0. Markov忆z模型与CAPM Markowitz A4: how to select a portfolio given that we know what the expected returns and return covariances are However, we dont yet know where to get estimates of these data Particularly since expected returns are very hard to measure, one thing that would be useful, but which we don t yet have, is a model of what returns should be The CaPM is an equilibrium model of the relation between the expected rate of return and the return covariances for all assets Equilibrium is an economics term that characterizes a situation where no investor wants to do anything differently -----We will need this concept to come up with a pricing model Note that the markowitz portfolio problem is relevant for each investor, regardless of whether the equilibrium argument, and the CAPM, is correct or not0. Markowitz 模型与CAPM ◼ Markowitz 模型: how to select a portfolio, given that we know what the expected returns and return covariances are. ◼ However, we don't yet know where to get estimates of these data. ◼ Particularly since expected returns are very hard to measure, one thing that would be useful, but which we don't yet have, is a model of what returns should be. ◼ The CAPM is an equilibrium model of the relation between the expected rate of return and the return covariances for all assets. ◼ Equilibrium is an economics term that characterizes a situation where no investor wants to do anything differently -----We will need this concept to come up with a pricing model. ◼ Note that the Markowitz portfolio problem is relevant for each investor, regardless of whether the equilibrium argument, and the CAPM, is correct or not