The Capital Asset Pricing Model :
This book evaluates the development of Modern Portfolio Theory (MPT)
based on the Sharpe CAPM and Ross four-factor APT, underpinned by
Modigliani and Miller’s “law of one price”. Today anybody with
appropriate software and a reasonable financial education can model
risky investment portfolios. But one lesson from the 2007 banking and
2010 euro crises is that computer driven models can be so complex that
investors may not interpret their results correctly. Returning to first
principles, we therefore explain why MPT is only a guide to action and
program trading is no substitute for human judgement. Investors should
always understand the models that underpin their analyses.
About the Author :
To contact Alan, please visit Robert Alan Hill at www.linkedin.com.
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