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Archive for September, 2001

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Acknowledgements

Acknowledgements I with to thank the following for their help: Ms. Janet Shead, the course leader and my personal supervisor of the dissertation, who guided me from the beginning. Strategic Financial Solutions, LLC, that provides such a powerful software – M-V Optimizer, which enables me to put the theories into practice. My parents, Yueyan & […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Chapter 3

Chapter 3 – Introduction to market portfolio This chapter provides a basic introduction to market portfolio and its efficiency, including some previous work by Tobin, Sharpe and Roll. It also explains why the concept of market portfolio is highlighted in this paper. 3.1 Market portfolio, indices and market proxy Market portfolio, market proxy and the […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Bibliography

Bibliography Book references Arnold, Glen (1998) Corporate financial management GB, Financial Times Professional Limited. BZW (1996) Equity-Gilt Study 1996 GB, Barclays De Zoete Wedd Crouhy,M. and Galai,G. and Mark, R. (2001) Risk Management McGraw-Hill Inc. Elton, Edwin J. (1991) Modern portfolio theory and investment analysis. 4th ed. Canada, John Wiley & Sons, Inc. Grinold, Richard […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Contents

Contents Abstract Acknowledgements Contents Chapter 1 – Introduction Chapter 2 – A review of Modern Portfolio Theory and the Capital Asset Pricing Model 2.1 Modern portfolio theory (MPT) 2.2 Capital Asset Pricing Model (CAPM) 2.3 Technical problems with the CAPM 2.4 Does the CAPM work in practice? Chapter 3 – Introduction to market portfolio 3.1 […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Chapter 4

Chapter 4 – A simple test of the efficiency of market portfolio This chapter includes an empirical test of the efficiency of market portfolio. Firstly, a number of shares and a market proxy will be selected. Secondly, an efficient frontier will be generated. Finally, it will be inspected whether the market proxy lies on the […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Chapter 1

Chapter 1 – Introduction The topic of this paper is as old as the hills. The capital asset pricing model (CAPM), a mathematical model used in portfolio theory, in which the expected rate of return on an asset is expressed in terms of the expected rate of return on the entire market and the beta […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Chapter 2

Chapter 2 – A review of Modern Portfolio Theory and the Capital Asset Pricing Model This chapter provides a brief review of pioneering theories of financial economics, Modern Portfolio Theory and the Capital Asset Pricing Model. By the end of this chapter, a research question will be raised. 2.1 Modern portfolio theory In the 1950s, […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Chapter 5

Chapter 5 – Looking inside and beyond the CAPM This chapter is, perhaps, the most difficult chapter in this paper to produce. On the one hand, Sharpe’s theory has been considered as a milestone in the field of financial economics for many years with lots of supporting evidences. On the other hand, Roll’s arguments questioning […]

MARKET PORTFOLIO AND CAPITAL ASSET PRICING: Chapter 6

Chapter 6 – Conclusions and recommendations First of all, this paper explained why the market portfolio is so important when discussing the CAPM. The CAPM is a mathematical model, the derivation of the model is perfect except its first stage – replacing the optimal risky portfolio by the market portfolio. If one can ignore this […]