Darden Capital Management: The Cavalier Fund

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Case

Reference no. UVA-F-1853

Subject category: Finance, Accounting and Control

Authors: Michael J Schill (Darden School of Business, University of Virginia)

Published by: Darden Business Publishing

Originally published in: 2018

Version: 13 March 2019

Revision date: 16-Oct-2023

Length: 10 pages

Data source: Published sources

Topics: Portfolio management; Capital asset pricing model; CAPM; Beta; Stock risk; Idiosyncratic risk; Systematic risk; Stock diversification; Cost of equity; Investment management; Market efficiency; Standard deviation; Expected return; Finance; Risk management

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Abstract

This case examines the investment strategy decisions of a student portfolio management team in April 2017. The case is designed to provide a context for an introduction to the intuition of the Capital Asset Pricing Model (CAPM) and practical estimation methods. Students are invited to make investment recommendations based on the risk-return characteristics of a set of stock-investment alternatives. The case discussion surrounds the tension with respect to the relevant measure of risk and the method for estimating benchmark returns. The case equips students with the materials for estimating a CAPM-based benchmark for each security using market data.