This paper points out to loopholes in Modern Portfolio Theory (MPT) and fundamental flaws that question its validity and applicability not only for investment but for education as well. Using theoretical analysis, Monte Carlo simulations and market data I present and discuss theoretical, as well...

Accepted wisdom, assuming capital market equilibrium and low cash returns, advises investors to hold optimal portfolios containing little cash. But credit crunches - periods of non-price credit rationing when effective cash yields are very high - happen in the real world. Because of this, it is...

The purpose of this case is to provide an introduction to fixed income portfolio management. In addition, the case describes the story of Bill Gross and the founding of PIMCO.Bill Gross continues to work the same schedule since joining PIMCO in 1970; a rigorous and structured workday that begins at...

The authors have developed an easy-to-use approach, derived from financial portfolio theory, for determining which product(s) to eliminate. This approach takes into account the effect the product deletion will have on the overall rate of return and the overall risk of the product portfolio

I show you how to use the Bloomberg Professional Service (i.e., the “Bloomberg Terminal”) to execute a Benjamin Graham value investing exercise using Bloomberg’s equity screening (EQS) function. I used this exercise very successfully for 15 years in a final-year undergraduate Applied...

The aggregate portfolio of Chinese actively managed stock mutual funds exhibits a large and significantly positive alpha. Results from bootstrap simulations indicate that most Chinese active stock mutual fund managers have skill. A substantial amount of their outperformance can be attributed to...

Andrew Rudd's inescapable conclusion that the integration of environment, social or governance (ESG) criteria in investment processes must worsen portfolio diversification appears to be academic wisdom since nearly thirty years, but is it right? We argue that it is wrong. We develop a simple...

In this paper we present an application where advanced undergraduate students can solve the expected utility portfolio model with a risk-free and a risky asset with both up and down returns in the Stock Market. With real Stock Market data, we use Excel Solver to find the portfolio decision and...

Three concepts: stochastic discount factors, multi-beta pricing and mean-variance efficiency, are at the core of modern empirical asset pricing. This chapter reviews these paradigms and the relations among them, concentrating on conditional asset-pricing models where lagged variables serve as...

En este segundo trabajo expondremos las ecuaciones por definición básicas necesarias para cuantificar la necesidad de fondos, beneficios y costos al cambiar la base de la estrategia ante apreciaciones del precio del subyacente. Incluyendo la segmentación de los efectos del cambio según los...