Financial market practitioner

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Suppose you are a senior fund manager with a large investment company. You are a proponent of the Efficient Market Hypothesis (EMH) and you are an advocate of the use of the Capital Asset Pricing Model (CAPM), the single-index model, the Arbitrage Pricing Theory (APT) model, the macro-economic multi-factor models and the Fama and French-type factor models. You also believe that security analysts may play an important role in making financial markets efficient.

Explain and illustrate an example when a financial market practitioner (including a security analyst) would use CAPM instead of the other models mentioned above.

Reference no: EM131200677

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