RISK AVERSION AND CAPITAL ALLOCATION TO RISKY ASSETS风险厌恶程度与风险资产的分配.ppt

6-* Figure 6.4 The Investment Opportunity Set Hafiz Hoque 6-* Lend at rf=7% and borrow at rf=9% Lending range slope = 8/22 = 0.36 Borrowing range slope = 6/22 = 0.27 CAL kinks at P Capital Allocation Line with Leverage Hafiz Hoque 6-* Figure 6.5 The Opportunity Set with Differential Borrowing and Lending Rates Hafiz Hoque 6-* Risk Tolerance and Asset Allocation The investor must choose one optimal portfolio, C, from the set of feasible choices Expected return of the complete portfolio: Variance: Hafiz Hoque 6-* Table 6.4 Utility Levels for Various Positions in Risky Assets (y) for an Investor with Risk Aversion A = 4 Hafiz Hoque 6-* Figure 6.6 Utility as a Function of Allocation to the Risky Asset, y Hafiz Hoque 6-* Table 6.5 Spreadsheet Calculations of Indifference Curves Hafiz Hoque 6-* Figure 6.7 Indifference Curves for U = .05 and U = .09 with A = 2 and A = 4 Hafiz Hoque 6-* Figure 6.8 Finding the Optimal Complete Portfolio Using Indifference Curves Hafiz Hoque 6-* Table 6.6 Expected Returns on Four Indifference Curves and the CAL Hafiz Hoque 6-* Passive Strategies: The Capital Market Line The passive strategy avoids any direct or indirect security analysis Supply and demand forces may make such a strategy a reasonable choice for many investors Hafiz Hoque 6-* Passive Strategies: The Capital Market Line A natural candidate for a passively held risky asset would be a well-diversified portfolio of common stocks such as the SP 500. The capital market line (CML) is the capital allocation line formed from 1-month T-bills and a broad index of common stocks (e.g. the SP 500). Hafiz Hoque 6-* Passive Strategies: The Capital Market Line The CML is given by a strategy that involves investment in two passive portfolios: virtually risk-free short-term T-bills (or a money market fund) a fund of common stocks that mimics a broad market index. Hafiz Hoque 6-* Passive Strategies: The Capital Market Line From 1926 to 2009, the passive risky portfolio offered