This assumption is based on the premise that the financial markets are perfect, and both borrowing and lending are frictionless. There can be restrictions on the amount investors can borrow, and it is typically based on their creditworthiness. Simultaneously, lending is not without costs, as lenders also face risks, which is carried over as interest […]
ארכיון חודשי: מרץ 2022
Here, each factor has a ‘beta’ attached to it, which indicates how sensitive the security is to that particular factor. Essentially, 'beta' shows the extent to which the returns on that security rise or fall for a specific change in that factor. To overcome these challenges, it is crucial to carefully select risk factors based […]