For PM: I remember some of the topics (1) - Instability in MVF is caused by errors in estimating exp.returns, var, cov = TRUE - not restricting short sales would cause a lot of rebalancing, costs, etc = TRUE (2) - adding an asset causes the EF to shift up and to the right = WRONG. It shifts up and to the right - don’t remember the other option (3) For the CML I put that the risk price was lower for the company as measured by the market risk price (like the sharpe ratio) (4) To calculate the Equity risk premium you had to use covariance and the market variance to get Beta, and multiply that with the market risk premium. Correct? (5) Not sure about this one , but is the domestic rf used by all domestic CAPM, Extended, and ICAPM? that’s all I remember
They had a question about average the frontier for 10 years and then using it? and the second one was leave short sales out. I’m not sure what was the answer. Shorts sales is definitely wrong because it would make it unstable.
prohibiting short sales was a viable solution to one of the questions
I thought domestic rf is used in all models… mcleod?
jpm351 Wrote: ------------------------------------------------------- > I thought domestic rf is used in all models… > mcleod? I put that they all assume that the investors hold the market portfolio. Pretty sure that’s wrong though. I thought ICAPM you use the 10-yr rf plus a spread or something?
tito26 Wrote: ------------------------------------------------------- > For PM: > > I remember some of the topics > > > (1) > - Instability in MVF is caused by errors in > estimating exp.returns, var, cov = TRUE > - not restricting short sales would cause a lot of > rebalancing, costs, etc = TRUE > > > (2) > - adding an asset causes the EF to shift up and to > the right = WRONG. It shifts up and to the right > - don’t remember the other option > > (3) > For the CML > I put that the risk price was lower for the > company as measured by the market risk price (like > the sharpe ratio) > > (4) > To calculate the Equity risk premium you had to > use covariance and the market variance to get > Beta, and multiply that with the market risk > premium. Correct? > > (5) > Not sure about this one , but is the domestic rf > used by all domestic CAPM, Extended, and ICAPM? > > that’s all I remember You’re #2 - confusing. Do you mean it shifts up and to the LEFT? Please say yes
I’m not sure if the domestic rf is used in the extended capm
I put they all use the domestic risk free rate…and i think the other assumption said “global” market portfolio not simply market portfolio?
I put they all use domestic RFR
For the 2) in the list I remember it is about the min and max return…if no short, it will be on the same efficient frontier…I think I said yes.
YEs sorry, I meant it shifts up and to the left, not to the right!!
jpm351 Wrote: ------------------------------------------------------- > I thought domestic rf is used in all models… > mcleod? Domestic Rf is definitely used in all 3 models.
So was the first answer on the vignette “NO NO” ?
the questions is asking shift up and to the right! so is wrong.
god this shit was hard. agree no no mcleod… got like 3/6 absolute toppsssss min return and max return assets are on the min var frontier always right?
that’s what I put
> (2) > - adding an asset causes the EF to shift up and to > the right = WRONG. It shifts up and to the left > - don’t remember the other option i think the other option is correct! so the answer would be: NO YES
The other question was should they average the min variance frontiers from the last 10 years… so NO
McLeod81 Wrote: ------------------------------------------------------- > The other question was should they average the min > variance frontiers from the last 10 years… so NO Agree.
Prohibiting short sales makes efficient frontier unstable? Definitely can’t average 10 years? Crap, I got it wrong.