Theoretical and Applied Economics Volume XVIII (2011)‚ No. 2(555)‚ pp. 75-88 Portfolio Risk Analysis using ARCH and GARCH Models in the Context of the Global Financial Crisis* Oana Mădălina PREDESCU Bucharest Academy of Economic Studies predescu_oana85@yahoo.com Stelian STANCU Bucharest Academy of Economic Studies stelian_stancu@yahoo.com Abstract. This paper examines both the benefits of choosing an internationally diversified portfolio and the evolution of the portfolio risk in the context
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the only unknown: d. The SML is plotted below. Data on the risk-free security (bRF = 0‚ kRF = 8.6%) and Security X (bX = 0.56‚ = 10.6%) provide the two points through which the SML can be drawn. kM pro¬vides a third point. e. In theory‚ you would be indifferent between the two stocks. Since they have the same beta‚ their relevant risks are identical‚ and in equilibrium they should provide the same returns. The two stocks would be represented by a single point on the SML. Stock
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assets‚ there exists a portfolio on the lower part of the portfolio frontier‚ rzp ‚ which is uncorrelated with it. Its β defined as Cov(rp ‚ rzp )/V ar(rp ) is therefore 0. That’s why the model is called the zero-beta CAPM. Let γ = E(rzp )‚ then the theory says that E(Rt − γ) = βE(Rpt − γ) We can estimate the model asset by asset using nonlinear least square (NLS). The formula must be in the form r = γ(1 − β) + βRm . Let g and b be γ and β‚ we can compare the estimates of γ as follows: > > + + + + +
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Mock Exam Questions Set 1 1. Identify and briefly describe the three forms of the efficient market hypothesis. The three forms of the efficient market hypothesis (EMH) are: The weak form. The weak form asserts that current stock prices fully reflect all available security market data The semi strong form. The semi strong form of the EMH asserts that public security prices fully reflect all information (including security market data). The strong form. The strong form of the EMH asserts that
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Portfolio optimization - a practical approach Andrzej Palczewski Institute of Applied Mathematics Warsaw University June 29‚ 2008 1 Introduction The construction of the best combination of investment instruments (investment portfolio) is a principal goal of investment policy. This is an optimization problem: select the best portfolio from all admissible portfolios. To approach this problem we have to choose the selection criterion first. The seminal paper of Markowitz [8] opened a new era
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FINC5001 GROUP ASSIGNMENT FINAL REPORT Executive Summary In this group assignment‚ by historical data analysis‚ we evaluate the two approaches Mean-Variance and CAPM specific in the stock risk estimation for minimize risk investor. The two approaches are consistent in the stock risk‚ but differ in the risk of portfolios we construct. Through our observation and the approach assumption analysis which refer to academic literatures‚ the former one represents more reasonable result ultimately as
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Atomic energy is energy produced by atoms. The term originated in 1903 when Ernest Rutherford began to speak of the possibility ofatomic energy.[1] The term was popularized by H. G. Wells in the phrase‚ "splitting the atom"‚ devised at a time prior to the discovery of the nucleus. Atomic energy also may refer to: * Nuclear binding energy‚ the energy required to split a nucleus of an atom * Nuclear potential energy‚ the potential energy of the particles inside an atomic nucleus * Nuclear
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Sample (Easy/Medium level of difficulty) Midterm Exam‚ FINE441- Fall 2012 – Answer KEYs are attached in the end! THIS IS THE EXAMPLE OF MULTIPLE CHOICE QUESTIONS. THE NUMERICAL PROBLEMS WILL BE SIMILAR (NOT IDENTICAL) TO THE END OF CHAPTER PROBLEMS POSTED ON My Courses and Assignments 1. You purchased a share of stock for $20. One year later you received $1 as dividend and sold the share for $29. What was your holding period return? A) 45% B) 50% C) 5% D) 40% E) none of the above Use the following
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favourable? Assume that the spot rate in one month time is US$1.68. Question 2 What types of risk are present in a portfolio? Which type of risk remains after the portfolio has been diversified? Question 3 How‚ according to portfolio theory is the risk of the portfolio measured exactly? Question 4 Discuss about the integration of market worldwide and its impact on international portfolio diversification. Question 5 Giri Lyer is a European analyst
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Cheryl Mew FINS2624 – Portfolio Management Semester 1‚ 2011 LECTURE 1 – BOND PRICING WHAT IS A BOND? A bond is a claim on some fixed future cash flows. A commonwealth government bond (CGB) is a bond which pays semi-annual coupons‚ in which the maturity date/ coupon payment date is on the 15th of every month. A zero coupon bond is a bond with no coupons. The important information of a bond: 1. 2. 3. 4. 5. 6. • 1. 2. Transaction date: T Settlement date:T+2 Coupon payment dates Maturity date
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