Flashcards in Portfolio Concepts Deck (12):
Mean-Variance Portfolio Theory
Based on the idea that the value of investment opportunities can be meaningfully measured in terms of mean return and variance of return.
Portfolios that have minimum variance for each given level of expected return.
Capital Allocation Line (CAL)
Describes the combinations of expected return and standard deviation of return available to an investor from combining her optimal portfolio of risky assets with the risk-free rate.
Capital Market Line (CML)
When investors share identical expectations about mean returns, variance of returns, and correlations of risky assets, the CAL for all investors is the same, it is known as the CML.
Security Market Line (SML)
The graph of the CAPM is the SML.
Risk for which investors require an additional return for bearing.
The standard deviation of the differences between a portfolio's and the benchmark's total return.
Value at Risk
A probability based measure of the loss that one anticipates will be exceeded only a specified small fraction of the time over a given horizon.
A measure of active return per unit of active risk.
A portfolio with factor sensitivities of zero to all factors, positive expected net cash flow, and an initial investment of zero.
A portfolio with a factor sensitivity of one to a particular factor and zero to all other factors.