Capital market theory

 

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Capital market theory

The generic term for models which aim to price assets, usually shares or baskets of them, in terms of the trade-off between risk and return that investors seek.The best known and most influential of these is the Capital Asset Pricing Model.



Similar Matches

Capital

Capital

Cash and physical assets owned by an individual or company.


Capital gains tax

Capital gains tax

The tax levied on profits from the sale of capital assets. A long-term capital gain, which is achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 20% (taxpayers in 28% tax bracket) and 10% (taxpayers in 15% tax bracket). Assets held for less than 12 months are taxed at regular income tax levels, and, since January 1, 2000, assets held for at least five years are taxed at 18% and 8%.


Return to capital

Return to capital

Same as the rental price of capital. Since capital can only be measured in monetary units, the rental price is, say, dollars per dollar's worth of capital per unit time, and it therefore has the form of a rate of return like an interest rate.


Capital gain

Capital gain

The amount chargeable to capital gains tax (CGT) from gains made on the disposal of an asset. In the case of stocks and shares, your gain is the difference between the proceeds of selling the shares and the amount you paid for them adjusted for indexationIn calculating the acquisition cost, you can include including broker commissions and stamp duty. Depending on when you bought the shares, the base cost can be increased through the indexation allowance - a good thing from a tax point of view because the higher your acquisition cost, the lower your chargeable gain.In calculating the disposal proceeds, you can deduct commissions and other charges incurred in the process of selling.Whether you have to pay Capital Gains Tax on the chargeable gain will depend on whether you have already used up your annual exemption (the amount of gains you can make in any one year without paying CGT), and on the level of your other gains or losses in the tax year.Taper relief, which reduces the rate of tax you pay on gains, may also be available, depending on how long you have held the shares at the time you sell them.


Capital adequacy ratio

Capital adequacy ratio

The ratio of a bank's capital to its risk-weighted credit exposure. International standards recommend a minimum for this ratio, intended to permit banks to absorb losses without becoming insolvent, in order to protect depositors.


Further Suggestions

Capital growth
capital expenditure
venture capital trust
Overcapitalization
Human capital
Capital market efficiency
Capital intensive
Recapitalization proposal
Capital appreciation or depreciation
Capital allocation decision
Small capitalization (small cap) stocks
Capital mobility
Capital intensity
capital adequacy
Issued share capital
Capital augmenting
Capitalization ratios
Contributed capital
Cost of limited partner capital
Maximum capital gains mutual fund
capital
authorised share capital
Capitalization table
Undercapitalized
Capital Gains


 
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