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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 Twofund 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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 Fall '08
 CHABOT
 Economics, Capital Asset Pricing Model, Modern portfolio theory, Rosanna Chan, Risk decomposition CAPM, CAPM handout

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