EC567FINANCIALECONOMETRICS
II:
APPLIEDPORTFOLIOMODELLING
FIXEDINCOMEPORTFOLIO
MANAGEMENT
November12th2013
ExamStructure
Any5from9
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Yearswork:Groupprojectmarks
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IntroductiontoPortfolioManagement
1)Sin
EC567FINANCIALECONOMETRICS
II:
APPLIEDPORTFOLIOMODELLING
CIANTWOMEY
WEEK#1:3September
2013
CourseInformation
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Lectures:
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Tuesday35pm,CA116
Notextbook;readings/articlespostedon
Blackboard
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Excelfocus:assignment;labsessions
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Assessment:YW(40%)&finalex
Topic 4:
Portfolio Concepts
Mean-Variance Analysis
Meanvariance portfolio theory is based
on the idea that the value of investment
opportunities can be meaningfully
measured in terms of mean return and
variance of return.
Assumptions of the Model
1. All
Lesson 4
The Theory of Choice: Utility
Theory Given Uncertainty
Lesson Outline
5 axioms of rationale behaviour
Properties of utility functions
Risk aversion and risk premiums
Possible functional forms for utility functions
plausibility
u Utility function
Static Portfolio Choices (L4)
Following topics are covered:
Mean and Variance as Choice Criteria an example
Insurance
Optimal insurance with loading
Optimal coinsurance
Optimality of deductible insurance
Optimal Investment Portfolio
Portfolio of s
Asset markets and asset prices
In this lecture we will see a brief overview of the markets and instruments and
provide an outline of the ideas that underpin explanations of asset prices and
hence rates of return.
Central to an understanding of finance i
Capital Market, Consumption and Investment (L1)
Consumption and investment without capital market
Consumption and investment with capital market
Fisher separation theorem
Breaking down the separation : transaction costs
Breaking down the separation: agenc
Efficient Capital Market (L2)
Defining efficient capital market
Defining the value of information
Example
Value of information and efficient capital markets
Rational expectation and market efficiency
Market efficiency with costly information
The joint hyp
Asset price determination: Introduction
The simplest economic theory of price determination applied to asset
markets is that of supply and demand.
The prices of many assets are highly flexible, with rates of change that
are rapid compared with the rates o
Expected Utility Theory
How to deal with uncertainty
Introduction
we have talked about individual decision making in
the absence of uncertainty
in reality, we usually make decision under uncertainty
example:
1. uncertainty from product quality (second-