FIN 010 Lecture Notes - Lecture 32: Santa Barbara City College, Asset Allocation, Msci
Document Summary
Scr (no exam q) - utility & risk, esg. Covariance, depending on what you"re adding (particular high concentration portfolios) Holding same portfolio then borrow/lend to maximise utility. What is the benefit of the sim? individual covariances between different assets exposure to risk factors. Clearer for diversification (assuming all idiosyncratic returns are independent which is false so considering when the assumptions break down) All assets should lie on the security market line (sml) What happens if there is no risk-free asset? (relaxing borrowing and lending) Multi-factor models provide expected returns and help us build the covariance matrix (we did don"t need utility, arbitrage) factors feed through to risk. A selection of alternative models to the capm. Fama and french 3-factor model: link to anomalies. Don"t forget that there are lots of factors! Investment styles specific reasons why people care eg. diversification. The impact of investment style on financial markets. Incentive fees in the hedge fund industry.
