Lecture 4 - Portfolio Diversification and Supporting Financial Institutions (CAPM Model)

author: Robert J. Shiller, Department of Economics, Yale University
recorded by: Yale University
published: Oct. 7, 2009,   recorded: March 2008,   views: 7102
released under terms of: Creative Commons Attribution No Derivatives (CC-BY-ND)

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Portfolio diversification is the most fundamental concept of risk management. The allocation of financial resources in stocks, bonds, riskless, assets, oil and other assets determine the expected return and risk of a portfolio. Taking account of covariances and expected returns, investors can create a diversified portfolio that maximizes expected return for a given level of risk. An important mission of financial institutions is to provide portfolio-diversification services.

Reading assignment:

Fabozzi et al. Foundations of Financial Markets and Institutions, chapters 7 and 12
Jeremy Siegel, Stocks for the Long Run, chapters 1 and 2


PowerPoint slides from screen - Lecture 4[PDF]
Problem Set 2: Portfolio Theory [PDF]

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Reviews and comments:

Comment1 h penton, November 16, 2009 at 5:23 a.m.:

Very interesting analysis of nose curves and optimalization in the portfolio domain!

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