January 2020
Beginner to intermediate
432 pages
11h 24m
English
Content preview from Python for Finance Cookbook
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Implementing the CAPM in Python
In this recipe, we learn how to estimate the famous Capital Asset Pricing Model (CAPM) and obtain the beta coefficient. This model represents the relationship between the expected return on a risky asset and the market risk (also known as systematic or undiversifiable risk). CAPM can be considered a one-factor model, on top of which more complex factor models were built.
CAPM is represented by the following equation:
Here, E(ri) denotes the expected return on asset i, rf is the risk-free rate (such as a government bond), E(rm) is the expected return on the market, and is the beta coefficient.
Beta can be interpreted ...
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