The document discusses key concepts in Modern Portfolio Theory, including:
- The Separation Theorem, which describes a two-step process for portfolio selection involving choosing an optimal risky portfolio and then combining it with a risk-free asset.
- The Capital Market Line (CML), which is tangent to the efficient frontier and describes the equilibrium relationship between expected return and risk for efficient portfolios.
- The Security Market Line (SML) describes the expected return of individual securities based on their beta. It represents the fair pricing of risky securities based on their systematic risk.
- The CML shows risk-return for total portfolios while the SML shows it for individual securities based on beta rather than
Asset Pricing and Portfolio Theory
I have presented a unique analysis which showcases the concepts of Aggregate & Aggregate lending and the numerical aspects of CAPM theory
Questions and Answers At Least 75 Words each.Please answer th.docxmakdul
Questions and Answers: At Least 75 Words each.
Please answer the following questions.
1. What are the differences and similarities between samples and populations?
2. What are the measures of Central Tendency assumptions?
3. What are measures of Dispersion used for and what are the assumptions for each?
4. Define collaboration and how you will apply it in Statistics? (100 Words)
The Capital Asset Pricing Model:
Theory and Evidence
Eugene F. Fama and Kenneth R. French
T he capital asset pricing model (CAPM) of William Sharpe (1964) and JohnLintner (1965) marks the birth of asset pricing theory (resulting in aNobel Prize for Sharpe in 1990). Four decades later, the CAPM is still
widely used in applications, such as estimating the cost of capital for firms and
evaluating the performance of managed portfolios. It is the centerpiece of MBA
investment courses. Indeed, it is often the only asset pricing model taught in these
courses.1
The attraction of the CAPM is that it offers powerful and intuitively pleasing
predictions about how to measure risk and the relation between expected return
and risk. Unfortunately, the empirical record of the model is poor—poor enough
to invalidate the way it is used in applications. The CAPM’s empirical problems may
reflect theoretical failings, the result of many simplifying assumptions. But they may
also be caused by difficulties in implementing valid tests of the model. For example,
the CAPM says that the risk of a stock should be measured relative to a compre-
hensive “market portfolio” that in principle can include not just traded financial
assets, but also consumer durables, real estate and human capital. Even if we take
a narrow view of the model and limit its purview to traded financial assets, is it
1 Although every asset pricing model is a capital asset pricing model, the finance profession reserves the
acronym CAPM for the specific model of Sharpe (1964), Lintner (1965) and Black (1972) discussed
here. Thus, throughout the paper we refer to the Sharpe-Lintner-Black model as the CAPM.
y Eugene F. Fama is Robert R. McCormick Distinguished Service Professor of Finance,
Graduate School of Business, University of Chicago, Chicago, Illinois. Kenneth R. French is
Carl E. and Catherine M. Heidt Professor of Finance, Tuck School of Business, Dartmouth
College, Hanover, New Hampshire. Their e-mail addresses are �[email protected]
edu� and �[email protected]�, respectively.
Journal of Economic Perspectives—Volume 18, Number 3—Summer 2004 —Pages 25– 46
legitimate to limit further the market portfolio to U.S. common stocks (a typical
choice), or should the market be expanded to include bonds, and other financial
assets, perhaps around the world? In the end, we argue that whether the model’s
problems reflect weaknesses in the theory or in its empirical implementation, the
failure of the CAPM in empirical tests implies that most applications of the model
are invalid.
We begin by outlining the logic of t ...
Capital Market Line graphically represents all portfolios with an optimal combination of risk and return.
https://efinancemanagement.com/investment-decisions/capital-market-line
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
Asset Pricing and Portfolio Theory
I have presented a unique analysis which showcases the concepts of Aggregate & Aggregate lending and the numerical aspects of CAPM theory
Questions and Answers At Least 75 Words each.Please answer th.docxmakdul
Questions and Answers: At Least 75 Words each.
Please answer the following questions.
1. What are the differences and similarities between samples and populations?
2. What are the measures of Central Tendency assumptions?
3. What are measures of Dispersion used for and what are the assumptions for each?
4. Define collaboration and how you will apply it in Statistics? (100 Words)
The Capital Asset Pricing Model:
Theory and Evidence
Eugene F. Fama and Kenneth R. French
T he capital asset pricing model (CAPM) of William Sharpe (1964) and JohnLintner (1965) marks the birth of asset pricing theory (resulting in aNobel Prize for Sharpe in 1990). Four decades later, the CAPM is still
widely used in applications, such as estimating the cost of capital for firms and
evaluating the performance of managed portfolios. It is the centerpiece of MBA
investment courses. Indeed, it is often the only asset pricing model taught in these
courses.1
The attraction of the CAPM is that it offers powerful and intuitively pleasing
predictions about how to measure risk and the relation between expected return
and risk. Unfortunately, the empirical record of the model is poor—poor enough
to invalidate the way it is used in applications. The CAPM’s empirical problems may
reflect theoretical failings, the result of many simplifying assumptions. But they may
also be caused by difficulties in implementing valid tests of the model. For example,
the CAPM says that the risk of a stock should be measured relative to a compre-
hensive “market portfolio” that in principle can include not just traded financial
assets, but also consumer durables, real estate and human capital. Even if we take
a narrow view of the model and limit its purview to traded financial assets, is it
1 Although every asset pricing model is a capital asset pricing model, the finance profession reserves the
acronym CAPM for the specific model of Sharpe (1964), Lintner (1965) and Black (1972) discussed
here. Thus, throughout the paper we refer to the Sharpe-Lintner-Black model as the CAPM.
y Eugene F. Fama is Robert R. McCormick Distinguished Service Professor of Finance,
Graduate School of Business, University of Chicago, Chicago, Illinois. Kenneth R. French is
Carl E. and Catherine M. Heidt Professor of Finance, Tuck School of Business, Dartmouth
College, Hanover, New Hampshire. Their e-mail addresses are �[email protected]
edu� and �[email protected]�, respectively.
Journal of Economic Perspectives—Volume 18, Number 3—Summer 2004 —Pages 25– 46
legitimate to limit further the market portfolio to U.S. common stocks (a typical
choice), or should the market be expanded to include bonds, and other financial
assets, perhaps around the world? In the end, we argue that whether the model’s
problems reflect weaknesses in the theory or in its empirical implementation, the
failure of the CAPM in empirical tests implies that most applications of the model
are invalid.
We begin by outlining the logic of t ...
Capital Market Line graphically represents all portfolios with an optimal combination of risk and return.
https://efinancemanagement.com/investment-decisions/capital-market-line
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
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LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Cracking the Workplace Discipline Code Main.pptxWorkforce Group
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Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
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2. Separation Theorem
According to this theorem, choice of portfolio
involves 2 separate steps:
Determination of optimum risky portfolio
Investor’s decision to form portfolio of risk-free asset
and optimum risky portfolio
3. A risk averse investor would choose a portfolio
that has more investments in risk free asset
A risk seeker would invest higher proportions in
optimum risky portfolio.
4. In a market situation, a large number of investors
holding portfolios consisting of a risk-free security
and multiple risky securities participate.
Rational investors will choose the portfolios along
CML since those portfolios offer highest return for
the same level of risk.
6. Capital Allocation Line is a line which shows the
manner in which capital is allocated
Capital Market Line is tangent to Efficient
Frontier
CML is an efficient set of risk-free and risky
securities and it shows risk-return trade-off in the
market equilibrium
7. Slope of CML
Slope of CML is also known as reward to
variability ratio
Slope of CML describes the best price at a given
level of risk
Slope, = E(Rm ) – Rf
m
8. A portfolio on CML gives 11 % return
m=3.6, Rf =5%,
Calculate Reward to variability ratio or the slope of
CML.
9. Slope of CML = 1.67
Slope of CML shows the equilibrium price of risk
in market.
This means that in the given example market
demands 1.67% return for 1% increase in portfolio
risk
10. CML, thus is important in describing the
equilibrium relationship between expected return
and risk for efficient portfolios that contain no
unsystematic risk.
This give rise to the most important question:
What is appropriate relationship b/w risk and return
for all securities – efficient and inefficient portfolios
14. All fairly priced securities plot exactly on SML
Over valued assets plot below SML and
Under valued assets plot above SML
The difference between actual expected return and
Fair Return is called as Alpha (α)
Alpha (α) = Actual Expected return – Fair Return
15. Difference between CML and SML
CML represents the risk premiums of efficient
portfolios as a function of portfolio standard
deviation
SML represents individual security risk premium
as a function of Security Beta.