The capital market theory


Question 1: Can the capital market theory be extended to include digital currencies?
Instruction for the 1st question: Summarize the lecture slides which i posted.
-negative return for cryptos -> decrease efficiency, not in efficiency frontier.

  • positive return for cryptos-> increase EF, advise for cryptos.
    Use formula 3 asset EF [w1Rf + w2 risky+w3crypto]

Question 2: Identify a risk factor not covered by asset pricing model literature that affects returns.
Hind slides ” Asset pricing theory”

Sample Solution