Donate
Description
Modern Portfolio Theory suggests that, through the application of statistical risk measures such as variance and correlation, portfolios that maximize return for a given level of risk can be created.
This module seeks to explain how unsystematic risk can be diversified away, assumptions of the models used, and how behavioral finance differs from theory.
Learning Objectives
• Assess the impact of correlation on the risk and return characteristics of two, three, and multi-asset portfolios.
• Identify the minimum variance frontier and the efficient frontier.
• Develop the Capital Market Line using the risk free asset and the market portfolio.
• Distinguish between systematic and unsystematic risk.
• Define beta as a measure of systematic risk and develop the Security Market Line.
• Discuss the assumptions of the Capital Asset Pricing Model and explore other asset pricing models.
• Examine behavioral finance theory as a refinement to modern portfolio theory.