Capital Asset Pricing Model (CAPM)
Hello doston, ek aur insightful aur exciting podcast mein aapka swagat hai.
Aaj hum capital asset pricing model ya CAPM ko discuss karenge. It's a tricky slope, lekin we recommend that you listen to this podcast carefully so that aap CAPM ko puri tarah samajh payein. Toh chaliye shuru karte hain!
Doston jab aap kisi bhi type ka investment shuru karte hain, the first thing you are told is this - The higher the risk, the higher will be your returns. In fact, investors ka sabse bada dilemma yahi hota hai - ki wo apne risk-taking ability aur desired returns ko kaise balance karein.
Realistically, your risk cannot be measured in absolute terms. Kyuki aap chahe saare factors consider kar lein, doston aap future nahi dekh sakte hain. However, the good news is that there are some methods jinko use karke aap iss risk ka ek close estimate le sakte hain.
Capital asset pricing model is one such method. Capital asset pricing model ya CAPM ek special model hai which is used to understand ki ek investment ke expected returns aur risk ka kya relationship hai.
Before we explain ki CAPM kaise use kiya ja sakta hai, let’s have a look at a factor that is very important in understanding CAPM - systematic risks.
Systematic risks wo risks ya dangers hote hain jo kisi bhi type ke investment ko affect kar sakte hain. These could include recessions, inflation rates or wars. Systematic risks ko samajhne ke liye unsystematic risks ko bhi samajhna zaroori hai. Unsystematic risks are those dangers that are applicable only to a particular stock and not the whole market in general.
CAPM sirf systematic risks ko consideration mein leta hai.
CAPM ek formula ya equation ko use karke calculate kiya jaa sakta hai. Essentially, ye formula aapko batata hai ki aapke expected returns are equal to the risk-free returns plus a risk premium. Let's take a look at the formula:
Ra = Rf + Be x (Rm – Rf)
Iss formula mein,
Ra stands for aapke expected dividends ya returns
Rf is the risk-free rate
Be ka matlab hai beta factor
Aur (Rm - Rf) hai current market risk premium.
Confuse ho gaye? Worry not, we’ll explain every element in this equation.
Risk-free rate: Simply put, risk-free rate is the rate of return jo aap investment pe expect kar sakte hai without considering that any risk will be applicable to it. Ye ek theoretical concept hai, because in reality, koi bhi investment risk se entirely free nahi hoti hai. CAPM mein risk-free rate is added to the beta factor and risk premium to understand ki aapka actual risk kitna hai.
Beta factor: CAPM mein beta sabse important element hai. Basically, beta aapko batata hai ki ek particular security ki volatility poore stock market ki volatility se compared kitni zyada ya kam hai.
Iska matlab, agar ek share ka price market ke sath sync me badhta ya kam hota hai, uss share ka beta factor is equal to 1.
Lekin, agar ek stock ke prices poore market ke prices se compared zyada increase ho rahe hain, the beta factor will be more than 1. Likewise, agar ek share ke prices poore market se compared kam rate par badh rahe hain, uske beta factor 1 se kam hoga.
Market risk premium: Market risk premium is the expected return jispe abhi aapne risk-free rate consider nahi kiya hai.
Basically, risk premium ek reward ki tarah act karta hai. Investors want to be compensated for investing their capital in a high-risk asset. Ye market risk premium investors ko risk-free rate ke over and above diya jaata hai.
By adding the risk-free rate to the beta and market risk premium, aap ek security ya asset kya returns degi, ye jaan sakte hain.
CAPM aapko ek seemingly clean, clear aur simple calculation se expected returns determine karne ka option deta hai. In the uncertain world of trading, this is great, right? Obviously, investors ke liye CAPM ke kayi benefits hote hain.
1. Ek dependable aur simple calculation se aap decide kar sakte hain whether or not invest in a particular asset.
2. CAPM model ye assume karta hai ki aap aise investor hain who has a diversified portfolio. Iss portfolio ki wajah se you are in a position to eliminate unsystematic risks. This is important because CAPM sirf systematic risks ko consideration mein leta hai.
3. Unlike other models, CAPM mein beta factor use hota hai. This means that CAPM changing systematic returns ko consider karta hai, giving you a clearer picture of the expected returns.
Remember, CAPM ek magic formula nahi hai which can spell out the future of an investment for you. So naturally, isko use karne ke disadvantages bhi hain.
1. The risk-free rate which is used in the CAPM formula is based on short-term government securities. Ye risk-free rate bohot zyada volatile hota hai, and can sometimes change within days.
2. This risk-free rate is not a very accurate variable to consider. Kyuki, unlike the government, individual investors same rates pe lend ya borrow nahi kar sakte. This is why the returns calculated may be higher than what the actual returns on the investment will be like.
3. Jo beta value iss equation mein use hoti hai, usko accurately calculate karna is very challenging and time-consuming. Isiliye, usually ek estimated ya proxy beta value use ki jaati hai. For this reason, the calculation may not be completely accurate.
Capital asset pricing model ek scientific method hai. Which is why, ye method aapko apne returns ke baare mein ek realistic idea de sakta hai. Lekin, this also means ki is model mein scientific methods wale kuch problems aa sakte hain.
It is a good idea to evaluate the prospects of your investment using several methods. CAPM ko aap best utilise kar sakte hain when it acts as one of the considerations you have made, and not the only factor you consider.
That’s all from today’s podcast! Lekin jaane se pehle hum aapko ek baar remind karaate hain - there is always some level of risk when you are investing in stocks. Ye podcast aapko ek educational overview dene ke liye banaya gaya hai. So, before you make an investment decision, aap apni khud ki research zaroor karein.
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Investments in the securities markets are subject to market risks. Read all the related documents carefully before investing.