Analysis of capital asset pricing model on Deutsche bank energy commodity

Abstract

Capital asset pricing model (CAPM) is one of the widely used asset pricing models in modern securities theory. This mathematical model can help investors understand the relationship between expected returns and investment risk. To help energy commodity investors (especially Deutsche Bank) make the best decisions in investment management, this paper uses the CAPM and some statistical tools (variance, covariance and mean) to study risks on the expected return of investing in four common Deutsche Bank (DB) crude oil assets (DB crude oil double short, SZO-DB crude oil short order, OLO-DB crude oil short position, DBO-Invesco DB Petroleum Fund). The result reveals that DTO-DB Crude oil Double Short has the highest beta risk and highest expected return. And the higher the risk, the higher the expected return, and vice versa, that is, the risk is directly proportional to the expected return. In addition, the results also show that 73% of the investor’s wealth can be spent on a risky asset in DTO-DB Crude oil Double Short, 67% in SZO-DB Crude oil Short, 16% in OLO-DB Crude oil Short. Since the expected returns of DBO-Invesco DB Crude oil fund has a negative risk with negative expected returns, the investment in DBO-Invesco DB Crude oil will result in having a loss from the investment.