Estimating betas and Security Market Line MGT 4850 Spring 2007 University of Lethbridge.

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Presentation transcript:

Estimating betas and Security Market Line MGT 4850 Spring 2007 University of Lethbridge

Overview CAPM and the risk-free asset –CAPM with risk free asset –Black’s (1972) zero beta CAPM The objective is to learn how to calculate: –Efficient Portfolios –Efficient Frontier –CML and SML

Calculating the efficient frontier Only four risky assets

Find two efficient portfolios Minimum Variance Market portfolio Use proposition two to establish the whole envelope CML SML

SML using Var/Cov

Regression

SML