FIN 501 Lecture Notes - Lecture 13: Capital Asset Pricing Model
20 Nov 2014
School
Department
Course
Professor
Document Summary
Buy + hold strategy involves buying financial instruments, forming the portfolio. Buying shares that mimics a market index (s&p/tsx composite index) + holding it. Investors do not pay transaction fees for frequent buying + selling. Do not spend time gathering info to find underpriced securities. Sharpe ratio, treynor ratio, + other risk measures are important tools. Attempt to buy undervalued + short sell overvalued to + obtain abnormal profits. There are mf managers who specialize in market timing. Also, market timers may advocate moving into a stock market or an industry at a particular time. Performance evaluation assessing how well money manager achieves balance between high returns + acceptable risks. Raw returns total % return on a port w/ no adjustment for risk/comparison to any benchmark. Reward-to-risk ratio that focuses on systematic risk only. Appropriate for evaluation of securities/port for possible inclusion into an existing portfolio. Standardizes returns, including excess returns, relative to .
