Finance Theory I – Case 2 Tracy Hsiao‚ Baltic Ocean Evaluation of AQR Momentum Funds Date: Dec. 5th‚ 201r Past performance of momentum strategies – CAPM & Fama‐French MOM 4 factors model In Table 1‚ we could evaluate the past performance of momentum strategy‚ Short Decile 1 and Long Decile 10‚ a.k.a. L/S (10‐1). Capital Asset Pricing Model (CAPM) E(R) = α + Rf + β (RM - Rf) + By applying to CAPM‚ we got a β that is almost zero (-0.08) showing the strategy could effectively diversify and reduce
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Meaning of Risk and Uncertainty Risk: In Common Parlance‚ risk means a low probability of an expected outcome. From business decision-making point of view‚ risk refers to a situation in which a business decision is expected to yield more than one outcome and the probability of each outcome is known to the decision makers or can be reliably estimated. For example‚ if a company doubles its advertisement expenditure‚ there are three probable outcomes: i) Its sales may more than double ii)
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Portfolio management Portfolio management is the professional management of various securities (shares‚ bonds and other securities) and assets (e.g.‚ real estate) in order to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies‚ pension funds‚ corporations‚ charities‚ educational establishments etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or exchange-traded
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Risk and Return: Portfolio Theory and Asset Pricing Models Portfolio Theory Capital Asset Pricing Model (CAPM) Efficient frontier Capital Market Line (CML) Security Market Line (SML) Beta calculation Arbitrage pricing theory Fama-French 3-factor model Portfolio Theory • Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent. Asset B has an expected return of 16 percent and a standard deviation of 40 percent. If the correlation between A and B is 0.6
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portfolio. The basic objective of the course is to acquaint the students in respect to the investment decisions related to financial assets‚ the risks and the returns involved‚ to make aware about the functioning of securities market alongside the theories and concepts involved in portfolio management. Essential Text: Reilly‚ Frank K. and Keith C. Brown‚ Investment Analysis and Portfolio Management‚ Eighth Edition‚ 2005‚ South-Western‚ U.S.A. (RB) Supplementary Material Bodie‚ Zvi‚ Alex Kane
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Review CAPM developed by Sharpe (1964)‚ Lintner (1965) and Mossini (1965) builds upon the “Portfolio Theory” introduced by Harry Markowitz (1959). CAPM presents the basis for determining the required rate of return on all risky assets. CAPM theory is built upon the assumptions of the Portfolio Theory plus some additional ones. The major factor that allowed Portfolio Theory to develop into CAPM Theory is the concept of the risk free asset. The inclusion of the risk free asset resulted in the derivation
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The Atomic Cafe The Atomic Cafe is a 1982 documentary film compiled of clips from government propaganda‚ training films‚ news stories‚ advertisements and other media from the 1940’s through the 1950’s. Many films were prepared by the U.S. government either for the military or for its citizens to view. The form of Atomic Cafe was unique for documentaries. It was produced entirely of different film sources edited together‚ without narration. The film made its points solely through the selection
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The Atomic Café After viewing The Atomic Café‚ I noticed many similarities to the film Radio Bikini that I viewed recently. Both films start off by showing the celebrations after Japan’s surrender and The Atomic Café had a song playing that stated the bomb on Hiroshima was the answer to a fighting boy’s prayers. The film‚ along with Radio Bikini‚ shows a clip of Vice Admiral W.H.R. Blandy who was the commander of the Bikini test‚ assuring to the American people that the test was safe. He stated
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The Atomic Mass of Metallo You may have noticed on the periodic table that the atomic mass of an element is usually not a whole number. That happens because of isotopes. An atom that is missing a neutron or has an extra neutron is called an isotope. They are still the same element; however‚ they are just a little different from every other atom of the same element. Most of the carbon atoms in the universe are Carbon-12‚ with 6 neutrons. A small percentage of carbon atoms are Carbon-13‚ with 7 neutrons
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Executive Summary Telstra Limited (TLS) is Australia’s leading telecommunications and information services company‚ with one of the best known brands in the country. It offers a full range of services and competes in all telecommunications markets throughout Australia. (Telstra Financial Report‚ 2009) Ansell Limited (ANN) is a global leader in barrier protective solutions. It designs‚ develops and manufactures a wide range of hand and arm protection solutions‚ clothing and condoms (Ansell Financial
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