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Behavioral Portfolio Theory 1 – Safety First

Behavioral Portfolio Theory 1 – Safety First

ur survey of portfolio theories continues; we have already evaluated Modern Portfolio Theory, the Capital Asset Pricing Model and the Arbitrage Pricing Theory in earlier blogs, and now turn to a series of articles on Behavioral Portfolio Theory (BPT).

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Copyright 2011 Eric Bank, Freelance Writer
The Three Vital Prime Brokerage Reports

The Three Vital Prime Brokerage Reports

While all hedge funds require financing, some perform their own clearing operations, while others hire a prime broker to perform administrative tasks. In today’s blog, we’ll discuss the three main administrative reports that prime brokers provide to their clients who are not self-clearing.

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Copyright 2011 Eric Bank, Freelance Writer
Beta

Beta

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Hedge funds use an array of strategies to guide trading.  Most of these strategies seek to decouple returns from those of the overall market, as measured by a statistic called “beta” (β). Beta is calculated by dividing the covariance of an investment’s return by the variance of a portfolio or market return:

βi = Cov (ri, rm) / Var(rm) where i = an investment, m = market portfolio, and r = return

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Copyright 2010 Eric Bank, Freelance Writer