MT Notes FIN 500
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This 2 page Study Guide was uploaded by D S on Monday October 12, 2015. The Study Guide belongs to FIN 500 at University of Illinois at Urbana-Champaign taught by Adam Clark-Joseph in Summer 2015. Since its upload, it has received 115 views. For similar materials see Introduction to Finance in Finance at University of Illinois at Urbana-Champaign.
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Date Created: 10/12/15
Study Guide MT 1 Professor ClarkJoseph University of Illinois Urbana Ghampaign today 1 Foundations Basic Stats known basic expectation condition expectation core thread probability that state w occurs CLT if you have things close enough to iid then get Gaussian convergence only if satisfy idea of having nite variance only works if done on a longer time interval like months year while in nite variance could be an issue it really i not a problem in nite persistence in practice correlations won t last forever Know the properties of Gaussian RV preserve linearity joint gaussian fully characterized 2 MVP we focused on MV but if you focused on other parameters likely be isomorphic not that we have preferences that hold this together in terms of monotonically increasing functions negative consequence occurs with bankruptcy statistical portfolio returns in isolation only care about u and a remember that when there are only positive weights there is no closed form solution 2 Fund Theorem and 1 Fund Theorem 3 CAPM and FF3 beta covariance with market risk and they found that though it didn t work well there were some gains with explanatory power with the market model one is able to decompose variance into idiosyncratic and sys tematic market risk might only be a part of the systematic note that with the additional factors there is no deep theoretical bases for why they work 4 EFM RWH Limitations of EFM Know the different forms understand the Grossman Stiglitz paradox and partially know the resolution with noise even if that solution may have been disproved EMH 5 graphs in terms of trading rules technical trading ineffective most cases remember that there exists people who can beat the market which people can bene t on this fact Delegated Money management is a thing and works when interests are aligned
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