对外经济贸易大学投资学课件4.ppt

Risk Aversion and Allocation Greater levels of risk aversion lead to larger proportions of the risk free rate. Lower levels of risk aversion lead to larger proportions of the portfolio of risky assets. Willingness to accept high levels of risk for high levels of returns would result in leveraged combinations. Optimal risky portfolio Two factors are important: Correlation between assets Number of assets in the portfolio Combination line of two assets under various correlation ?=-1 ?=1 Power of diversification and the correlation of assets The effects of diversification depends on the correlation of assets. If assets are highly correlated, the benefits from diversification reduced. If assets are perfectly positive correlated, diversification can not reduce risk. Adding assets Adding assets can significantly reduce portfolio variance, but can not eliminate portfolio variance Adding Assets We can write equal-weight portfolio variance as : Define: We can write portfolio variance as Asset allocation with two risky assets and one risk free asset Consider now investors can invest in two risky assets: bond (8%, 12%)and equity(13%, 20%). The correlation between bond and equity is 0.3. risk free rate is 5%. Figure 7.6 The Opportunity Set of the Debt and Equity Funds and Two Feasible CALs The Sharpe Ratio Maximize the slope of the CAL for any possible portfolio, p The objective function is the slope: Figure 7.7 The Opportunity Set of the Debt and Equity Funds with the Optimal CAL and the Optimal Risky Portfolio Figure 7.8 Determination of the Optimal Overall Portfolio Construct optimal portfolio with two risky asset and one risk-free asset wB = 1 – Ws Max SP = E(rP)- rf σP Figure 7.9 The Proportions of the Optimal Overall Portfolio Figure 7.10 The Minimum-Variance Frontier of Risky Assets Markowitz Portfolio Selection Model Security Selection First step is to determine the risk-return opportunities available All portfolios that lie on the minimum-variance frontier fro