Note---A Note on the Use of the CAPM as a Strategic Planning Tool

Anthony Boardman and Norman E. Carruthers
Additional contact information
Norman E. Carruthers: The DPA Group Inc., 401-1509 Center St. South, Calgary, Alberta, Canada T2G 2E6

Management Science, 1985, vol. 31, issue 12, 1589-1592

Abstract: A recent paper by Naylor and Tapon (Naylor, Thomas H., Francis Tapon. 1982. The capital asset pricing model: an evaluation of its potential as a strategic planning tool. Management Sci. 28 1166--1173.) showed that the capital asset pricing model (CAPM) can be an important strategic planning tool, but their specific strategic suggestions were incorrect. The proper conclusion to draw from the CAPM is that a company should purchase a business if its expected return exceeds the expected return in equilibrium of a business in the same risk class. In the absence of synergy, each potential acquisition should be evaluated on its own merit, independent of the other businesses in a company's portfolio. When all firms are in equilibrium, no gain may be made from merger or takeover.

Keywords: strategic; planning:; capital; asset; pricing; models (search for similar items in EconPapers)
Date: 1985
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.31.12.1589 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:31:y:1985:i:12:p:1589-1592

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().