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Treynor–Black Model
In Finance the Treynor–Black model is a mathematical model for security selection published by Fischer Black and Jack Treynor in 1973. The model assumes an investor who considers that most securities are priced efficiently, but who believes they have information that can be used to predict the abnormal performance (Alpha) of a few of them; the model finds the optimum portfolio to hold under such conditions. In essence the optimal portfolio consists of two parts: a passively invested index fund containing all securities in proportion to their market value and an 'active portfolio' containing the securities for which the investor has made a prediction about alpha. In the active portfolio the weight of each stock is proportional to the alpha value divided by the variance of the residual risk. The Model Assume that the risk free rate is ''RF'' and the expected market return is ''RM'' with standard deviation \sigma_M. There are ''N'' securities that have been analyzed and are tho ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of financial economics bridges the two). Finance activities take place in financial systems at various scopes, thus the field can be roughly divided into personal, corporate, and public finance. In a financial system, assets are bought, sold, or traded as financial instruments, such as currencies, loans, bonds, shares, stocks, options, futures, etc. Assets can also be banked, invested, and insured to maximize value and minimize loss. In practice, risks are always present in any financial action and entities. A broad range of subfields within finance exist due to its wide scope. Asset, money, risk and investment management aim to maximize value and minimize volatility. Financial analysis is viability, stability, and profitability asse ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fischer Black
Fischer Sheffey Black (January 11, 1938 – August 30, 1995) was an American economist, best known as one of the authors of the Black–Scholes equation. Background Fischer Sheffey Black was born on January 11, 1938. He graduated from Harvard College in 1959 and received a PhD in applied mathematics from Harvard University in 1964. He was initially expelled from the PhD program due to his inability to settle on a thesis topic, having switched from physics to mathematics, then to computers and artificial intelligence. Black joined the consultancy Bolt, Beranek and Newman, working on a system for artificial intelligence. He spent a summer developing his ideas at the RAND corporation. He became a student of MIT professor Marvin Minsky,Perry Mehrling, "Fischer Black and the Revolutionary Idea of Finance", Wiley (2005), 400 pages, and was later able to submit his research for completion of the Harvard PhD. Black joined Arthur D. Little, where he was first exposed to economic and ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Jack Treynor
Jack Lawrence Treynor (February 21, 1930 – May 11, 2016) was an American economist who served as the President of Treynor Capital Management in Palos Verdes Estates, California. He was a Senior Editor and Advisory Board member of the ''Journal of Investment Management'', and was a Senior Fellow of the Institute for Quantitative Research in Finance. He served for many years as the editor of the CFA Institute's Financial Analysts Journal. Career Treynor was the protégé of Franco Modigliani and mentor of Fischer Black. Trained as a mathematics major at Haverford College, he completed Harvard Business School with distinction in 1955 and stayed on for a year afterwards writing cases for Professor Robert Anthony. In 1956, he coauthored a paper on capital equipment leasing. At Harvard, Treynor had been taught that the way to make long-term plant decisions was to discount the 20, 30 or 40 year stream of future benefits back to the present and compare its present value with the initia ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Efficient-market Hypothesis
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information. Because the EMH is formulated in terms of risk adjustment, it only makes testable predictions when coupled with a particular model of risk. As a result, research in financial economics since at least the 1990s has focused on market anomalies, that is, deviations from specific models of risk. The idea that financial market returns are difficult to predict goes back to Bachelier, Mandelbrot, and Samuelson, but is closely associated with Eugene Fama, in part due to his influential 1970 review of the theoretical and empirical research. The EMH provides the basic logic for modern risk-based theories of asset prices, and frameworks such as consumption-based asset pricing and int ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Alpha (investment)
Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. An alpha of 1% means the investment's return on investment over a selected period of time was 1% better than the market during that same period; a negative alpha means the investment underperformed the market. Alpha, along with beta, is one of two key coefficients in the capital asset pricing model used in modern portfolio theory and is closely related to other important quantities such as standard deviation, R-squared and the Sharpe ratio. In modern financial markets, where index funds are widely available for purchase, alpha is commonly used to judge the performance of mutual funds and similar investments. As these funds include various fees normally expressed in percent terms, the fund has to maintain an alpha greater than its fees in order to provide positive gains compared with an index fund. Historically, the vast majority of traditional funds ha ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Index Fund
An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can a specified basket of underlying investments.Reasonable Investor(s), Boston University Law Review, available at: https://ssrn.com/abstract=2579510 While index providers often emphasize that they are for-profit organizations, index providers have the ability to act as "reluctant regulators" when determining which companies are suitable for an index. Those rules may include tracking prominent indexes like the S&P 500 or the Dow Jones Industrial Average or implementation rules, such as tax-management, tracking error minimization, large block trading or patient/flexible trading strategies that allow for greater tracking error but lower market impact costs. Index funds may also have rules that screen for social and sustainable criteria. An index fund's rules of construction clearly identify the type of companies suitable for the fund. The most c ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Single-index Model
The single-index model (SIM) is a simple asset pricing model to measure both the risk and the return of a stock. The model has been developed by William Sharpe in 1963 and is commonly used in the finance industry. Mathematically the SIM is expressed as: : r_ - r_f = \alpha_i + \beta_i(r_ - r_f) + \epsilon_ \, : \epsilon_ \sim N(0,\sigma_i^2) \, where: : ''rit'' is return to stock ''i'' in period ''t'' : ''rf'' is the risk free rate (i.e. the interest rate on treasury bills) : ''rmt'' is the return to the market portfolio in period ''t'' : \alpha_i is the stock's alpha, or abnormal return : \beta_i is the stock's beta, or responsiveness to the market return : Note that r_ - r_f is called the excess return on the stock, r_ - r_f the excess return on the market : \epsilon_ are the residual (random) returns, which are assumed independent normally distributed with mean zero and standard deviation \sigma_i These equations show that the stock return is influenced by the market (be ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
William F
William is a male given name of Germanic origin.Hanks, Hardcastle and Hodges, ''Oxford Dictionary of First Names'', Oxford University Press, 2nd edition, , p. 276. It became very popular in the English language after the Norman conquest of England in 1066,All Things William"Meaning & Origin of the Name"/ref> and remained so throughout the Middle Ages and into the modern era. It is sometimes abbreviated "Wm." Shortened familiar versions in English include Will, Wills, Willy, Willie, Bill, and Billy. A common Irish form is Liam. Scottish diminutives include Wull, Willie or Wullie (as in Oor Wullie or the play ''Douglas''). Female forms are Willa, Willemina, Wilma and Wilhelmina. Etymology William is related to the given name ''Wilhelm'' (cf. Proto-Germanic ᚹᛁᛚᛃᚨᚺᛖᛚᛗᚨᛉ, ''*Wiljahelmaz'' > German ''Wilhelm'' and Old Norse ᚢᛁᛚᛋᛅᚼᛅᛚᛘᛅᛋ, ''Vilhjálmr''). By regular sound changes, the native, inherited English form of the name shoul ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Models
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumption (economics), consumption of money, assets, goods and services (the discipline of financial economics bridges the two). Finance activities take place in Financial system, financial systems at various scopes, thus the field can be roughly divided into Personal finance, personal, Corporate finance, corporate, and public finance. In a financial system, assets are bought, sold, or traded as Financial instrument, financial instruments, such as Currency, currencies, Loan, loans, Bond (finance), bonds, Share (finance), shares, Stock, stocks, Option (finance), options, Futures contract, futures, etc. Assets can also be Bank, banked, Investment, invested, and Insurance, insured to maximize value and minimize loss. In practice, Financial risk, risks are alway ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
