Skip to main content

2023 | OriginalPaper | Buchkapitel

Capital Asset Pricing: An Easy and Unified Solution

verfasst von : Zhiqiang Zhang

Erschienen in: Fundamental Problems and Solutions in Finance

Verlag: Springer Nature Singapore

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

This chapter tries to solve the discount rate for equity, or equity pricing. Based on the models derived in Chapters “Certainty Equivalent, Risk Premium and Asset Pricing” and “Debt/​Loan Risk, Bankruptcy Cost and Debt/​Loan Pricing”, it is relatively easy to solve the problem. In the process, we find another easier way to work out the discount rate model for total capital, which can confirm each other with the reasoning in Chapter “Certainty Equivalent, Risk Premium and Asset Pricing”. Finally, a unified solution to capital asset pricing is built up, that is, a discount rate model series for debt, equity and total capital—all three models have unified structure (risk free rate + risk premium), based on the same risk measurement (company volatility) as well as unified concept and logic. Literally, our solution to discount rate or asset pricing is the fundamental solution. Based on such a solution, most issues concerning discount rate can be solved or answered. As examples, we further solve some related problems, such as the comprehensive application of ZZ growth model and ZZ CAPM, the relationships among the three discount rates, the long run tendency of the discount rates. The tendency of the discount rates has been hotly debated but can be solved soundly with our discount rate models.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Fußnoten
1
It is often believed that conclusion needs support from data; the more data, the more convincing. As a matter of fact, data is also a resource and perhaps cost as well. For the same conclusion, the less data, the better. The reason is obvious: less data usually means less work load of research or the high efficiency of research; while less data also means the saving of reading time as well as cost or higher reading efficiency of readers. On the other hand, whether a conclusion is more convincing is usually determined by the logic behind. The reason is again obvious, the strict or correct logic represents total (correct) data, which is bigger than any sample data as well as any big data. Therefore, here as well as in other places in this book, we try to derive conclusion based on strict reasoning and necessary data rather than only the past incomplete data with unknown mistakes.
 
2
Which is equivalent to 100% or complete positive corelated.
 
3
The volatility of the debt can also be high when the leverage level is high. We shall not do numerical illustration further here since it is easy to understand.
 
4
Rather than bonds with guarantees, or bonds embedded options like convertible bonds, callable bonds, etc.
 
5
The capital cost in their paper is actually the reasonable or fair capital cost, which is equivalent to the discount rate.
 
Literatur
1.
Zurück zum Zitat Zhang Z. Debt pricing, equity pricing and total asset pricing—a unified solution model to the discount rate problem. China Soft Sci. 2018;4:146–55. Zhang Z. Debt pricing, equity pricing and total asset pricing—a unified solution model to the discount rate problem. China Soft Sci. 2018;4:146–55.
2.
Zurück zum Zitat Fama EF, French KR. Common risk factors in the returns on stocks and bonds. J Financ Econ. 1993;33(1):3–56. Fama EF, French KR. Common risk factors in the returns on stocks and bonds. J Financ Econ. 1993;33(1):3–56.
3.
Zurück zum Zitat Ml W. Why the far-distant future should be discounted at its lowest possible rate. J Environ Manage. 1998;36(3):201–8. Ml W. Why the far-distant future should be discounted at its lowest possible rate. J Environ Manage. 1998;36(3):201–8.
4.
Zurück zum Zitat Cochrane JH. Presidential address: discount rates. J Financ. 2011;66(4):1047–108.CrossRef Cochrane JH. Presidential address: discount rates. J Financ. 2011;66(4):1047–108.CrossRef
5.
Zurück zum Zitat Gollier C, Hammitt JK. The long-run discount rate controversy. Ann Rev Resour Econ. 2014;6(1):273–95.CrossRef Gollier C, Hammitt JK. The long-run discount rate controversy. Ann Rev Resour Econ. 2014;6(1):273–95.CrossRef
6.
Zurück zum Zitat Levi Y, Welch I. Best practice for cost-of-capital estimates. J Financ Quant Anal. 2017;52(2):427–63.CrossRef Levi Y, Welch I. Best practice for cost-of-capital estimates. J Financ Quant Anal. 2017;52(2):427–63.CrossRef
7.
Zurück zum Zitat Fama EF, French KR. Choosing factors. J Financ Econ. 2018;128(2):233–53.CrossRef Fama EF, French KR. Choosing factors. J Financ Econ. 2018;128(2):233–53.CrossRef
8.
Zurück zum Zitat Serhiy K, Shrihari S. Why do discount rates vary? J Financ Econ. 2020;137(3):740–51.CrossRef Serhiy K, Shrihari S. Why do discount rates vary? J Financ Econ. 2020;137(3):740–51.CrossRef
9.
Zurück zum Zitat Zhang Z. ZZ financial discovery. University of International Business and Economics Press; 2008. Zhang Z. ZZ financial discovery. University of International Business and Economics Press; 2008.
10.
Zurück zum Zitat Zhang Z. Advanced finance: theoretical innovation and decision application. Peking University Press; 2012. Zhang Z. Advanced finance: theoretical innovation and decision application. Peking University Press; 2012.
11.
Zurück zum Zitat Zhang Z. Research on real option valuation. China Financial and Economic Publishing House; 2019. Zhang Z. Research on real option valuation. China Financial and Economic Publishing House; 2019.
Metadaten
Titel
Capital Asset Pricing: An Easy and Unified Solution
verfasst von
Zhiqiang Zhang
Copyright-Jahr
2023
Verlag
Springer Nature Singapore
DOI
https://doi.org/10.1007/978-981-19-8269-9_9

Premium Partner