14. The Stock Market: Strategies Based on Data versus Strategies Based on Ideology

  1. James R. Thompson

Published Online: 29 NOV 2011

DOI: 10.1002/9781118109656.ch14

Empirical Model Building: Data, Models, and Reality, Second Edition

Empirical Model Building: Data, Models, and Reality, Second Edition

How to Cite

Thompson, J. R. (2011) The Stock Market: Strategies Based on Data versus Strategies Based on Ideology, in Empirical Model Building: Data, Models, and Reality, Second Edition, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118109656.ch14

Publication History

  1. Published Online: 29 NOV 2011
  2. Published Print: 24 OCT 2011

ISBN Information

Print ISBN: 9780470467039

Online ISBN: 9781118109656

SEARCH

Keywords:

  • Markowitz's efficient frontier;
  • Sharpe's super efficient frontier;
  • capital market line;
  • Ito's lemma;
  • geometric brownian model

Summary

This chapter contains sections titled:

  • Introduction

  • Markowitz's Efficient Frontier: Portfolio Design as Constrained Optimization

  • Sharpe's Super Efficient Frontier: The Capital Market Line (CML)

  • The Security Market Line

  • The Sharpe Diagonal Model

  • Portfolio Evaluation and the Capital Asset Pricing Model (CAPM)

  • Views of Risk

  • Stock Progression as Geometric Brownian Motion

  • Estimating μ and σ

  • The Time Indexed Distribution of Portfolio Value

  • Negatively Correlated Portfolios

  • Bear Jumps

  • “Everyman's“ MaxMedian Rule for Portfolio Manangement

  • Derivatives

  • The Black-Scholes Derivation Using Differential Equations

  • Black-Scholes: Some Limiting Cases

  • Conclusions