Finance Theory — 15.5: The Market Portfolio скачать в хорошем качестве

Finance Theory — 15.5: The Market Portfolio

Why should a hedge fund manager borrowing millions and a retiree holding mostly Treasury bills own the exact same risky portfolio? Nobel Prize-winning theory shows that the optimal risky portfolio isn't a secret formula — it's the entire market, cap-weighted, available to anyone through a low-cost index fund. This video walks through the logic from Markowitz's efficient frontier to Sharpe's Capital Market Line to arrive at this powerful result. Key concepts covered: • The efficient frontier: the set of portfolios offering the highest expected return for each level of risk • The Capital Market Line (CML): combining a risk-free asset with the tangency portfolio M to dominate the entire frontier • The Sharpe ratio and why portfolio M maximizes return per unit of risk • Two-fund separation: all investors hold the same M, adjusting risk tolerance only by mixing M with T-bills (or leveraging) • Market clearing argument: aggregating all investors' holdings proves M must be the cap-weighted market portfolio • Why every stock with positive market cap earns its place — the role of the full covariance matrix and correlation benefits • The market portfolio is naturally long-only with all positive weights • Practical approximations: S&P 500, Russell 2000, and total market index funds • 20-year comparison of S&P 500 vs. Russell 2000 showing similar trajectories with meaningful divergences • Why index investing is mathematically optimal, not just settling for average • Preview of the Capital Asset Pricing Model (CAPM) and individual stock pricing ━━━━━━━━━━━━━━━━━━━━━━━━ SOURCE MATERIALS The source materials for this video are from    • Ses 15: Portfolio Theory III & The CAPM an...