Talk:Modern portfolio theory: Difference between revisions

Revision as of 18:40, 30 November 2004

Revision as of 19:02, 30 November 2004

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: Ideally, one should use some kind of time series analysis to estimate these parameters. If one makes an assumption about the nature of the underlying time series process, then there is some rational justification for making estimates of the various parameters characterizing the process. I don't have a clue in fact how the nuts-and-bolts financial analysts actually compute these numbers and whether they would take exception to the characterization given in the article, but I think the person that put that material in ([[User:fintor|fintor]]) is knowledgeable about practices in this area. [[User:CSTAR|CSTAR]] 22:40, 19 Nov 2004 (UTC)

:: Oh, I'd absolutleyabsolutely agree about it as a statement of practice. I thought that it currently reads like a criticism of the abstract theory itself, claiming the CAPM nonsensically requires you to mix past and future. In practice, there are tons of historical calculations of beta, but only a few proprietary models for predicting beta (see Barra, who sells both [http://www.barra.com]]).(Indeed, all theories tell you to focus on good estimates of the future for all modeled parameters, but in practice, detailed analysis of past perfomance gets a lot of weight.) [[User:Chrisvls|Chris vLS]] 08:17, 20 Nov 2004 (UTC)

::: I totally withdraw my comment. The text is correct. Nearly all forms I can find of the formula use E() to denote what is expected, and do not show E(beta). Hence, the description is correct. Sorry for the trouble. [[User:Chrisvls|Chris vLS]] 19:02, 30 Nov 2004 (UTC)

== Risk free asset ==