Portfolio Management and the Capital Asset Pricing Model
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- Certificate on Completion
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This course has been designed for students studying Corporate Finance at the under-graduate or post-graduate level.
The topics covered are - Portfolio theory, Capital Asset Pricing model theory and Miller and Modigliani theory.
- First year in Accountancy
Students will learn how to calculate risk and return for a portfolio and a single asset investment.
Also learn how to construct a Portfolio, CAPM and Miller Modigliani diagrams.
- Construct portfolios for two projects and calculate their risk and expected return
- Graphically illustrate the combination of two or more portfolios
- Explain the derivation and rationale of the Capital Market Line
- Explain why diversification lowers risk and the meaning of Beta
- Explain the difference between the Capital Market Line and the Security Market Line
- Construct the Security Market Line
- Explain the difference between expected and required return
- Discuss the limitations of CAPM for capital budgeting decisions
This first video gives you an overview of how the Portfolio theory, the Capital Asset Pricing model and the Miller Modigliani model are derived and will be developed.
Video 2 will teach you the theory and application of Portfolio theory. You will learn how to calculate portfolio return, the covariance and portfolio risk as measured by standard deviation. You will also learn how to construct an efficient frontier of investments as well as positive and negative correlated portfolios.
You will learn how to construct the CML line from the risk-free rate to the efficient market. How to move up and down the CML as well as the meaning and the construction of indifference curves. CAPM is also introduced.
You will learn the CAPM assumptions and the development of the SML line from Portfolio theory. I will teach you how to calculate market beta using the co-variance and the correlation of an investment with the market. We will go through a comprehensive example that teaches you how to calculate all the components of CAPM and how to draw CAPM diagrams.
This lecture has been broken down to 2 videos of 30 minutes each. In this 2 part section you will learn the following –
- How to move from Portfolio theory to CAPM to M & M model.
- How to use CAPM for investment decisions for all equity companies and debt/equity financed companies
- The relationship between the SML and WACC
- De-levered beta (Project beta)
- Limitations in using CAPM for investment appraisals
This lecture is the continuation of the CAPM and MM model - Called Video 5 Part 2. Contents – see previous lecture description.
This final video teaching brings together the Portfolio, CAPM and MM theory as a visual illustration using a graphical presentation. I will blend and bring together how one theory is developed and is carried through to the following theory until we get a full understanding of all 3.
This session will take you through 2 more tutorial / examination questions
