Lecture 11 (Ch 10)
Behavioral Finance
and
Technical Analysis
Where we are
Up to now:
if markets efficient: no arbitrage (=0)
CAPM, Fama-French and APT
(in theory) do passive portfolio management
tests show markets are pretty efficient
This lecture:
h

Lecture 12
Midterm Review
Financial Markets
Roles:
informational role and capital allocation
consumption timing smooth our consumption, save when young and consume during retirement
allocation of risk
combining risky and riskless portfolio depending on

Lecture 5 (Ch 6)
Diversification
Where we are
up to now:
goals regarding return and risk: utility
optimal allocation between risky and risk-free asset
this lecture:
how to combine risky assets in a portfolio?
diversification
covariance and correlat

Lecture 8 (Ch 2 & 8)
Market Indexes
and
CAPM in Practice
Where we are
Up to now:
optimal diversification
CAPM: (under some specific assumptions)
optimal risky portfolio is the market portfolio
for every asset i:
ri,t rf ,t i rM ,t rf ,t i,t
This lectu

Lecture 7 (Ch 7)
The Capital Asset
Pricing Model
Where we are
up to now:
how to allocate between risky and riskless assets
how to choose optimal risky portfolio
efficient minimum variance frontier
this lecture:
how much return to get for risk
CAPM

Lecture 4 (Ch 5)
Capital Allocation to Risky
Assets
Where we are
up to now:
real vs. nominal return
distribution of returns: mean and variance
risk measures: STD, VaR
what exactly is risk?
this lecture:
risk aversion and utility
indifference curves

Lecture 10 (Ch 9)
Market Efficiency
Where we are
Up to now:
risk , return E(r), and
- CAPM, APT
no arbitrage implies =0
Fama-French and other multifactor models
This lecture:
Market Efficiency (Ch 9)
- forms of market efficiency
- evidence on market

Lecture 9 (Ch 8)
Arbitrage Pricing Theory
and
Multifactor Models
Where we are
up to now:
trade-off between risk and return
measure for priced risk is beta, CAPM
abnormal return alpha
this lecture:
Arbitrage Pricing Theory (APT)
limitations of the C

Lecture 14 (Ch 13)
The Term Structure of
Interest Rates
Chapter Overview
The yield curve
Interest rates under certainty
Interest rates under uncertainty
Theories of the term structure
The expectation hypothesis
Liquidity preference
Interpreting the ter