Finance and Investment : Business Intractibility and Applications
Describe about the Finance and Investment for Business Intractibility and Applications.
Answer:
Part 2: Valuation
1. CAPM estimation:
|
Particulars |
Standard Deviation |
|
Singapore DBS Bank |
0.055 |
|
OCBC Bank |
0.047 |
|
UOB Bank |
0.055 |
|
STI Index |
0.037 |
Table 1: Standard deviation of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
|
Particulars |
Covariance |
|
DBS and STI |
-0.00167 |
|
OCBC and STI |
-0.00151 |
|
UOB and STI |
-0.00159 |
Table 2: Covariance of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
|
Particulars |
Average Return |
|
DBS Bank |
0.004975 |
|
OCBC Bank |
-0.000348 |
|
UOB Bank |
0.001867 |
|
STI Index |
0.001834 |
Table 3: Average or expected return of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
|
Particulars |
DBS Bank |
OCBC Bank |
UOB Bank |
|
Beta |
-1.210949 |
-1.095129922 |
-1.150810406 |
|
Risk-free rate |
2.125% |
2.125% |
2.125% |
|
Expected Market Return |
0.001834 |
0.001834 |
0.001834 |
|
Cost of Equity |
4.48% |
4.25% |
4.36% |
Table 4: CAPM valuation, cost of equity of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
Reference and Bibliographies:
Brown, P. and Walter, T., 2013. The CAPM: theoretical validity, empirical intractability and practical applications. Abacus, 49(1), pp.44-50.
Da, Z., Guo, R.J. and Jagannathan, R., 2012. CAPM for estimating the cost of equity capital: Interpreting the empirical evidence. Journal of Financial Economics, 103(1), pp.204-220.
Dempsey, M., 2013. The capital asset pricing model (CAPM): the history of a failed revolutionary idea in finance?. Abacus, 49(1), pp.7-23.
Johnstone, D.J., 2013. The CAPM debate and the logic and philosophy of finance. Abacus, 49(S1), pp.1-6.
Yahoo Singapore Finance. (2016). Yahoo Singapore Finance. [online] Available at: https://sg.finance.yahoo.com/ [Accessed 22 Sep. 2016].
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