Explain about sharpers market model, Risk Management

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Q. Explain about sharpers market model?

One important basic development in the portfolio management that led to the development of CAPM was the measurement of risk. The pioneering work of harry Markowitz laid down the corner stone's of modern portfolio theory buy measuring portfolio risk in terms of co variances. Later with a view to simplify the computation, sharpen, linter and Tobin have side stepped the difficult task of evaluation co variances between all securities this is achieved by including a risk free security in the analysis and identifying the market portfolio on Markowitz efficient frontier and then generating a market sensitivity index for each security. Theirs is widely came to be called as the market model.


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