Econ+435+EXAMII+guide - mean to calculate the efficient...

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GSI: Rosanna Chan Econ 435 Informal Guide to Exam II Resources Lecture notes: 9-16 Chapters: 8-9 Practice Questions: Exam II Practice Questions on Handouts in Ctools Lecture notes Quiz II and Quiz III Handouts: CAPM handout given in section week of 10/16-10/20 General Questions: End of Chapter questions to test understanding of concepts Tips Start with the lecture notes, pay attention to concepts and definitions. Remember from last time there may be tricky questions that test your understanding and not just your ability to calculate!!! Below are just SOME examples of stuff you should pay attention to lectures so far… Use the textbook to get a deeper understanding and for reference. Lecture 10 Stochastic dominance Diversification Efficient frontier – what is right of the frontier, the left of the frontier? Two- Fund Theorem – how will a person exhibit preferences of risk? Lecture 11 What is more important here is to be able to conceptually follow what the maths is about: Ie what does it
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Unformatted text preview: mean to calculate the efficient frontier, what are you holding constant, what are you minimizing, what are you finding out. Discussion handout and project II is designed to get you to see through the math. Also, this shows why a person would be willing to hold a riskier asset over a less risky one due to it’s covariance of returns – a major point!! Lecture 12 Two-fund theorem and what it implies about the choice of risky assets Capital Market line – what is the slope, the constant? Risk decomposition CAPM – what does it do ? Are tests of the CAPM supported? What are the pros and cons? (more in lecture 14) Lecture 13 Arbitrage Pricing Theorem – what does this do? How is it different from CAPM? What is the principle behind this (versus CAPM)? After reviewing material, practice all the questions (without looking at the answers). Attend review to check that you have covered everything and you can do all the problems thus far. GSI: Rosanna Chan...
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Econ+435+EXAMII+guide - mean to calculate the efficient...

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