Efficient Portfolios MGT 4850 Spring 2008 University of Lethbridge.

Slides:

Advertisements

Similar presentations

Chapter 5 Portfolio Risk and Return: Part I

Advertisements

Capital Asset Pricing Model

1 CHAPTER TWELVE ARBITRAGE PRICING THEORY. 2 FACTOR MODELS ARBITRAGE PRICING THEORY (APT) –is an equilibrium factor mode of security returns –Principle.

MIP/MB-IPB/08 1 MANAJEMEN INVESTASI DAN PORTOFOLIO Lecture 4a: CAPM.

The Capital Asset Pricing Model. Review Review of portfolio diversification Capital Asset Pricing Model  Capital Market Line (CML)  Security Market.

Chapter 18 CAPITAL ASSET PRICING THEORY

The Capital Asset Pricing Model

The Capital Asset Pricing Model Chapter 9. Equilibrium model that underlies all modern financial theory Derived using principles of diversification with.

CHAPTER NINE THE CAPITAL ASSET PRICING MODEL. THE CAPM ASSUMPTIONS n NORMATIVE ASSUMPTIONS expected returns and standard deviation cover a one-period.

Why use single index model? (Instead of projecting full matrix of covariances) 1.Less information requirements 2.It fits better!

QDai for FEUNL Finanças November 2. QDai for FEUNL Topics covered  Minimum variance portfolio  Efficient frontier  Systematic risk vs. Unsystematic.

The Capital Asset Pricing Model P.V. Viswanath Based on Damodaran’s Corporate Finance.

Estimating betas and Security Market Line MGT 4850 Spring 2007 University of Lethbridge.

1 Limits to Diversification Assume w i =1/N,  i 2 =  2 and  ij = C  p 2 =N(1/N) 2  2 + (1/N) 2 C(N 2 - N)  p 2 =(1/N)  2 + C - (1/N)C as N  

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

1 IX. Explaining Relative Prices. 2 Explaining Relative Prices 1.CAPM – Capital Asset Pricing Model 2.Non Standard Forms of the CAPM 3.APT – Arbitrage.

Efficient Portfolios MGT 4850 Spring 2009 University of Lethbridge.

FINA 6335 The CAPM and Cost of Capital Lecture 9

1 Optimal Risky Portfolio, CAPM, and APT Diversification Portfolio of Two Risky Assets Asset Allocation with Risky and Risk-free Assets Markowitz Portfolio.

Investments, 8 th edition Bodie, Kane and Marcus Slides by Susan Hine McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights.

Capital Asset Pricing Model CAPM Security Market Line CAPM and Market Efficiency Alpha (  ) vs. Beta (  )

CAPITAL ASSET PRICING MODEL(CAPM) CAPITAL ASSET PRICING MODEL(CAPM)

This module identifies the general determinants of common share prices. It begins by describing the relationships between the current price of a security,

The Capital Asset Pricing Model

McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 9 Capital Asset Pricing.

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 The Capital Asset Pricing Model.

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

Investment Analysis and Portfolio Management

Optimal Risky Portfolio, CAPM, and APT

Capital Asset Pricing Model

Capital Asset Pricing Model CAPM Security Market Line CAPM and Market Efficiency Alpha (  ) vs. Beta (  )

Essentials of Investments © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Fourth Edition Irwin / McGraw-Hill Bodie Kane Marcus 1 Chapter 8.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

1 CHAPTER NINE RISKFREE BORROWING AND LENDING. 2 DEFINING THE RISK FREE ASSET WHAT IS A RISK FREE ASSET? –DEFINITION: an asset whose terminal value is.

Copyright ©1997 Ian H. Giddy Portfolio Diversification and the CAPM 1.

McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

Fi8000 Valuation of Financial Assets Spring Semester 2010 Dr. Isabel Tkatch Assistant Professor of Finance.

“Differential Information and Performance Measurement Using a Security Market Line” by Philip H. Dybvig and Stephen A. Ross Presented by Jane Zhao.

McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Capital Asset Pricing and Arbitrage Pricing Theory CHAPTER 7.

Chapter 7 Capital Asset Pricing and Arbitrage Pricing Theory.

INVESTMENTS | BODIE, KANE, MARCUS Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin CHAPTER 9 The Capital Asset.

Capital Market Theory (Chap 9,10 of RWJ) 2003,10,16.

Return and Risk: The Asset-Pricing Model: CAPM and APT.

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Asset Pricing Models: CAPM & APT.

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 The Capital Asset Pricing Model.

FIN 614: Financial Management Larry Schrenk, Instructor.

Investments, 8 th edition Bodie, Kane and Marcus Slides by Susan Hine McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights.

1 CHAPTER THREE: Portfolio Theory, Fund Separation and CAPM.

Managerial Finance Ronald F. Singer FINA 6335 Review Lecture 10.

1 EXAMPLE: PORTFOLIO RISK & RETURN. 2 PORTFOLIO RISK.

AcF 214 Tutorial Week 5. Question 1. a) Average return:

Bodie Kane Marcus Perrakis RyanINVESTMENTS, Fourth Canadian Edition Copyright © McGraw-Hill Ryerson Limited, 2003 Slide 7-1 Chapter 7.

Optimal Risky Portfolios

Capital Market Line and Beta

Capital Market Theory: An Overview

Capital Asset Pricing and Arbitrage Pricing Theory

Capital Asset Pricing and Arbitrage Pricing Theory

The Capital Asset Pricing Model

Return and Risk: The Capital Asset Pricing Models: CAPM and APT

Portfolio Theory & Related Topics

Optimal Risky Portfolios

Asset Pricing Models Chapter 9

The Capital Asset Pricing Model

Capital Asset Pricing and Arbitrage Pricing Theory

Corporate Finance Ross  Westerfield  Jaffe

Cost of Capital: Capital Asset Pricing Model (CAPM) and Weighted Average Cost of Capital (WACC) Magdalena Partac.

Capital Asset Pricing and Arbitrage Pricing Theory

Figure 6.1 Risk as Function of Number of Stocks in Portfolio

Optimal Risky Portfolios

Capital Asset Pricing Model

Presentation transcript:

Efficient Portfolios MGT 4850 Spring 2008 University of Lethbridge

Capital Asset Pricing Model Assumptions Perfect Competition – Individual investors are price takers Single Investment Horizon Investments are limited to traded financial assets No taxes or transaction costs Investors are rational mean variance optimizers Homogeneous expectations

Capital Asset Pricing Model Equilibrium Conditions All investors will hold the same portfolio of risky assets – the market portfolio Market Portfolio contains all securities Risk premium on the market depends on the average risk aversion of all market participants Risk premium on an individual security is a function with its covariance with the market

Efficient frontier (2 portfolios)

Creating the frontier