In an ideal world, a portfolio would be composed of a wide range of return-producing units, each of which is risky but independent of the others. Such a portfolio would result in high returns with low volatility. These return-producing elements or factors already exist in the traditional asset classes and can be extracted. This course is specifically about these factors that both explain performance and provide market premiums.
Course Objectives
- Discovering factors
- Important factor premiums
- Extracting factor premiums
- Implementing factor-based portfolio
- Challenges of constructing factor-based portfolio
Course Outline
Module 1: Introduction
Module 2: The Capital Asset Pricing Model
- CAPM: A One-Factor Model
- Fama-French Three-Factor Model
Module 3: Other Important Factors
- Momentum Factor
- Profitability Factor
- Quality Factor
- Term Factor
- Carry Factor
Module 4: Alternative Investments
- Risk Factor Exposures of Alternative Investments
- Risk Factors for Hedge Funds