Describe about the Finance and Investment for Business Intractibility and Applications.
Part 2: Valuation
1. CAPM estimation:
|
Particulars
|
Standard Deviation
|
|
Singapore DBS Bank
|
0.055
|
|
OCBC Bank
|
0.047
|
|
UOB Bank
|
0.055
|
|
STI Index
|
0.037
|
Table 1: Standard deviation of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
|
Particulars
|
Covariance
|
|
DBS and STI
|
-0.00167
|
|
OCBC and STI
|
-0.00151
|
|
UOB and STI
|
-0.00159
|
Table 2: Covariance of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
|
Particulars
|
Average Return
|
|
DBS Bank
|
0.004975
|
|
OCBC Bank
|
-0.000348
|
|
UOB Bank
|
0.001867
|
|
STI Index
|
0.001834
|
Table 3: Average or expected return of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
|
Particulars
|
DBS Bank
|
OCBC Bank
|
UOB Bank
|
|
Beta
|
-1.210949
|
-1.095129922
|
-1.150810406
|
|
Risk-free rate
|
2.125%
|
2.125%
|
2.125%
|
|
Expected Market Return
|
0.001834
|
0.001834
|
0.001834
|
|
Cost of Equity
|
4.48%
|
4.25%
|
4.36%
|
Table 4: CAPM valuation, cost of equity of Singapore DBS Bank, OCBC Bank, UOB Bank and STI Index
(Source: Yahoo Singapore Finance 2016)
Reference and Bibliographies:
Brown, P. and Walter, T., 2013. The CAPM: theoretical validity, empirical intractability and practical applications. Abacus, 49(1), pp.44-50.
Da, Z., Guo, R.J. and Jagannathan, R., 2012. CAPM for estimating the cost of equity capital: Interpreting the empirical evidence. Journal of Financial Economics, 103(1), pp.204-220.
Dempsey, M., 2013. The capital asset pricing model (CAPM): the history of a failed revolutionary idea in finance?. Abacus, 49(1), pp.7-23.
Johnstone, D.J., 2013. The CAPM debate and the logic and philosophy of finance. Abacus, 49(S1), pp.1-6.
Yahoo Singapore Finance. (2016). Yahoo Singapore Finance. [online] Available at: https://sg.finance.yahoo.com/ [Accessed 22 Sep. 2016].
