Project valuation and investment decisions: CAPM versus arbitrage

Carlo Alberto Magni

MPRA Paper from University Library of Munich, Germany

Abstract: This paper shows that (i) project valuation via disequilibrium NPV+CAPM contradicts valuation via arbitrage pricing, (ii) standard CAPM-minded decision makers may fail to profit from arbitrage opportunities, (iii) standard CAPM-based valuation violates value additivity. As a consequence, the standard use of CAPM for project valuation and decision making should be reconsidered.

Keywords: Investment; valuation; CAPM; arbitrage; disequilibrium NPV (search for similar items in EconPapers)
JEL-codes: G11 G12 G30 G31 (search for similar items in EconPapers)
Date: 2007-03
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Citations: View citations in EconPapers (7)

Published in Applied Financial Economics Letters 1.3(2007): pp. 137-140

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14525

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