PPT-Markowitz Risk - Return Optimization

Author : liane-varnes | Published Date : 2018-09-21

Introduction Modern portfolio theory was fathered by Harry Markowitz in the 1950s It assumes that an investor wants to maximize a portfolios expected return contingent

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Markowitz Risk - Return Optimization: Transcript

Introduction Modern portfolio theory was fathered by Harry Markowitz in the 1950s It assumes that an investor wants to maximize a portfolios expected return contingent on any given amount of risk with risk measured by the standard deviation of the portfolios rate of return. Presenter. Venue. Date. Why Focus on Return Concepts?. Holding Period Return. Other Return Concepts. Equity Risk Premium. Equity Risk Premium Estimates. Historical Estimates. Forward-Looking Estimates. Stand-alone and Portfolio Considerations. Efficient Market Hypothesis. Securities are in equilibrium: “Fairly priced” . 100,000+ analysts (MBAs, CFAs, PhDs) work for investment firms. Analysts have access to data and $$ to invest. Topic 12. I. . Efficient Market. Theory (EMT). Efficient Market Theory. Where did EMT come from?. What is the Efficient Market Theory?. What does it Imply?. How can it be tested?. What conclusions can we draw about market efficiency?. Lecture 3 – Part 3. M. Pawan Kumar. pawan.kumar@ecp.fr. Slides available online http://. cvn.ecp.fr. /personnel/. pawan. /. Solving Linear Programs. s.t.. A . x. ≤ . b. max. x. . c. T. x. Optimization. Chapter 12. Chapter Outline. 12.1 The Expected Return of a Portfolio. 12.2 The Volatility of a Portfolio . 12.3 Measuring Systematic Risk. 12.4 Putting it All Together: The Capital Asset Pricing Model . (chapter 8). Investment. returns. The rate of return on an investment can be calculated as follows:. . (Amount received – Amount invested). . Return =. . ________________________. . Diversification is key to risk management. Asset allocation most important single decision. Using Markowitz Principles. Step 1: Identify optimal risk-return combinations using the Markowitz analysis . I. . Efficient Market. Theory (EMT). Efficient Market Theory. Where did EMT come from?. What is the Efficient Market Theory?. What does it Imply?. How can it be tested?. What conclusions can we draw about market efficiency?. © 2012 Pearson Prentice Hall. All rights reserved.. 8-. 1. © 2012 Pearson Prentice Hall. All rights reserved.. 8-. 2. Risk and Return Fundamentals. In most important business decisions there are two key financial considerations: risk and return.. , Gonzalez, Moore. , Siegert, . Tansey, . & Wyatt. 1. Overview. Expected . and Realized Rate of . Return. Stand-Alone Risk and Return . Portfolio . Risk and . Return. The . Calculation of . Beta. , Gonzalez, Moore. , Siegert, . Tansey, . & Wyatt. 1. Overview. Expected . and Realized Rate of . Return. Stand-Alone Risk and Return . Portfolio . Risk and . Return. The . Calculation of . Beta. Careers in Finance. Corporate finance. Investment, Money Management. Banking (commercial banking, investment banking). Insurance. Real estate finance. International finance. Derivatives (e.g., futures, options, swaps, etc). Module 5.4. Equilibrium risk pricing. Modules 2 and 3 largely followed the work of Markowitz.. Module 4 follows the work of Sharpe. . Sharpe was going after a “holy grail” of finance. He was trying to figure out how to identify over-priced and .

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