Abstract
This chapter firstly provides a comprehensive review the modern portfolio theory bases including, in particular, investor’s choice, portfolio diversification, and the market model. Then, two most widely used asset pricing models, the CAPM and the APT, are presented. Several empirical tests of these models are also discussed as they are difficult to test and to use in practice. Finally, we expose some problems associated with the application of asset pricing models to emerging market returns. Indeed, emerging markets are at least partially segmented, and emerging asset returns are highly non-normal. Furthermore, emerging markets present other sources of risk: information asymmetries, liquidity, country risk, etc.
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Arouri, M.E.H., Jawadi, F., Nguyen, D.K. (2010). Asset Pricing Models. In: The Dynamics of Emerging Stock Markets. Contributions to Management Science. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-2389-9_3
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DOI: https://doi.org/10.1007/978-3-7908-2389-9_3
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