Week 7_MPT and CAPM_Note by Wang

Week 7_MPT and CAPM_Note by Wang - MPT and CAPM An MGT 330...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
MPT and CAPM An MGT 330 supplement note Kevin Q. Wang This is an entirely optional, very mathematical note on the modern portfolio theory (MPT) and the capital asset pricing model (CAPM). It is for those who cannot live without math. That is, if you don’t feel you have learned anything without seeing a mathematical derivation, then the note is for you. This note presents (i) how to get the tangency portfolio, (ii) an elegant result of the portfolio theory, and (iii) how to establish the CAPM. Notations Suppose we have n risky assets with returns ˜ r 1 , ··· r n , and a riskless asset. The riskless rate is r f .L e t w be the n × 1 vector of weights on the n risky assets, i.e., w =( w 1 ··· w n ) 0 ,andlet µ denote the n × 1 vector of expected excess returns on the risky assets, i.e., µ =( µ 1 ··· µ n ) 0 , where µ i = E r i ) r f .Le t V be the n × n variance-covariance matrix of the
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Week 7_MPT and CAPM_Note by Wang - MPT and CAPM An MGT 330...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online