CAPM, Risk and Portfolio Selection in «Stable» Markets

Abstract : Our main purpose in this paper is to derive the generalized equilibrium relationship between risk and return under the assumption that the asset returns follow a joint symmetric $\alpha$-stable distribution, with $1< \alpha <2$. In order to justify such an investigation, we start by empirically evidencing the fractal structure of stocks market through extensive tests of self-similarity and stability. These tests allow us to model price changes with $\alpha$-stable distributions. We then show that equilibrium rates of return on all risky assets are functions of their {\bf covariation} with the market portfolio. The «stable» CAPM highlights a new measure of the quantity of risk which may be interpreted as a generalized beta coefficient.
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Rapport
[Research Report] RR-2776, INRIA. 1996
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https://hal.inria.fr/inria-00073916
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Dernière modification le : vendredi 25 mai 2018 - 12:02:05
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Lotfi Belkacem, Jacques Lévy Véhel, Christian Walter. CAPM, Risk and Portfolio Selection in «Stable» Markets. [Research Report] RR-2776, INRIA. 1996. 〈inria-00073916〉

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