Lecture notes in Finance 1

The main contents of this chapter include all of the following: The basics of return calculations, the basics of portfolio choice, mean-variance frontier, index models, portfolio choice, CAPM, foreign exchange, performance analysis, risk measures, utility-based portfolio choice, CAPM extensions and multi-factor models, investment for the long run, efficient markets, dynamic portfolio choice. | Lecture Notes in Finance 1 (MiQE/F, MSc course at UNISG) Paul Söderlind1 7 January 2017 1 University of St. Gallen. Address: s/bf-HSG, Rosenbergstrasse 52, CH-9000 St. Gallen, Switzerland. E-mail: . Document name: . Contents 1 2 3 4 The Basics of Return Calculations Portfolio Return: Definition, Mean and Variance Forward Contracts . . . . . . . . . . . . . . . . Asset Value as Discounted Cash Flow . . . . . Markets, Instruments and Some Key Terms . . Asset Classes . . . . . . . . . . . . . . . . . . Appendix: A Primer in Matrix Algebra . . . . Appendix: Data Sources . . . . . . . . . . . . The Basics of Portfolio Choice Investor Preferences . . . . . . . . . Leverage . . . . . . . . . . . . . . . Diversification . . . . . . . . . . . . Portfolio Management . . . . . . . Appendix: A Primer in Optimization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mean-Variance Frontier Mean-Variance Frontier of Risky Assets . . . . . . . . . . . . . . . . . Mean-Variance Frontier of Riskfree and Risky Assets . . . . . . . . . . The Tangency Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix: A Primer on Using Numerical Optimization Routines . . . Index Models The Inputs to a MV Analysis The Market Model . . . . . Single-Index Models . . . . Estimating Beta . . . . . . .