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FINC 3017 Essay

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Essay discussing the betting against beta (BAB) factor in equity markets based on the work of Frazzini and Pedersen (2014). Your essay should address the following points: What is betting against beta? How does betting against beta relate to the CAPM?  What evidence has been found to support betting against beta in equity markets?  What evidence has been found to reject betting against beta in equity markets?

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6 Pages Essays / Projects 1-2 Years old
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FINC 3017 Essay
Topics this document covers:
Finance Money Economy Financial markets Mathematical finance Investment Arbitrage Financial ratios Capital asset pricing model Beta Statistical arbitrage Financial economics Andre Frazzini
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Topics this document covers:
Finance Money Economy Financial markets Mathematical finance Investment Arbitrage Financial ratios Capital asset pricing model Beta Statistical arbitrage Financial economics Andre Frazzini
Sample Text:
In order to achieve this, evidence supporting and opposing betting against beta from previous journalists is examined in order to generate a reasonable conclusion. Issues provided in the evidence include the inefficiencies of CAPM, lottery demand as well as illiquidity and transaction costs. What is Betting against Beta How does it relate to CAPM Betting against beta(BAB) is a dynamic strategy proposed by Andre Frazzini and Lasse Heje Pedersen which provides an investment strategy of statistical arbitrage due to the supposed inefficiencies of the capital asset pricing model(CAPM). This is based off that the idea that under the CAPM model, investors create portfolios which maximises the Sharpe ratio and then manipulates leverage in order to suit their personal risk p...
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