Robert Alan Hill - Portfolio Theory Financial Analyses [eBook (PDF)]

Description

This book and Exercises evaluate Modern Portfolio Theory (Markowitz, CAPM, MM and APT) for future study. From the original purpose of MPT through to asset investment by management, we learn why anybody today with the software and a reasonable financial education can model portfolios. However, one lesson from the 2007 meltdown is that computer driven models are so complex that hardly anybody understands what is going on. Returning to first principles, we learn why investors and not their computers should always interpret their results. Moreover, MPT is a guide to action and not a substitute. Investors should understand the models that underpin the computer programmes they run.
Content

Part I: An Introduction
An Overview
Introduction
The Development of Finance
Efficient Capital Markets
The Role of Mean-Variance Efficiency
The Background to Modern Portfolio Theory
Summary and Conclusions
Selected References
Part II: The Portfolio Decision
Risk and Portfolio Analysis
Introduction
Mean-Variance Analyses: Markowitz Efficiency
The Combined Risk of Two Investments
The Correlation between Two Investments
Summary and Conclusions
Selected References
The Optimum Portfolio
Introduction
The Mathematics of Portfolio Risk
Risk Minimisation and the Two-Asset Portfolio
The Minimum Variance of a Two-Asset Portfolio
The Multi-Asset Portfolio
The Optimum Portfolio
Summary and Conclusions
Selected References
The Market Portfolio
Introduction
The Market Portfolio and Tobin’s Theorem
The CML and Quantitative Analyses
Systematic and Unsystematic Risk
Summary and Conclusions
Selected References
Part III: Models of Capital Asset Pricing
The Beta Factor
Introduction
Beta, Systemic Risk and the Characteristic Line
The Mathematical Derivation of Beta
The Security Market Line
Summary and Conclusions
Selected References
The Capital Asset Pricing Model (CAPM)
Introduction
The CAPM Assumptions
The Mathematical Derivation of the CAPM
The Relationship between the CAPM and SML
Criticism of the CAPM
Summary and Conclusions
Selected References
Capital Budgeting, Capital Structure and the CAPM
Introduction
Capital Budgeting and the CAPM
The Estimation of Project Betas
Capital Gearing and the Beta Factor
Capital Gearing and the CAPM
Modigliani-Miller and the CAPM
Summary and Conclusions
Selected References
Part IV: Modern Portfolio Theory
Arbitrage Pricing Theory and Beyond
Introduction
Portfolio Theory and the CAPM
Arbitrage Pricing Theory (APT)
Summary and Conclusions
Selected References
Appendix for Chapter 1