Project valuation and investment decisions: CAPM versus arbitrage

This paper shows that (i) project valuation via disequilibrium NPV+CAPM contradicts valuation via arbitrage pricing, (ii) standard CAPM-minded decision makers may fail to profit from arbitrage opportunities, (iii) standard CAPM-based valuation violates value additivity. As a consequence, the standard use of CAPM for project valuation and decision making should be reconsidered.

MoreLess

Year of publication:	2007-03
Authors:	Magni, Carlo Alberto
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Investment \| valuation \| CAPM \| arbitrage \| disequilibrium NPV

More details

Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Notes:	Published in Applied Financial Economics Letters 1.3(2007): pp. 137-140
Classification:	G11 - Portfolio Choice ; G12 - Asset Pricing ; G31 - Capital Budgeting; Investment Policy ; G30 - Corporate Finance and Governance. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005260104