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Behavioral Portfolio Theory
Behavioral portfolio theory (BPT), put forth in 2000 by Shefrin and Statman,SHEFRIN, H., AND M. STATMAN (2000): "Behavioral Portfolio Theory," ''Journal of Financial and Quantitative Analysis'', 35(2), 127–151. provides an alternative to the assumption that the ultimate motivation for investors is the maximization of the value of their portfolios. It suggests that investors have varied aims and create an investment portfolio that meets a broad range of goals.{{cite web, last=Bank, first=Eric, title=Behavioral Portfolio Theory 1 – Safety First, date= 18 February 2011, url=http://www.hedgefundwriter.com/2011/02/18/behavioral-portfolio-theory-1-%E2%80%93-safety/, accessdate=7 September 2011 It does not follow the same principles as the capital asset pricing model, modern portfolio theory and the arbitrage pricing theory. A behavioral portfolio bears a strong resemblance to a pyramid with distinct layers. Each layer has well defined goals. The base layer is devised in a way tha ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Asset Pricing Model
In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. CAPM assumes a particular form of utility functions (in which only first and second moments matter, that is risk is measured by variance, for example a quadratic utility) or alternatively asset returns whose probability distributions are completely described by the first two moments (for example, the normal distribution) and zero transaction costs (necessary for diversification to get rid of all idiosyncratic risk). Under these conditions, CAPM shows that the cost of eq ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Modern Portfolio Theory
Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is less risky than owning only one type. Its key insight is that an asset's risk and return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return. It uses the variance of asset prices as a proxy for risk. Economist Harry Markowitz introduced MPT in a 1952 essay, for which he was later awarded a Nobel Memorial Prize in Economic Sciences; see Markowitz model. Mathematical model Risk and expected return MPT assumes that investors are risk averse, meaning that given two portfolios that offer the same expected return, investors will prefer the less risky one. Thus, an investor will take on increased risk only if compensat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Arbitrage Pricing Theory
In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, it is widely believed to be an improved alternative to its predecessor, the Capital Asset Pricing Model (CAPM). APT is founded upon the law of one price, which suggests that within an equilibrium market, rational investors will implement arbitrage such that the equilibrium price is eventually realised. As such, APT argues that when opportunities for arbitrage are exhausted in a given period, then the expected return of an asset is a linear function of various factors or theoretical market indices, where sensitivities of each factor is represented by a factor-specific beta coefficient or factor loading. Consequently, it provides traders with an indication of ‘true’ asset value and enables exploitation of market discrepancies via arbitrage. The linear fac ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Descriptive Theory
In the study of language, description or descriptive linguistics is the work of objectively analyzing and describing how language is actually used (or how it was used in the past) by a speech community. François & Ponsonnet (2013). All academic research in linguistics is descriptive; like all other scientific disciplines, it seeks to describe reality, without the bias of preconceived ideas about how it ought to be. Modern descriptive linguistics is based on a structural approach to language, as exemplified in the work of Leonard Bloomfield and others. This type of linguistics utilizes different methods in order to describe a language such as basic data collection, and different types of elicitation methods. Descriptive versus prescriptive linguistics Linguistic description is often contrasted with linguistic prescription, — entry for "Descriptivism and prescriptivism" quotation: "Contrasting terms in linguistics." (p.286) which is found especially in education and in publi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Roy's Safety-first Criterion
Roy's safety-first criterion is a risk management technique, devised by A. D. Roy, that allows an investor to select one portfolio rather than another based on the criterion that the probability of the portfolio's return falling below a minimum desired threshold is minimized. For example, suppose there are two available investment strategies—portfolio A and portfolio B, and suppose the investor's threshold return level (the minimum return that the investor is willing to tolerate) is −1%. Then, the investor would choose the portfolio that would provide the maximum probability of the portfolio return being at least as high as −1%. Thus, the problem of an investor using Roy's safety criterion can be summarized symbolically as: \underset\Pr(R_<\underline) where is the probability of (the actual return of asset i) being less than (the minimum acceptable return). Normally distributed return and SFRatio If the portfolios under consideratio ...[...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Mental Account
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Mental may refer to: * of or relating to the mind Films * ''Mental'' (2012 film), an Australian comedy-drama * ''Mental'' (2016 film), a Bangladeshi romantic-action movie * ''Mental'', a 2008 documentary by Kazuhiro Soda * ''Mental'', a 2014 Odia language remake of the 2010 Telugu film ''Seeta Ramula Kalyanam'' * ''Jai Ho'', a 2014 Indian action drama film originally titled ''Mental'' Other uses * ''Mental'' (TV series), a 2009 TV series produced by Fox Telecolombia * ''Mental'' (album), a 2014 album by KJ-52 *"Mental", a song by Eels from their 1996 album ''Beautiful Freak'' See also * * Mental disability (other) * Mental foramen, an opening on the anterior surface of the mandible * Mental health Mental health encompasses emotional, psychological, and social well-being, influencing cognition, perception, and behavior. It likewise determines how an individual handles stress, interpersonal relationships, and decision-making. Mental health ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Market Sentiment
Market sentiment, also known as investor attention, is the general prevailing attitude of investors as to anticipated price development in a market. This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events. If investors expect upward price movement in the stock market, the sentiment is said to be ''bullish''. On the contrary, if the market sentiment is ''bearish'', most investors expect downward price movement. Market participants who maintain a static sentiment, regardless of market conditions, are described as ''permabulls'' and ''permabears'' respectively. Market sentiment is usually considered as a contrarian indicator: what most people expect is a good thing to bet against. Market sentiment is used because it is believed to be a good predictor of market moves, especially when it is more extreme. Very bearish sentiment is usually followed by the market going u ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Portfolio Theories
Portfolio may refer to: Objects * Portfolio (briefcase), a type of briefcase Collections * Portfolio (finance), a collection of assets held by an institution or a private individual * Artist's portfolio, a sample of an artist's work or a case used to display artwork, photographs etc. * Career portfolio, an organized presentation of an individual's education, work samples, and skills * Electronic portfolio, a collection of electronic documents * IT portfolio, in IT portfolio management, the portfolio of large classes of items of enterprise Information Technology * Patent portfolio, a collection of patents owned by a single entity * Project portfolio, in project portfolio management, the portfolio of projects in an organization * Ministry (government department), the post and responsibilities of a head of a government department Computing * Atari Portfolio, a palmtop computer * Extensis Portfolio, a digital asset manager Media * ''The Portfolio'', a British fine arts ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
