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Summary Economics: CAPITAL MARKETS (university level) Aesthetic Clear Detailed Revision Notes

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PLEASE NOTE: For cheaper prices, find me on Etsy or Ebay @Studylicious Revision Notes for Capital Markets – University Level Economics Please note this is a Digital Product and no physical product will be sent, read the description below before purchasing. Thank you! ACHIEVED 86.6% IN THIS MODULE!!! Hello, I am a recent First-Class Honours Graduate in Economics and Finance. Given the circumstances, this has undoubtfully disrupted many students’ ability to do well. I am determined to change this. To save you both the time and effort, I am offering my revision notes of the Capital Markets module. Topics include: • Lecture 1: introduction and net present value • Lecture 2: how to value bonds and stocks • Lecture 3: relationship between risk and return • Lecture 4: risk aversion and capital allocation to risky assets • Lecture 5: optimal risky portfolios • Lecture 6: capital asset pricing model (CAPM) • Lecture 7: index models and the arbitrage pricing theory • Lecture 8: efficient markets and behavioural finance • Lecture 9: empirical evidence on security returns This module allows you to ·Evaluate stock and bond prices based on economic fundamentals; ·Understand the trade-off between risk and expected return; ·Understand the concept of diversification; ·Construct optimal portfolios. My revision notes are compiled with diagrams and examples to help consolidate your understanding (as seen in the thumbnail pictures above). Spending hours creating and using these for my own exams, this will save you both the time and effort allowing you to “work smarter, not harder”. I wish you the best of luck in your exams and hope these notes will aid you in your revision. Upon purchase, please message me so that I can send you the download link. If you have any further questions, please do not hesitate to ask :) * Photocopying and/or redistributing this material is not permitted *

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1




Sources of risk




Diversification

, 2

A portfolio of two risky assets
Asset allocation (asset class or different assets within a class):




Bonds – risk of duration




Portfolio diversification miracle

, 3

Two risky assets (same std dev.)




Two risky assets (different std dev.)
Perfect correlation: if
our stock goes
up/down, the other
does the same.

Mixing assets can
sometimes lower
your standard dev
(risk)

, 4

Asset allocation example: why buy gold?




Create a portfolio with gold




Portfolios of two risky assets – the theory – the aim

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