Discussing results in asset pricing and efficient portfolio allocation,we show that mixed success and errors in these results often follow from a lack of information about the asset return distribution and wrong assum...Discussing results in asset pricing and efficient portfolio allocation,we show that mixed success and errors in these results often follow from a lack of information about the asset return distribution and wrong assumptions about its properties.Some mistakes in asset pricing come from the assumption of symmetry in return distributions.Some errors in efficient portfolio allocation follow from Markowitz’s approach when applying it to portfolio optimization of skewed asset returns.The Extended Merton model(EMM),generating skewed return distributions,demonstrates that(i)in skewed asset returns,the variance is not an adequate measure of risks and(ii)positive skewness in the asset returns comes together with a high default probability.Thus,the maximization of the mean portfolio returns and skewness with controlled variance used in mainstream papers can critically increase portfolio risks.We present the new settings of the optimal portfolio allocation problem leading to less risky efficient portfolios than the solutions suggested in all previous papers.展开更多
The capital-asset pricing model （CAPM） discovered by Sharp （1964）, Lintner （1965） and Mossin （1966） is a general equilibrium model. It not only allows improved understanding of market behavior, but also provid...The capital-asset pricing model （CAPM） discovered by Sharp （1964）, Lintner （1965） and Mossin （1966） is a general equilibrium model. It not only allows improved understanding of market behavior, but also provides practical benefits. At the same time, it also provides a practical mechanism for evaluating performance in a risk-adjusted mode. This model thus provides the initial basis for the practical implementation of the many aspects of portfolio analysis. However, Richard Roll （1977） has directed some biting criticism at the tests in affirming the CAPM. This criticism is aimed at one of the critical notions-the identifying of the efficient market portfolio. This paper solves the highly difficult problem by a geometrical way. It first denotes the efficient frontier of Markowitz model with the weights vector of portfolio. Then, it denotes the capital market line （CML） with the weights vector too. By the definition of the CML, the efficient market portfolio thus can be identified.展开更多
文摘Discussing results in asset pricing and efficient portfolio allocation,we show that mixed success and errors in these results often follow from a lack of information about the asset return distribution and wrong assumptions about its properties.Some mistakes in asset pricing come from the assumption of symmetry in return distributions.Some errors in efficient portfolio allocation follow from Markowitz’s approach when applying it to portfolio optimization of skewed asset returns.The Extended Merton model(EMM),generating skewed return distributions,demonstrates that(i)in skewed asset returns,the variance is not an adequate measure of risks and(ii)positive skewness in the asset returns comes together with a high default probability.Thus,the maximization of the mean portfolio returns and skewness with controlled variance used in mainstream papers can critically increase portfolio risks.We present the new settings of the optimal portfolio allocation problem leading to less risky efficient portfolios than the solutions suggested in all previous papers.
文摘The capital-asset pricing model （CAPM） discovered by Sharp （1964）, Lintner （1965） and Mossin （1966） is a general equilibrium model. It not only allows improved understanding of market behavior, but also provides practical benefits. At the same time, it also provides a practical mechanism for evaluating performance in a risk-adjusted mode. This model thus provides the initial basis for the practical implementation of the many aspects of portfolio analysis. However, Richard Roll （1977） has directed some biting criticism at the tests in affirming the CAPM. This criticism is aimed at one of the critical notions-the identifying of the efficient market portfolio. This paper solves the highly difficult problem by a geometrical way. It first denotes the efficient frontier of Markowitz model with the weights vector of portfolio. Then, it denotes the capital market line （CML） with the weights vector too. By the definition of the CML, the efficient market portfolio thus can be identified.
