capital expenditure opportunities. The conclusion is reached that an estimate of an asset's “own risk” may be a vital first step in estimating its covariance properties with the market index. A method of incorporating the information generated by simulation into the capital asset pricing model is also provided.