Bus. Econ. 271 -- Portfolio Theory
J. Sell
Spring1998

Outline of Materials Covered prior to the Final Examination. This is in addition to the material from the First Examination and the Second Examination. Note: You should be able to discuss the following concepts clearly and completely without the use of notes and talk about why each is important to the study of Marketing. You should also be able to give examples of the concepts other than the ones given in class.

III. Modern Portfolio Theory (cont'd.)

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C. Capital Asset Pricing Model (cont'd.)

a. The Characteristic Line
b. Alpha and Beta -- calculation and interpretation
c. The interpretation of R2.
d. Individual and portfolio betas.
e. A passive investment strategy
f. The Security Market Line

1. Derivation
2. Use in an Active Investment Strategy

D. Factor Models and Arbitrage Pricing Theory

a. Derivation of APT and comparison with CAPM
b. Use and calculation with EXCEL or SHAZAM

E. Ex-Post Performance Measures

a. Sharpe, Treynor, and Jensen Measures
b. Calculation and Use
c. An alternative measure of diversification

IV. Investment Companies and Mutual Funds

A. Structure and Organization
B. Use as an investment strategy

V. Futures and Options

A. Basic terms and Options/Futures Mechanics
B. Factors affecting Option prices
C. The Black/Scholes Options pricing model

Revised 30 April 1998 by Jws.