Assumptions of Portfolio Theory • Investors are rational. • Investors are basically risk averse. • Investors wants to maximize the returns from his/her investments for a given level of risk. • Investor portfolio includes all of his/her assets and liabilities. • The relationship between the returns of assets in the portfolio is important since the returns from these investments interact with each other. Risk Aversion • Portfolio Theory assumes investors are basically risk averse. • Risk aversion
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known as unsystematic risk. This risk is unique to the specific security and affects a single asset or small group of assets. In contrast to systematic risk, which is the market risk that affects the larger number of assets. Unsystematic risk of a portfolio can be brought down to zero through diversification whereas systematic risk cannot be diversified. This can be further elaborated with the help of an example. A sudden rise in inflation affects all the companies by lowering the real return of all
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CONTENTS BONDS 1 STOCKS 6 OPTIONS 10 FUTURES 16 PORTFOLIO PERFORMANCE EVALUATION 20 INTERNATIONAL INVESTING 26 BONDS Page 480 –CFA Problems Questions #1 1. Leaf Products may issue a 10-year maturity fixed-income security, which might include a sinking fund provision and either refunding or call protection. a) Describe a sinking fund provision. The sinking fund provision allows the firm to repurchase a fraction of the outstanding bonds at either the market price or the sinking
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Betting Against Beta Andrea Frazzini and Lasse H. Pedersen* This draft: October 9, 2011 Abstract. We present a model with leverage and margin constraints that vary across investors and time. We find evidence consistent with each of the model’s five central predictions: (1) Since constrained investors bid up high-beta assets, high beta is associated with low alpha, as we find empirically for U.S. equities, 20 international equity markets, Treasury bonds, corporate bonds, and futures; (2) A
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Investments team project KUBS Investment Fund Manager Group 14 (Step 1) For the convenience of problem solving, we solved the problems in following orders: a–c–e–b-d. a) The yearly expected return: First, find the weekly return for each stock by using the formula of: rᵢ=p₁-p₀p₀ Second, for each of the stock, add all of the weekly return and then divide by the number of sample (from Oct 27, 2005 until Oct 19, 2015) to get the average of weekly return. rw=1mnί=1mnrᵢ (where mn is 521) Third
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Zeus Asset Management Inc Executive Summary Zeus Asset Management Inc is an asset management firm with more than $1.7 billion in asset under management. Zeus is well known for relationship-oriented that served both individual and institutional investors with the investment philosophy of believing that they could get a superior return over the long run using a conservative, risk-averse and quality-oriented approach. Zeus have been measuring it’s return in an absolute basis however Abbott demanded
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буурах, өгөөж нэмэгдэх, хөрөнгө оруулагчдын сэтгэл зүй тогтвортой байх, ханшийн хэт хэлбэлзэл буурах, цаашлаад хөрөнгийн зах зээлд хөрөнгө оруулагчид нэмэгдэх улмаар хөрвөх чадвар сайжирч, зах зээл идэвхжих чухал ач холбогдолтой. Түлхүүр үгс: Modern Portfolio Theory, Behavioral Finance, C programming language, Visual Studio Хөрөнгө Оруулагчийн Санхүүгийн Хэрэгцээ, Чадамж, Хувийн Зан Төлөвт Нийцсэн Оновчтой Багц Бүрдүүлэх “MB 1.0” Программ ГАРЧИГ I. СУДЛАГДСАН БАЙДАЛ ..........................
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------------------------------------------------- Portfolio Composition The Money Team designed this portfolio September 27th, 2013 with the plan to invest mainly in large cap and high growth U.S equities. All equities were purchased on that date with the intention to hold them until December 6th, 2013. The primary goal of this portfolio was to maximize growth and value of the portfolio through an active investment strategy. This portfolio was concentrated in large cap U.S equities and domestic
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The Portfolio Theory also known as Modern Portfolio Theory was first developed by Harry Markowitz. He had introduced the theory in his paper ‘Portfolio Selection’ which was published in the Journal of Finance in 1952. In 1990, he along with Merton Miller and William Sharpe won the Nobel Prize in Economic Sciences for the Theory. The theory suggests a hypothesis on the basis of which, expected return on a portfolio for a given amount of portfolio risk is attempted to be maximized or alternately the
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D. factor betas E. B and D The coefficients are called factor betas, factor sensitivities, or factor loadings. Difficulty: Easy 6. Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios? A. The CAPM B. The multifactor APT C. Both the CAPM and the multifactor APT D. Neither the CAPM nor the multifactor APT E. None of the above is a true statement. The multifactor APT provides no guidance as to the determination of the risk
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