清华大学经管学院--金融工程4(ppt27)全英文.pptVIP

* CHAPTER FOUR: Index Models and APT — Problems of Markowitz Portfolio Selection There are some problems for Markowitz portfolio selection: Huge number of estimates of covariance between all pairs of available securities Vast computing capacity required to resolve an optimization quadric programming for large portfolio CAPM is a single factor model 5.7% 1.1% 14.3% 6.4 4.4 19.2 7.9 4.4 23.4 7.0 4.6 15.6 5.1 6.1 9.2 2.9 3.1 13.0 Single-Index Models 1 2 3 4 5 6 ? Year ? Growth of GDP（ ） ? Inflation （ ） Difference of the realized return of Stock i and the risk-free rate（ ） A Mini Case Regression Model Macro or systematic factor Firm’s or unsystematic factor Exogenous Covariance Systematic risk Unsystematic risk — Market Model CAPM is a special case of Single-Index Models taking as the factor. CAPM: The market is at equilibrium Can you beat the market? If you can find a portfolio manager with a positive you can beat the market! CML 0 The hyperbola through A and B cannot be tangent to the efficient frontier The point A cannot be located on the efficient frontier Multi-Index Models The Mini Case Growth of GDP Inflation Firm’s or unsystematic factor Covariance — More About Arbitrage A riskless arbitrage opportunity exists if and only if ether: Two portfolios can be created that have identical payoffs in every state but have different costs; or Two portfolios can be created with equal costs, but where the first portfolio has at least the same payoff as the second in all states, but has a higher payoff in at least one state; or A portfolio can be created with zero cost, but which has a non-negative payoff in all states and a positive payoff in at least one state. A Mini Case A B C D -20 20 40 60 0 70 30 -20 90 -20 -10 70 15 23 15 36 25% 25% 25% 25% High real rates Low real rates Probability of the states High inflatio