Midterm 2 Review SP 2011

Midterm 2 Review SP 2011 - Matrix basics o Matrix of...

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Fin 4514 Review Sheet for Exam 2 Basic information Chapters o 6(only on the material used in the application of optimal portfolios), 7, 8 o Application of optimal portfolios. Background information on matrix and matrix operations. The concepts used in the application. Reviewing Ch 6 and Ch 7 along with the application will help you. Format o Approximately 80% MC questions (4 points each) o Approximately 20% problems and short answer questions Show ALL your work for potential partial credit Optimal Portfolios and the application (Chapters 6 and 7) Investment choices for investors with different level of risk aversion Concept of diversification Portfolio statistics with two risky-assets o Minimum variance portfolio weights
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Unformatted text preview: Matrix basics o Matrix of returns, weights, and covariance matrix o Rules of matrix operation Concepts of minimum-variance portfolios and efficient portfolios Identification of the optimal portfolio when there is no risk-free lending and borrowing Identification of optimal capital allocation line when an investor can borrow and lend at the risk-free rate Identification of the optimal complete portfolio on the optimal capital allocation line Index Model (Chapter 8) Advantages of index model, number of inputs The model and its direct application Beta estimation using regression Variance decomposition using index model Covariance under index model...
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