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Comparative Analysis of Applicability of Unilateral Risk Models in Stock Markets with Asymmetric Distribution of Stock Returns

Student: Anastasia Zhigaleva

Supervisor: Alexander Osharin

Faculty: Faculty of Economics

Educational Programme: Economics (Bachelor)

Year of Graduation: 2018

Nowadays, there are quite effective mathematical and statistical tools for determining the cost of equity. As a generally accepted method of forming the amount of expenses for own capital, a simple and well economically justified model for estimating capital assets of the CAPM is used. Empirical studies in emerging capital markets have shown that the CAPM model demonstrates a low explanatory ability to estimate the expected (required) return on invested capital. The hypothesis that the one-sided interpretation of risk is more productive for decision-making by rational investors operating in a highly speculative market, to which the Russian market can be attributed, is tested in this paper. The main objective of the study is to determine the relationship between the risk and the expected returns from the portfolio and each security separately. The objectives of the study include: 1) justification of the correspondence of the structure of each optimal individual portfolio to the market structure; 2)Calculation of the expected return on individual assets, individual and market portfolios; 3)checking consistency of results with the results of economic practice. Drawing up a portfolio in which risks will be diversified, and profit maximization is a task that includes many possible approaches, and it is almost impossible to consider them all. Within the framework of the work, a short review of some studies was made which aimed at testing the pricing models for financial assets proposed by Russian and foreign researchers. Also, the work proposes the evolution of pricing models with the inclusion of higher-order moments, examines the empirical results of testing extended models on the Russian stock market, and gives their mathematical justifications.

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