投资学Chap006.ppt

INVESTMENTS | BODIE, KANE, MARCUS INVESTMENTS | BODIE, KANE, MARCUS CHAPTER 6 Risk Aversion and Capital Allocation to Risky Assets Allocation to Risky Assets Investors will avoid risk unless there is a reward. The utility model gives the optimal allocation between a risky portfolio and a risk-free asset. 6-* Risk Aversion and Utility Values Investors are willing to consider: risk-free assets speculative positions with positive risk premiums Portfolio attractiveness increases with expected return and decreases with risk. What happens when return increases with risk? 6-* Table 6.1 Available Risky Portfolios (Risk-free Rate = 5%) Each portfolio receives a utility score to assess the investor’s risk/return trade off 6-* Utility Function U = utility E ( r ) = expected return on the asset or portfolio A = coefficient of risk aversion s2 = variance of returns ? = a scaling factor 6-* Table 6.2 Utility Scores of Alternative Portfolios for Investors with Varying Degree of Risk Aversion 6-* Mean-Variance (M-V) Criterion Portfolio A dominates portfolio B if: And 6-* Estimating Risk Aversion Use questionnaires Observe individuals’ decisions when confronted with risk Observe how much people are willing to pay to avoid risk 6-* Capital Allocation Across Risky and Risk-Free Portfolios Asset Allocation: Is a very important part of portfolio construction. Refers to the choice among broad asset classes. Controlling Risk: Simplest way: Manipulate the fraction of the portfolio invested in risk-free assets versus the portion invested in the risky assets 6-* Basic Asset Allocation Total Market Value $300,000 Risk-free money market fund $90,000 Equities $113,400 Bonds (long-term) $96,600 Total risk assets $210,000 6-* Basic Asset Allocation Let y = weight of the risky portfolio in the complete portfolio; (1-y) = weight of risk-free assets: 6-* The Risk-Free Asset Only the government can issue default-free bonds. Risk-free in real terms only if price indexed and maturity