{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

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

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Ec 136, Financial Economics Lecture 20 November 12
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
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.
Background image of page 2
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
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. CAPM ° CAPM states that market portfolio is e°cient. { Market portfolio = portfolio of all risky assets. ° Key idea: equilibrium 1. All investors hold mean-var e°cient portfolios 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.
Background image of page 4
Implications of CAPM ° If CAPM holds, no need to perform mean-var analysis. { Investors can free-ride on analyses of other so- phisticated investors { Use market portfolio as optimal mutual fund of risky assets.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}