• Study Resource
  • Explore
    • Arts & Humanities
    • Business
    • Engineering & Technology
    • Foreign Language
    • History
    • Math
    • Science
    • Social Science

    Top subcategories

    • Advanced Math
    • Algebra
    • Basic Math
    • Calculus
    • Geometry
    • Linear Algebra
    • Pre-Algebra
    • Pre-Calculus
    • Statistics And Probability
    • Trigonometry
    • other →

    Top subcategories

    • Astronomy
    • Astrophysics
    • Biology
    • Chemistry
    • Earth Science
    • Environmental Science
    • Health Science
    • Physics
    • other →

    Top subcategories

    • Anthropology
    • Law
    • Political Science
    • Psychology
    • Sociology
    • other →

    Top subcategories

    • Accounting
    • Economics
    • Finance
    • Management
    • other →

    Top subcategories

    • Aerospace Engineering
    • Bioengineering
    • Chemical Engineering
    • Civil Engineering
    • Computer Science
    • Electrical Engineering
    • Industrial Engineering
    • Mechanical Engineering
    • Web Design
    • other →

    Top subcategories

    • Architecture
    • Communications
    • English
    • Gender Studies
    • Music
    • Performing Arts
    • Philosophy
    • Religious Studies
    • Writing
    • other →

    Top subcategories

    • Ancient History
    • European History
    • US History
    • World History
    • other →

    Top subcategories

    • Croatian
    • Czech
    • Finnish
    • Greek
    • Hindi
    • Japanese
    • Korean
    • Persian
    • Swedish
    • Turkish
    • other →
 
Profile Documents Logout
Upload
Foord Conservative Fund (Class B2)
Foord Conservative Fund (Class B2)

ECON337901: Midterm Exam, Spring 2017
ECON337901: Midterm Exam, Spring 2017

Chapter 10
Chapter 10

...  The following applies to any financial asset: V = Current value of the asset Ct = Expected future cash flow in period (t) k = Investor’s required rate of return Note: When analyzing various assets (e.g., bonds, stocks), the formula below is simply modified to fit the particular kind of asset being ...
tactical income fund
tactical income fund

Ch. 2. Asset Pricing Theory (721383S)
Ch. 2. Asset Pricing Theory (721383S)

New trading risk indexes - The Department of Economics
New trading risk indexes - The Department of Economics

... Modern portfolio theory introduced by Markowitz in 1952 is widely used by banks, financial firms, and financial advisers. This theory explores how risk adverse investors construct portfolios in order to optimise expected returns for a given level of market risk. Portfolio theory provides a broad co ...
Active Equity Risk - University of California Regents
Active Equity Risk - University of California Regents

... ‹ E.g., a .01 standard deviation increase* in exposure to the Momentum (style) risk factor will cause portfolio risk to decrease by 0.0012% or .12 bp ‹ *Calculation assumes that an increase (decrease) in asset weights resulting in increase (decrease) in factor exposure is offset by a decrease (incre ...
Chapter 6 - Extra Materials
Chapter 6 - Extra Materials

... Variation and Risk ...
Generali China - Unit Linked Growth
Generali China - Unit Linked Growth

... Launch Date ...
Investment Risk - Central Independent Advisers
Investment Risk - Central Independent Advisers

... inflation. This category includes cash and other money market related instruments. There is little chance of capital values falling (unless the institution holding your money gets into serious financial difficulty). You can expect to receive interest on your savings though rates do rise and fall. Du ...
PORTFOLIO*S RISKS AND RETURN
PORTFOLIO*S RISKS AND RETURN

... part of the total risk, the diversifiable or nonmarket part. What is left is the nondiversifiable portion or the market risk. Variability in a security’s total returns that is directly associated with overall movements in the general market or economy or risk attributable to broad macro factors affe ...
Shaw SMA - Large Cap Portfolio
Shaw SMA - Large Cap Portfolio

... significantly higher than for the market as a whole, and so may not suit all investors. Clients should make an assessment as to whether this stock and its potential price volatility is compatible with their financial objectives. Clients should discuss this stock with their Shaw adviser before making ...
Portfolio choice with jumps: A closed-form solution
Portfolio choice with jumps: A closed-form solution

52-Week High and Momentum Investing
52-Week High and Momentum Investing

... effect. • We benchmark each earning announcement return by the firm with median book-to market in the same decile as the announcer. • Every June, we sort firms independently into five groups by Oscore and three groups by debt/asset ratio (top 30%, middle 40% and bottom 30%), and form portfolios base ...
Premium Factors and the Risk-Return Trade
Premium Factors and the Risk-Return Trade

... Kraus and Litzenberger (1976) carried out a study to extend the mean- variance capital asset pricing model by including the effect of skewness on assets’ returns variation. Their specification asserts that average return is linear in systematic covariance and systematic skewness respectively. Furthe ...
NBER WORKING PAPER SERIES THE VALUATION OF LONG-DATED ASSETS Ian Martin
NBER WORKING PAPER SERIES THE VALUATION OF LONG-DATED ASSETS Ian Martin

Recessions and balanced portfolio returns
Recessions and balanced portfolio returns

... The portfolio’s returns—both nominal and inflationadjusted—are not drastically different in recessionary periods than in expansionary periods, in spite of its exposure to stocks. Recessions are never welcome, of course, and they are often associated with higher return volatility for stocks (and henc ...
Chapter Thirteen - McGraw Hill Higher Education
Chapter Thirteen - McGraw Hill Higher Education

... than expected returns from one asset are offset by better than expected returns from another • However, there is a minimum level of risk that cannot be diversified away and that is the systematic portion ...
Alpha Dynamics_Evaluating the Activeness of Equity Portfolios.indd
Alpha Dynamics_Evaluating the Activeness of Equity Portfolios.indd

... return profile. This is consistent with the notion that market efficiency varies, and less efficient (more diverse) market segments offer greater potential to add value through active management. For instance, our experience indicates that small-capitalization portfolios can maintain active share in ...
PDF Download
PDF Download

... out always to be downward sloping at the market-clearing price, which therefore is unique. Assuming only that individuals are risk averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to fall. We show that these conditions neither im ...
Document
Document

... Fluctuations in income returns; Fluctuations in price changes of the investment; Fluctuations in reinvestment rates of return. ...
On the Essential Role of Finance Science in Finance Practice in
On the Essential Role of Finance Science in Finance Practice in

Capital Structure without Taxes
Capital Structure without Taxes

... There are two stocks in the market, Stock A and Stock B. The price of Stock A today is $50. The price of Stock A next year will be $40 if the economy is in a recession, $55 if the economy is normal, and $60 if the economy is expanding. The probabilities of recession, normal times, and expansion are ...
Benchmarks as Limits to Arbitrage: Understanding the Low
Benchmarks as Limits to Arbitrage: Understanding the Low

Measuring Systematic Risk for Crop and Livestock Producers
Measuring Systematic Risk for Crop and Livestock Producers

< 1 ... 32 33 34 35 36 37 38 39 40 ... 62 >

Modern portfolio theory

Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel memorial prize for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral economics.MPT is a mathematical formulation of the concept of diversification in investing, with the aim of selecting a collection of investment assets that has lower overall risk than any other combination of assets with the same expected return. This is possible, intuitively speaking, because different types of assets sometimes change in value in opposite directions. For example, to the extent prices in the stock market move differently from prices in the bond market, a combination of both types of assets can in theory generate lower overall risk than either individually. Diversification can lower risk even if assets' returns are positively correlated.More technically, MPT models an asset's return as a normally or elliptically distributed random variable, defines risk as the standard deviation of return, and models a portfolio as a weighted combination of assets, so that the return of a portfolio is the weighted combination of the assets' returns. By combining different assets whose returns are not perfectly positively correlated, MPT seeks to reduce the total variance of the portfolio return. MPT also assumes that investors are rational and markets are efficient.MPT was developed in the 1950s through the early 1970s and was considered an important advance in the mathematical modeling of finance. Since then, some theoretical and practical criticisms have been leveled against it. These include evidence that financial returns do not follow a normal distribution or indeed any symmetric distribution, and that correlations between asset classes are not fixed but can vary depending on external events (especially in crises). Further, there remains evidence that investors are not rational and markets may not be efficient. Finally, the low volatility anomaly conflicts with CAPM's trade-off assumption of higher risk for higher return. It states that a portfolio consisting of low volatility equities (like blue chip stocks) reaps higher risk-adjusted returns than a portfolio with high volatility equities (like illiquid penny stocks). A study conducted by Myron Scholes, Michael Jensen, and Fischer Black in 1972 suggests that the relationship between return and beta might be flat or even negatively correlated.
  • studyres.com © 2025
  • DMCA
  • Privacy
  • Terms
  • Report