A CRITICAL EVALUATION OF ASSET PRICING MODELS: CAPM, APT, AND THE FAMA-FRENCH MULTIFACTOR MODEL
Abstract
Asset pricing models are part of the financial instruments for understanding and approximating expected returns on financial assets, including stocks, bonds, real estate and etc. Asset pricing models are vital for investors, portfolio managers and financial analysts since they determine the relationship between risk and return to make informed decisions about investment strategy or portfolio management and adjustment. Asset pricing models assists investors in making decisions that allow them to maximize the return and minimize the risk of their investment portfolios by quantifying the relationship between an asset's risk and its expected return (Fervent, 2021).
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