19. Using the Capital Asset Pricing Model and Arbitrage Pricing Theory in Capital Budgeting

  1. H. Kent Baker and
  2. Philip English
  1. S. David Young1 and
  2. Samir Saadi2

Published Online: 23 MAY 2013

DOI: 10.1002/9781118258422.ch19

Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects

Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects

How to Cite

Baker, H. K. and English, P. (2011) Using the Capital Asset Pricing Model and Arbitrage Pricing Theory in Capital Budgeting, in Capital Budgeting Valuation: Financial Analysis for Today's Investment Projects, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118258422.ch19

Author Information

  1. 1

    Professor of Accounting and Control, INSEAD

  2. 2

    Ph.D. Candidate, Queen's University

Publication History

  1. Published Online: 23 MAY 2013
  2. Published Print: 13 JUN 2011

ISBN Information

Print ISBN: 9780470569504

Online ISBN: 9781118258422

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Keywords:

  • capital asset pricing model;
  • arbitrage pricing theory;
  • equilibrium model;
  • risk-free rate;
  • security market line

Summary

This chapter contains sections titled:

  • Introduction

  • The Capital Asset Pricing Model

  • Theoretical Extensions of the Capm

  • Challenges to Using the Capm

  • Biases in Testing for the Validity of the Capm

  • The Arbitrage Pricing Theory

  • Recent Developments: Does Information Asymmetry Matter to the Cost of Equity?

  • Using the Capm and the Apt in Practice

  • Summary and Conclusions

  • Discussion Questions

  • References

  • About the Authors