Chap2 heories of FPI - 副本.ppt

Chapter 2? FPI: Theories Learning Outcomes Knowing the Markowitz approach to portfolio selection. Knowing how to calculate the expected return and standard deviation of portfolio Knowing how to select the optimal portfolio. Knowing the CAPM model Understanding the implication the CML and the SML Knowing the Model of International CAPM 2.1 The Theory of Security Portfolio In 1952, Harry M. Markowitz published a landmark paper ——“Portfolio Selection”, that is generally viewed as the origin of the modern portfolio theory. Assume: an investor has a given sum of money A holding period for investing, t = 0 and t = 1 How to select an optimal portfolio from a set of possible portfolios 2.1.1 The analysis of single security Expected return and uncertainty (or risk) Expected value can be viewed as a measure of the potential reward associated with any portfolio standard deviation can be viewed as a measure of the risk. Single security： Expected Returns Standard Deviations (or Risk) Covariance Correlation 2.1.3 The Selection of Portfolio Considering the following two security example. Security 1, the Shipping Company, has an expected return of 5% and standard deviation of 20%. Security 2, the Gold company, has an expected return of 15% and standard deviation of 40%.  The feasible set it represents all portfolios that could be formed from a group of N securities. That is, All possible portfolios that could be formed from the N securities lie either on or within the boundary of the feasible set In general,this set will have an umbrella-type shape. The efficient set Theorem 2.1.4 Selection of the optimal portfolio Assumptions Nonsatiation: investors are assumed to prefer higher levels of terminal wealth to lower levels of terminal wealth. Risk Aversion: the investor will choose the portfolio with the smaller standard deviation indifference curves: represents an investor’s preferences for risk and return Features: All portfolios that lie on a g