The celebrated capital asset pricing model (‘CAPM’) brought numerous appealing insights and spawned a new theory of capital budgeting. One key intuition is that there is ‘no penalty for diversifiable risk’ – that is, any risky payoff that has zero-correlation with the wider economy, and hence zero-beta, is treated as ‘risk-free’. Does that mean that managers can bet the firm on a spin of the roulette wheel without attracting a higher CAPM discount rate? Our re-interpretation of CAPM reveals that potential financial losses which are conventionally regarded as firm-specific ‘unpriced’ risks can bring a large increase in the firm’s beta and CAPM cost of capital, despite having zero-beta and making only negligible difference at the aggregate market level. This mathematical result clashes with textbook expositions but is easily demonstrated and can be traced to authoritative but overlooked parts of the theoretical CAPM literature. JEL Classification: G11, G12.
Borisjohnson boris johnson speaking earlier. sara jane ahmed is the finance adviser to the vulnerable group of 20 a group countries particularly vulnerable to climate change. we were just talking about american leadership, and you may be heard nick saying that america led yesterday and brought a lot of countries together to start putting more money towards the developing nations in the smaller states. you obviously advise on the finance side do you think that money is forthcoming? is - do you think that money is forthcoming? - do you think that money is forthcomina? , ., , ., , ., forthcoming? is not ust a question of forthcoming. forthcoming? is not ust a question of forthcoming, but i forthcoming? is notjust a question of forthcoming, but also forthcoming? is notjust a question of forthcoming, but also access i forthcoming? is notjust a question | of forthcoming, but also access and cost of capital. currently as we know, the current covid climate crisis together, this dual
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