FM11 Ch 05 Risk and Return_ Portfolio Theory and Asset Pricing Models

... 5-2 Portfolio Theory  Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent Asset B has an expected return of 16 percent and a standard deviation ... the correlation between A and B is 0.6, what are the expected return and standard deviation for a portfolio comprised of 30 percent Asset A and 70 percent Asset B? 5-3 Portfolio Ex...

Ngày tải lên: 06/04/2015, 19:41

... (Diversifiable) Risk 35 Stand-Alone Risk, σ p 20 Market Risk 10 20 30 40 2,000+ # Stocks in Portfolio - 27 Stand-alone Market Diversifiable = risk + risk risk Market risk is that part of a security’s stand-alone ... market risk, so prices and returns reflect this lower risk  The one-stock investor bears higher (stand-alone) risk, so the return is less than that required by t...

Ngày tải lên: 06/04/2015, 19:41

... the effect of liquidity risk on asset pricing In the first essay, I test the liquidity- adjusted capital asset pricing model (LCAPM) of Acharya and Pedersen (2005) for 1962-2004 in Liquidity is ... commonality in liquidity and the asset pricing implication of liquidity risk in three developed countries of Japan, UK and US He finds that global and industry-wide cr...

Ngày tải lên: 02/11/2014, 00:43

... portfolio risk management 23 - 20 How are risk exposures identified and measured?  Large corporations have risk management personnel which have the responsibility to identify and measure risks facing ... substantially in the interim 23 - 19 Chapter 23 Extension: Insurance and Bond Portfolio Risk Management  Risk identification and measurement  Property loss, l...

Ngày tải lên: 06/04/2015, 19:41

... rs = rRF + (RPM)bi could change  Inflation expectations  Risk aversion  Company risk  g could change 7 - 35 Stock value vs changes in rs and g D1 = $2, rs = 10%, and g = 5%: P0 = D1 / (rs-g) ... 0.06 0 .07 - 15 What is the stock’s market value one year from now, ^ 1? P  D1 will have been paid, so expected dividends are D2, D3, D4 and so on Thus, D2 P1 = rs - g = $2.2427 = $32.10...

Ngày tải lên: 06/04/2015, 19:41

... ADVANCES IN CORPORATE FINANCE AND ASSET PRICING i This page intentionally left blank ii ADVANCES IN CORPORATE FINANCE AND ASSET PRICING EDITED BY L RENNEBOOG Department of Finance and CentER, ... reputation in fighting inflation, inflationary pressures first show up in asset- price Introduction: Corporate Restructuring and Governance, Valuation and...

Ngày tải lên: 22/03/2014, 23:20

... 7.b When given the choice of asset A versus asset B, an individual chooses asset A This same individual, when given the choice between asset C and asset D, chooses asset D Could this individuals ... However, in the eld of nancial economics, a somewhat dierent denition is often employed Financial economists seek to understand how the risk of an assets payo determines the asse...

Ngày tải lên: 29/06/2014, 07:20

... capital = 10% 11 - Incremental Cash Flow for a Project  Project’s incremental cash flow is: Corporate cash flow with the project Minus Corporate cash flow without the project 11 - Should you ... judgments 11 - 28 What three types of risk are relevant in capital budgeting?  Stand-alone risk  Corporate risk  Market (or beta) risk 11 - 29 How is each type of...

Ngày tải lên: 06/04/2015, 19:41

... 94 REFERENCES 95 iv PART I Standard (One Period) Portfolio Theory Chapter Portfolio Choices Chapter Portfolio Choices 1.A Framework and notations In all the following we consider ... instance and M Any ecient portfolio writes: Ă Â x = b àr1 The tangent portfolio (m,M ) is: Ă Â m = bM àr1 bM = Ă Â 1 àr1 Proof 1, 2, 3, are standard and easy to prove Let us proove and 6: x ....

Ngày tải lên: 18/12/2013, 09:12

... set Take Œ0; 1 and two points x and y such that gk x/ Ä gk;0 and gk y/ Ä gk;0 Then gk x C /y/ Ä gk x/ C /gk y/ Ä gk;0 ; H Hult et al., Risk and Portfolio Analysis: Principles and Methods, Springer ... investment and risk management decisions, financial institutions and insurance companies are required to quantify and report their risks Financial institutions and insur...

Ngày tải lên: 07/03/2014, 06:20

... Capital Markets and Portfolio Theory Roland Portait From the class notes taken by Peng Cheng Novembre 2000 Table of Contents Table of Contents PART I Standard (One Period) Portfolio Theory ... 94 REFERENCES 95 iv PART I Standard (One Period) Portfolio Theory Chapter Portfolio Choices Chapter Portfolio Choices 1.A Framework and notations In all the following we consi...

Ngày tải lên: 28/06/2014, 22:20

... Robert Alan Hill Portfolio Theory and Investment Analysis Download free eBooks at bookboon.com Portfolio Theory and Investment Analysis 2nd edition © 2014 Robert Alan Hill ... Multi-Asset Portfolio 37 3.5: he Optimum Portfolio 40 Summary and Conclusions 43 Selected References 45 he Market Portfolio 46 Introduction 46 4.1 he Market Portfolio and Tobin’s heorem 4...

Ngày tải lên: 05/11/2014, 15:52

... Robert Alan Hill Portfolio Theory & Financial Analyses Exercises Download free eBooks at bookboon.com Portfolio Theory & Financial Analyses: Exercises 1st edition © 2010 Robert ... Theory & Financial Analyses: Exercises Contents Exercise 2.3: Correlation and Risk Reduction Summary and Conclusions 22 he Optimum Portfolio 23 Introduction 23 Exercise 3.1: Two-Asse...

Ngày tải lên: 05/11/2014, 15:54

... ordering costs increase  If Q > EOQ, total carrying costs increase, but ordering costs decrease 28 - 15 Suppose delivery takes weeks Assuming certainty in delivery and usage, at what inventory ... if you view cash as an operating assets, just like inventory  In this view, cash has a carrying cost, which is the opportunity cost for investing the funds, and an order cost, wh...

Ngày tải lên: 06/04/2015, 19:41

... losses)(More ) 25 -  Break-up value: Assets would be more valuable if broken up and sold to other companies 25 - What are some questionable reasons for mergers?  Diversification  Purchase of assets ... rate would change the discount rate 25 - 26 Assume the target company has 20 million shares outstanding The stock last traded at $11 per share, which reflects the target’s value on...

Ngày tải lên: 06/04/2015, 19:41