Portfolio theory

Sort By:
Page 3 of 50 - About 500 essays
  • Better Essays

    securities trading in the stock market has significantly increased. Since then, many studies have analysed the performance of managed portfolios and evaluated the way investors explain returns on stocks (Jagannathan and Wang, 1996). The most common theory used by managers and practitioners is known as the Capital Asset Pricing Model (CAPM). However, this theory has been criticised by some empirical models. This paper will critically analyse the relative merits of the CAPM and will discuss the Fama

    • 2528 Words
    • 11 Pages
    Better Essays
  • Better Essays

    A. Portfolio; feasible set; efficient portfolio; efficient frontier A portfolio is a group of financial assets, differing in possible risk and return, and is managed by an investor or a group of professionals. Generally, a higher return expected by a portfolio owner generates a higher risk as well, and vice versa. The mix of financial assets can range, and these can include stocks, bonds, mutual funds, and cash equivalents. Stocks are considered the most volatile of these options and thus generate

    • 1549 Words
    • 7 Pages
    Better Essays
  • Decent Essays

    According to investment glossaries, a risk is a future probability of loss inherent in any investment (Investopedia Financial Dictionary, 2016). To this day, the positive correlation between risk and return continues to be the cornerstone of financial theory. The basic capital asset pricing model (CAPM) formula is built on this relationship. CAPM provides the required return based on the level of systematic risk of an investment. The risk associated with an investment is taken to lie along a scale. On

    • 1089 Words
    • 5 Pages
    Decent Essays
  • Good Essays

    development of a quantitative method that takes the diversification benefits of portfolio allocation into account. Modern portfolio theory is the result of his work on portfolio optimization. Ideally, in a mean-variance optimization model, the complete investment opportunity set, i.e. all assets, should be considered simultaneously. However, in practice, most investors distinguish between different asset classes within their portfolio-allocation frameworks. In our analysis, we view the process of asset allocation

    • 2233 Words
    • 9 Pages
    Good Essays
  • Better Essays

    Pros And Cons Of Capm

    • 1045 Words
    • 5 Pages

    CAPM to this industry. 2. Concept of Capital asset pricing model During 1952, Markowitz came out with a theory based on diversified investment is able to construct the risk-averse investors. He diversified investment portfolio theory and efficiency of the priory rigorous mathematical tools as a means to demonstrate risk-averse investors in a number of risky assets in construct the optimal portfolio methods. But due

    • 1045 Words
    • 5 Pages
    Better Essays
  • Good Essays

    Paper Outline The objective of this paper is to understand the process of calculation of weighted average cost of capital(WACC), which is the core multiple used for discounting future cash flows of an entity and calculating the intrinsic value of the company’s stock. However, in this paper, we will solely focus on the calculation of WACC and its component, the costs of equity and cost of debt. In order to work with a pragmatic approach, we have selected Henkel AG, a German conglomerate active in

    • 2189 Words
    • 9 Pages
    Good Essays
  • Better Essays

    model strength to out-of-sample predictive accuracy is to be determined, by dividing each models portfolio into four segments, High Adjusted R2 , Medium Adjusted R2, Low Adjusted R2, and a random mixture as the control. The research uses the S&P500 as the “market” portfolio. Using ten years of monthly data from the period between 1st January 2004 to the 31st November 2014, as in sample data. The portfolio returns were then monitored for an

    • 1844 Words
    • 8 Pages
    Better Essays
  • Good Essays

    There are some theories to help investors: portfolio theory, capital asset pricing model (CAPM), option pricing model and so on. This essay will explain portfolio theory firstly. Secondly, this essay will explain CAPM and discuss the importance of the assumptions of CAPM. Thirdly, this essay will explain arbitrage pricing theory (APT) and factors model. Finally, this essay will compare CAPM with APT and factors model. Harry Markowitz put forward portfolio theory in 1952; portfolio theory is that using

    • 1554 Words
    • 7 Pages
    Good Essays
  • Better Essays

    “hype” surrounding the security. These were short-term investments and were based on the premise “that a buyer could pay any price for a stock as long as they expected future buyers to assign a higher value”. This theory is also known as the “greater fool” theory. Now that the two theories have been explained, let’s look at some historical examples from Malkiel that really paint the picture in chapter 2. The first speculative craze noted was over tulips in the seventeenth century in Holland. The tulips

    • 3853 Words
    • 16 Pages
    Better Essays
  • Good Essays

    tendency and a method for people dealing with their income, while portfolio is an important investment vehicle. In the same time, financial services industry has played a critical part in making investment portfolio available to ordinary people. In this essay, the meaning and functions of portfolio will be analyzed and it will argue the advantages of the financial services industry outweigh the disadvantages. Firstly, portfolio theory has become an essential strategy in the modern investment market

    • 1396 Words
    • 6 Pages
    Good Essays