have in mind is the more fundamental one between what I will call the business school approach to finance and the economics department approach. Let me say immediately, however, that my distinction is purely “notional,” not physical — a dis-tinction over what the field is really all about, not where the offices of the faculty happen to be located. In the United States, the vast majority of aca-demics in finance teach in business schools, not eco-nomics departments, and always have. At the same time
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are the two components of risk? * Unsystematic risk (diversifiable risk) * Business risk * Financial risk * Can be eliminated through diversification * Systematic risk (non diversifiable risk) * Market risk * Interest rate risk * Reinvestment risk * Purchasing power risk * How are they measured? * (portfolio risk) Total risk= diversifiable + non-diversifiable * Standard deviation measures total
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asset held in isolation, risk is measured with the probability distribution and its associated statistics: the mean, the standard deviation, and the coefficient of variation. The concept of diversification is examined by measuring the risk of a portfolio of assets that are perfectly positively correlated, perfectly negatively correlated, and those that are uncorrelated. Next, the chapter looks at international diversification and its effect on risk. The Capital Asset Pricing Model (CAPM) is then
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manufacturer for over 30 years and had taken full advantage of the company’s voluntary retirement savings plan. However, instead of buying a diversified set of investment he had invested his money into a few high growth companies. Over time his investment portfolio had growth to about $900,000 being primarily comprised of the stocks of 3 companies. He was very fortunate that his selections turned out to be good ones and after numerous stock-splits the prices of the three companies had appreciated significantly
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Diversification A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Diversification strives to smooth out/reduces unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance
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CHAPTER 2 RISK AND RETURN: PART I (Difficulty: E = Easy, M = Medium, and T = Tough) True-False Easy: (2.2) Payoff matrix Answer: a Diff: E [i]. If we develop a weighted average of the possible return outcomes, multiplying each outcome or "state" by its respective probability of occurrence for a particular stock, we can construct a payoff matrix of expected returns. a. True b. False (2.2) Standard deviation Answer: a Diff: E [ii]. The tighter the probability
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gives: . The problem with this is determining marginal utility. In many cases, the SDF is a linear function of a factor (CAPM): That factor f captures when returns in situation A may be more pleasant than the same returns in situation B. Portfolio theory (Risk & return: theory – empirics) Uses assumption A1 and A2, and more: Investors: A3. Agents maximize utility, and do so for 1 period. (Rationality: agents are capable to find the very best solution for their problem, and are willing
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Course Literature, articles, ME2017 V14 1. Blichfeldt & Eskerod (2008): Project portfolio management – There´s more to it than what management enacts. International Journal of Project Management, Vol 26, Issue 4, May 2008, pp. 357-365 2. Pellegrinelli S. (2011): What’s in a name: Project or programme? International Journal of Project Management, Vol 29, pp. 232–240 3. Pellegrinelli S. & Garagna L. (2009): Towards a conceptualisation of PMOs as agents and subjects of change and renewal. International
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New York University, Yale University, Emory University, University of Chicago Booth, Kellogg School of Management, Harvard University, NBER Behavioral Economics 2010, the 2010 Annual Management Conference at University of Chicago Booth School of Business, the 2011 Bank of America/Merrill Lynch Quant Conference and the 2011 Nomura Global Quantitative Investment Strategies
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those are, * Mitigation of Risk To construct efficient and well diversified portfolio three persons are joined together through that we can manage and bear risk among us. On the other hand single marital status, young age and relax feeling of family responsibilities rub up the high tolerance level for risk. * Maintain an appropriate degree of portfolio diversification We will maintain efficient diversification portfolio at all time and it should be matches with the reasonable sector allocation
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