transaction cost. Accepting the ideas of efficient market hypothesis and based on the collective effort of Sharpe‚ Treynor‚ Lintner‚ and Mossin (see Perold‚ 2004)‚ Capital Asset Pricing Model (CAPM) was developed in 1960s as a modified form of Sharpe Ratio in evaluating financial assets returns and prices versus risks in the form of: E (ri) = rf + ¦Âi [ E(rm) ¨Crf ] . From the CAPM model‚ Jensen (1968) derive his risk-adjusted measure of portfolio performance (now known as "Jensen ’s Alpha")
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1. What is Zeus’s investment philosophy? Zeus’s investment philosophy is based on the belief that superior investment results can be achieved over many years by following a conservative‚ risk-averse‚ quality-oriented approach to investment management. In other words‚ the firm uses active approach to investment management‚ which means the primary job of portfolio managers is to deliver the best possible performance relative to the benchmark’s performance working within the risk and other constraints
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regression of CAPM‚ 3-factor‚ 4-factor and 5- factor models are: Variable Names Description MF1_RF Returns of the mutual fund 1 MF2_RF Returns of the mutual fund 2 RM Market Index RF Risk free rate RM_RF CRSP index 1-month T-Bill SMB Small (market capitalization) minus big factor HML High (book-to-market ratio) minus low factor MOM Momentum factor TRADEDLIQ Traded liquidity factor Car hart‚ Mark M. employed two models of performance measurement: CAPM and 4-factor
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Short-Answer Questions - Answer All Questions Q1 a) According to the Capital Market Theory and Capital Assets Pricing Model‚ what are the characteristics of the Market Portfolio? (3marks) b) What does an overvalued asset mean in the context of CAPM‚ and does such an asset lie above or below the Security Market Line? (3 marks) c) In a two-asset portfolio‚ what determines the degree of risk-reduction effect? (2 marks) d) Sketch and properly label the indifference curve of a highly
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Case study of ZEUS ASSET MANAGEMENT‚ INC. Introduction This case study aim to analysis the performance measurement of the Zeus‚ and find out the appropriate way to measures the performance of Zeus’s investment and point why the way is suitable for the Zeus. Then estimate some ratios of Zeus and their conpetitor to compare the performance of each investment. Backgrounds of Zeus Zeus asset Management was an asset Management Company founded in 1968 in Atlanta. The firm becomes to an independent
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Treynor-Black Model Using the Treynor-Black Model in Active Portfolio Management Aruna Eluri‚ David S. Price‚ Kelly Walker Course Project for IE590 Financial Engineering Purdue University‚ West Lafayette‚ IN 47907-2023 August 1‚ 2011 Abstract In 1973‚ Jack Treynor and Fischer Black published a mathematical model for security selection called the Treynor-Black model. The model finds the optimum portfolio to hold in the situation where an investor considers that most securities are priced effectively
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1961. Eugene Fama described markets as efficient in 1965. Harry Markowitz prescribed mean-variance portfolio theory in its early form in 1952 and in its full form in 1959. William Sharpe adopted mean-variance portfolio theory as a description of investor behavior and in 1964 introduced the capital asset pricing theory (CAPM). According to this theory‚ differences in expected returns are determined only by differences in risk‚ and beta is the measure of risk. Behavioural finance contradiction to these
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Report‚ 2009). This report uses mean-variance method and CAPM approach‚ to form the portfolio combined two stocks TLS and ANN. By justifying five years (2005-2010) monthly data in using mean variance method to calculate the expected return (ANN 0.007488‚ TLS -0.004441)‚ standard deviation (ANN 0.076531‚ TLS 0.053729)‚ as well as beta (ANN 0.64‚ TLS 0.31). And then one year (2009) daily data to determine portfolio expected return in using CAPM method. With MV method‚ based on the justification and limitation
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`“Critically assess how finance managers can‚ in practice‚ contribute to the maximisation of shareholder wealth”. This essay will examine how finance managers in day to day practice can participate in the aid of increasing maximum shareholder wealth. The focus point of this is based on the financial managers themselves‚ how they can manipulate and change things in order to increase shareholder wealth using certain tools and methods of analysis. Shareholders are deemed as the owners of the business
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............................................................................. 2 Chapter 1 Introduction..................................................................................................... 2 Chapter 2 Consensus Expected Returns: The CAPM ..................................................... 3 Chapter 3 Risk ................................................................................................................. 3 Chapter 4 Exceptional Return‚ Benchmarks‚ and Value Added...
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