PPT-Optimal Portfolio Choice and the CAPM

PV Viswanath A different perspective on the CAPM We saw earlier why intuitively the CAPM should describe required returns We will see in this chapter the connection between the CAPM and individual investors construction of optimal portfolios. Portfolio Risk and Return: Part II. Presenter. Venue. Date. Formulas for Portfolio Risk and Return. EXHIBIT 6-1 Portfolio Risk and Return . Portfolio of Risk-Free and Risky Assets. Optimal Risky Portfolio. CIS 606. Spring 2010. Greedy Algorithms. Similar to dynamic programming.. Used for optimization problems.. Idea. When we have a choice to make, make the one that looks best . right now. . Make . a locally . lecture 17: CAPM & Other models. March 16, 2015. Vandana. . Srivastava. Review of CAPM-- CML. efficient frontier (the straight line through . r. f. and T) is the same for every investor (CML). Two fund separation. P.V. . Viswanath. For a First Course in . INvestments. Learning Goals. 2. How does diversification help in constructing optimal risky portfolios?. How do we construct the opportunity set when there are two risky assets available?. David . Laibson. July 9, 2014. How Are Preferences Revealed?. Beshears. , Choi, . Laibson. , . Madrian. (2008). Revealed preferences (decision utility). Normative preferences (experienced utility). Why might revealed . 1. Inefficient portfolios. - have lower return and higher risk. Investment Opportunity Set:. The . n-Asset Case. 2. An . efficient portfolio . is one that has the highest expected returns for a given level of risk. . The Capital Asset Pricing Model (CAPM). The CAPM . . The market portfolio. . . . The capital market line. .  The risk premium on the market portfolio.  . Expected returns on individual securities. 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 . Chapter Outline. 11.1 . The Expected Return of a Portfolio. 11.2 . The Volatility of a Two-Stock Portfolio. 11.3 . The Volatility of a Large Portfolio. 11.4 . Risk Versus Return: Choosing an . Efficient Portfolio. Greedy algorithms, coin changing problem. Haidong. . Xue. Summer 2012, at GSU. What is a greedy algorithm?. Greedy algorithm. : “an algorithm always makes the choice that looks best at the moment”. Tool by Means of Certainty-Uncertainty Searches. A Presentation for . the Transportation Data Palooza: A Showcase . of. Innovative . Technology . Solutions at the United . States Department of Transportation Headquarters, Washington DC. P.V. . Viswanath. For a First Course in . INvestments. Learning Goals. 2. What are the assumptions of the CAPM?. What are the implications of the CAPM?. What happens if we relax the assumptions of the CAPM?. David Laibson. April 27, 2022. It is a standing topic of complaint that a man knows too little of himself. Be it so: but is it so certain that the legislator must know more? It is plain, that of individuals the legislator can know nothing: concerning those points of conduct which depend upon the particular circumstances of each individual, it is plain, therefore, that he can determine nothing to advantage. . Paul Cuff. Investment Optimization. . is a vector of price-relative returns for a list of investments. A random vector with known distribution. is a portfolio. A vector in the simplex. is the price-relative return of the portfolio.