STAT244.Lecture.01 2

STAT244.Lecture.01 2 - excess return, E ( p t )-R f , is...

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Modeling: Historical Perspective I Louis Bachelier (1900): Brownian Motion I Markowitz (1952): Risk/Return Tradeoff I Sharpe, Lintner, Mossin and Black (1962-1964): CAPM Key Conclusions: I log( p t ) is a random walk I Risk and return are related; risk is measured by variance;
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Unformatted text preview: excess return, E ( p t )-R f , is related to E ( m t )-R f . Issues: I Are asset prices predictable? I Stock picking has done better than buy and hold!...
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