第十章收益和风险CAPM.ppt

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1、PPT PPT 文档演模板 文档演模板 Office Office PPT PPT11 六月 2023第十章收益和风险CAPMPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.1 Individual Securities The characteristics of individual securities that are of interest are the:Expected Return Variance and Standard Deviation Covariance and CorrelationPPT PPT 文档演模板 文档演模板 O

2、ffice Office PPT PPT10.2 Expected Return,Variance,and Covariance Consider the following two risky asset world.There is a 1/3 chance of each state of the economy and the only assets are a stock fund and a bond fund.PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovarianceP

3、PT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovariancePPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovariancePPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovariancePPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2

4、Expected Return,Variance,and CovariancePPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovariancePPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovariancePPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.2 Expected Return,Variance,and CovariancePPT PP

5、T 文档演模板 文档演模板 Office Office PPT PPT10.3 The Return and Risk for PortfoliosNote that stocks have a higher expected return than bonds and higher risk.Let us turn now to the risk-return tradeoff of a portfolio that is 50%invested in bonds and 50%invested in stocks.PPT PPT 文档演模板 文档演模板 Office Office PPT

6、PPT10.3 The Return and Risk for PortfoliosThe rate of return on the portfolio is a weighted average of the returns on the stocks and bonds in the portfolio:PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.3 The Return and Risk for PortfoliosThe rate of return on the portfolio is a weighted average of the

7、 returns on the stocks and bonds in the portfolio:PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.3 The Return and Risk for PortfoliosThe rate of return on the portfolio is a weighted average of the returns on the stocks and bonds in the portfolio:PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.3 The Return

8、 and Risk for PortfoliosThe expected rate of return on the portfolio is a weighted average of the expected returns on the securities in the portfolio.PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.3 The Return and Risk for PortfoliosThe variance of the rate of return on the two risky assets portfolio i

9、s where BS is the correlation coefficient between the returns on the stock and bond funds.PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.3 The Return and Risk for PortfoliosObserve the decrease in risk that diversification offers.An equally weighted portfolio(50%in stocks and 50%in bonds)has less risk

10、than stocks or bonds held in isolation.PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.4 The Efficient Set for Two AssetsWe can consider other portfolio weights besides 50%in stocks and 50%in bonds 100%bonds100%stocksPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.4 The Efficient Set for Two AssetsWe can co

11、nsider other portfolio weights besides 50%in stocks and 50%in bonds 100%bonds100%stocksPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.4 The Efficient Set for Two Assets100%stocks100%bondsNote that some portfolios are“better”than others.They have higher returns for the same level of risk or less.These c

12、ompromise the efficient frontier.PPT PPT 文档演模板 文档演模板 Office Office PPT PPTTwo-Security Portfolios with Various Correlations 100%bondsreturn 100%stocks=0.2=1.0=-1.0PPT PPT 文档演模板 文档演模板 Office Office PPT PPTPortfolio Risk/Return Two Securities:Correlation Effects Relationship depends on correlation coe

13、fficient-1.0+1.0 The smaller the correlation,the greater the risk reduction potential If=+1.0,no risk reduction is possiblePPT PPT 文档演模板 文档演模板 Office Office PPT PPTPortfolio Risk as a Function of the Number of Stocks in the PortfolioNondiversifiable risk;Systematic Risk;Market RiskDiversifiable Risk

14、;Nonsystematic Risk;Firm Specific Risk;Unique Risk n In a large portfolio the variance terms are effectively diversified away,but the covariance terms are not.Thus diversification can eliminate some,but not all of the risk of individual securities.Portfolio riskPPT PPT 文档演模板 文档演模板 Office Office PPT

15、PPT10.5 The Efficient Set for Many SecuritiesConsider a world with many risky assets;we can still identify the opportunity set of risk-return combinations of various portfolios.return PIndividual AssetsPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.5 The Efficient Set for Many SecuritiesGiven the oppor

16、tunity set we can identify the minimum variance portfolio.return Pminimum variance portfolioIndividual AssetsPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.5 The Efficient Set for Many SecuritiesThe section of the opportunity set above the minimum variance portfolio is the efficient frontier.return Pmi

17、nimum variance portfolioefficient frontierIndividual AssetsPPT PPT 文档演模板 文档演模板 Office Office PPT PPTOptimal Risky Portfolio with a Risk-Free Asset In addition to stocks and bonds,consider a world that also has risk-free securities like T-bills100%bonds100%stocks rfreturn PPT PPT 文档演模板 文档演模板 Office O

18、ffice PPT PPT10.7 Riskless Borrowing and LendingNow investors can allocate their money across the T-bills and a balanced mutual fund100%bonds100%stocks rfreturn Balanced fundCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.7 Riskless Borrowing and LendingWith a risk-free asset available and the effici

19、ent frontier identified,we choose the capital allocation line with the steepest slope return Pefficient frontierrfCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.8 Market EquilibriumWith the capital allocation line identified,all investors choose a point along the linesome combination of the risk-fre

20、e asset and the market portfolio M.In a world with homogeneous expectations,M is the same for all investors.return Pefficient frontierrfMCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPTThe Separation Property The Separation Property states that the market portfolio,M,is the same for all investorsthey ca

21、n separate their risk aversion from their choice of the market portfolio.return Pefficient frontierrfMCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPTThe Separation Property Investor risk aversion is revealed in their choice of where to stay along the capital allocation linenot in their choice of the li

22、ne.return Pefficient frontierrfMCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPTMarket EquilibriumJust where the investor chooses along the Capital Asset Line depends on his risk tolerance.The big point though is that all investors have the same CML.100%bonds100%stocks rfreturn Balanced fundCMLPPT PPT 文

23、档演模板 文档演模板 Office Office PPT PPTMarket EquilibriumAll investors have the same CML because they all have the same optimal risky portfolio given the risk-free rate.100%bonds100%stocks rfreturn Optimal Risky PorfolioCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPTThe Separation PropertyThe separation prope

24、rty implies that portfolio choice can be separated into two tasks:(1)determine the optimal risky portfolio,and(2)selecting a point on the CML.100%bonds100%stocks rfreturn Optimal Risky PorfolioCMLPPT PPT 文档演模板 文档演模板 Office Office PPT PPTOptimal Risky Portfolio with a Risk-Free Asset By the way,the o

25、ptimal risky portfolio depends on the risk-free rate as well as the risky assets.100%bonds100%stocksreturn First Optimal Risky PortfolioSecond Optimal Risky PortfolioCML0CML1PPT PPT 文档演模板 文档演模板 Office Office PPT PPTDefinition of Risk When Investors Hold the Market Portfolio Researchers have shown th

26、at the best measure of the risk of a security in a large portfolio is the beta(b)of the security.Beta measures the responsiveness of a security to movements in the market portfolio.PPT PPT 文档演模板 文档演模板 Office Office PPT PPTEstimating b with regression Security Returns Security Returns Return on Retur

27、n on market%market%Ri=a i+biRm+eiSlope=bi Characteristic Line Characteristic LinePPT PPT 文档演模板 文档演模板 Office Office PPT PPTEstimates of b for Selected StocksStock BetaBank of America 1.55Borland International 2.35Travelers,Inc.1.65Du Pont 1.00Kimberly-Clark Corp.0.90Microsoft 1.05Green Mountain Power

28、 0.55Homestake Mining 0.20Oracle,Inc.0.49PPT PPT 文档演模板 文档演模板 Office Office PPT PPTThe Formula for BetaClearly,your estimate of beta will depend upon your choice of a proxy for the market portfolio.PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.9 Relationship between Risk and Expected Return(CAPM)Expect

29、ed Return on the Market:Expected return on an individual security:Market Risk Premium This applies to individual securities held within well-diversified portfolios.PPT PPT 文档演模板 文档演模板 Office Office PPT PPTExpected Return on an Individual Security This formula is called the Capital Asset Pricing Mode

30、l(CAPM)Assume bi=0,then the expected return is RF.Assume bi=1,thenExpected return on a security=Risk-free rate+Beta of the securityMarket risk premiumPPT PPT 文档演模板 文档演模板 Office Office PPT PPTRelationship Between Risk&Expected ReturnExpected return b1.0PPT PPT 文档演模板 文档演模板 Office Office PPT PPTRelatio

31、nship Between Risk&Expected ReturnExpected return b1.5PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.10 Summary and Conclusions This chapter sets forth the principles of modern portfolio theory.The expected return and variance on a portfolio of two securities A and B are given by By varying wA,one can

32、trace out the efficient set of portfolios.We graphed the efficient set for the two-asset case as a curve,pointing out that the degree of curvature reflects the diversification effect:the lower the correlation between the two securities,the greater the diversification.The same general shape holds in

33、a world of many assets.PPT PPT 文档演模板 文档演模板 Office Office PPT PPT10.10 Summary and Conclusions The efficient set of risky assets can be combined with riskless borrowing and lending.In this case,a rational investor will always choose to hold the portfolio of risky securities represented by the market portfolio.Then with borrowing or lending,the investor selects a point along the CML.return Pefficient frontierrfMCML