Historical development of portfolio theory

Leković, Мiljan

doi:10.5937/tehnika2102220l

Cited by 5 publications

(2 citation statements)

References 14 publications

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“…Rast cena će se nastaviti sve dok očekivani prinos ne dostigne nivo koji odgovara preuzetom sistemskom riziku. Krajnji rezultat obe opisane situacije jeste ravnoteža na tržištu kapitala [25]. Prema [11], polazna jednačina za izvođenje CAPM modela izraženog preko cena jeste jednačina standardnog CAPM modela izražena preko kovarijanse (jednačina ( 9)).…”

Section: Slika 1 -Moguć Set Portfolija Konstruisanih Kombinacijom Akt...unclassified

Evidence for and against the validity of the capital asset Pricing model

M.¹

2022

Tehnika

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The Capital Asset Pricing Model (CAPM) makes a significant contribution to understanding the relationship between return and risk and valuing assets in the capital market. The basic idea of the CAPM model is that assets exposed to the same level of systemic risk should have the same level of expected return. Therefore, the CAPM model values the asset, ie. determines its price at a level that ensures that the expected return corresponds to the assumed systemic risk. In addition to the positive aspects of the CAPM model, the paper pays equal attention to understanding the problems and taking into account the shortcomings and limitations that this model faces. The aim of the research is to find an answer to the question of whether the CAPM model is the correct model for valuing financial assets. In this regard, the paper presents numerous pieces of evidence for and against the validity of the CAPM model, concluding that, even after more than half a century of research, no consensus has been reached in the financial literature on the presence or absence of its validity.

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Section: Slika 1 -Moguć Set Portfolija Konstruisanih Kombinacijom Akt...unclassified

Evidence for and against the validity of the capital asset Pricing model

M.¹

2022

Tehnika

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“…A great many papers have been written on Modern Portfolio Theory since. Two surveys that cover many of the important developments are found in [5,6].…”

Section: Previous Contributionsmentioning

confidence: 99%

Mutual Fund Allocations that Maximize Safe Portfolio Returns

Prendergast¹

2022

Preprint

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This paper describes an empirical analysis of optimized portfolios and safe return rates across multiple investment time horizons using Telser’s Safety-First method. The analysis uses thirty years of historical monthly data for 81 different Fidelity® mutual funds and a blended money market fund rate. The Fidelity® funds represent a wide variety of investment factors, strategies and asset types, including bonds, stocks, commodities and convertible securities. A large synthetic return dataset was generated from this data by a Monte-Carlo random walk using cointegrated bootstrapping of investment returns and yields. Portfolio optimization was then performed on this synthetic dataset for safety factors varying from 60% to 99% and time horizons varying from one month to ten years. Results from portfolio analyses include the following: 1) there are no risk-free investments available to Fidelity® mutual fund investors, as even money market funds have risk due to yield fluctuations, 2) optimized portfolios are sensitive to both investment time horizons and safety factor confidence levels, 3) conservative, short-term investors are better off leaving their money in a money market fund than investing in securities, 4) optimized portfolios for longer term, more aggressive investors consist of a blend of both value and growth equities, and 5) the funds most often represented in optimized portfolios are those that have the best risk/reward ratios, although this rule is not universal. Two practical applications of this optimization approach are also presented.

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