FINC314 Lecture Notes - Lecture 17: Jack L. Treynor, Market Risk, Systematic Risk
10 Feb 2020
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Document Summary
For this evening, i assigned a couple of articles, how to use security analysis to improve portfolio. Selection and global portfolio optimization, which attempt to provide frameworks for blending neutral estimates (generated by asset pricing models) with the subjective views of analysts and/or investors. These articles touch on many notable items which we do not have time to address this evening; however, we will likely return to them quite a bit in the coming weeks. In how to use security analysis to improve portfolio selection, jack treynor and fischer black provide us with some very interesting insights. For instance, the authors make the following assertion: [i]t is useful in balancing portfolios to distinguish between two sources of risk: market, or systematic risk on the one hand, and appraisal, or insurable risk on the other. This is a bit of an aside; however, the authors make a powerful statement connected to the validity of the parsimony of their work.
