Lecture #20 - Ec 136, Financial Economics Lecture 20...

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Ec 136, Financial Economics Lecture 20 November 12
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Outline for today 1. CAPM 2. Expected return-beta representation 3. Beta-representation: proof www.econ.berkeley.edu/~szeidl/ec136/ec136index.htm Readings: BKM Chapter 9 Problem set 7 : due November 19, Thurs, in class.
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0. Midterm max 75th 50th 25th mean stdev midterm 1 96 91 86 76 82 13 midterm 2 100 84 75 65.5 74 14 Rough suggested translation from sum of two midterms to letter grade: { A : 171-200 { B : 146-170 { C : 100-145
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1. CAPM { Market portfolio = portfolio of all risky assets. Key idea: equilibrium 2. Mutual fund thm = ) all investors hold risky assets in the same relative proportions as in tangency 3. Demand = supply, so market portfolio has same proportions as tangency Hence market portfolio is the tangency portfolio.
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Implications of CAPM If CAPM holds, no need to perform mean-var analysis. { Investors can free-ride on analyses of other so-
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This note was uploaded on 09/02/2010 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.

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Lecture #20 - Ec 136, Financial Economics Lecture 20...

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