MIT 15.401 Finance Theory I, Fall 2008 View the complete course: ocw.mit.edu/15-401F08 Instructor: Andrew Lo License: Creative Commons BY-NC-SA More information at ocw.mit.edu/terms More courses at ocw.mit.edu
Пікірлер: 142
@luishoyos39448 жыл бұрын
god bless this guy!!!! my finance professor is so bad, I cannot understand anything in class. here everything seems very simple
@RaylinRecords3 жыл бұрын
I agree! I love the visualizations he creates for his students.
@Emin18965896 ай бұрын
where are you working by now?:D
@additeachxo6 жыл бұрын
This man is amazing.. very knowledgeable & good at explaining. Well done MIT
@klam776 жыл бұрын
Never explained anywhere else SO clearly! Brilliant.
@bonze93478 жыл бұрын
Thanks to MIT for sharing and thanks to Prof Lo for explaining this well!
@mikejpete3 жыл бұрын
Bm
@LondonTablefootball3 жыл бұрын
Y5y
@jatjat26542 жыл бұрын
@@LondonTablefootball mobile
@9BoStOnGeOrGe8 жыл бұрын
For some reason this is easier to follow than an undergrad class in financial economics...
@gregorybattis95884 жыл бұрын
Instructor quality.
@anidasyahla19293 жыл бұрын
agree
@gregorybattis95883 жыл бұрын
I was watching this video again on my alternative account a few minutes ago and just saw this comment again. The first words in my head were instructor quality which is what I wrote a year ago. I've completed more classes in finance now and this guy taught me more in like ~20 hours of watch time than what I learned, so far in all of my undergrad. I am not exaggerating either and it should say that because I am coming back to these on my spring break in 2021 to watch these again.
@offwallstreet63863 жыл бұрын
@@gregorybattis9588 i completely agree, this course has been very useful to me and im spending my spring break watching these! do you know if this course was taught to undergrads at MIT or was it a graduate level course?
@gregorybattis95883 жыл бұрын
@@offwallstreet6386 Graduate level class for MBA students.
@Phillip-sv7rr2 күн бұрын
The exchange between lecturer and students is amazing.
@sel50698 жыл бұрын
1:05:22 capm
@arkoraa7 жыл бұрын
You read my mind
@saver-lx3qk6 жыл бұрын
HoneyMayoHair i
@oussamalmrabti43306 жыл бұрын
This is pure ALTRUISM. Thank you
@treepeenbawlz19344 жыл бұрын
bless
@mrmagorium126 жыл бұрын
Wow this is fantastic, my university finance professors suck! So happy this is a free resource online for anyone who wishes to learn
@mustavogaia26555 жыл бұрын
I think this isthe second time the professor refers to the next class 15.403. Can't this be also released on this channel?
@Greg_Chase2 жыл бұрын
I taught software engineering at the university level for 5 years. This is an able communicator. Very good, peaceful, and engaging attitude. This would be a very popular professor where I went to undergrad and grad school (UC Berkeley). I bet his lecture materials are organized and accurate. All my peers at Cal would try to get into his courses. It's a blessing that MIT knows how to choose which profs to make available to the public. Thank you MIT! .
@yulei44268 жыл бұрын
what a wonderful explanation. so clear
@JK-sy4ym8 жыл бұрын
this is one of the best processor on MITOpencourse. Respect.
@arthurkodama3 жыл бұрын
Increadible class, very easy language! The explanation for the Nobel Prize model economic simplification is the best part 1:02:00!!!
@versystudio8225 жыл бұрын
Amazing lectures, indeed
@mohamudmohameddaar489 жыл бұрын
Thank you professor a great lecturer
@Elaba_3 жыл бұрын
He is not wasting time writing things down on a board. If I watch the other MIT-courses on KZfaq with other teachers I get the unpleasant feeling the quality of teaching can have a huge impact on succeeding to get your diploma.
@johnlee20042 жыл бұрын
Netflix is a stock that’s negatively correlated with a market downturn. Now I just need a time machine to go back 8 years so I can get a kudos from the professor!
@theWebWizrd6 ай бұрын
You also need a time machine to take advantage of it, seeing as that covariance only describes a past movement and there is little reason why it would predict future covariance. That is why the theory presented in this lecture does not translate to reality very well. Perhaps the more dynamic model he mentions does, but I doubt it. Sadly it is a fundamental problem with using statistics for stock analysis.
@rajnikanth69475 жыл бұрын
Professor is exceptionally good.
@user-gr1on2ho8e9 жыл бұрын
awesome lecturer. fantastic .
@ambarvideos10 жыл бұрын
Brilliant !
@lizy43723 жыл бұрын
55:38 "Because Warren Buffett beat it (market) in the past, do you think he's going to beat it in the future?". This actually does make some sense, all those portfolio analysis were based on historical data. So portfolio analysis is basically saying "market was behaving this way in the past, so we assume it is going to behave like this in the future." Whis is a big assumption, and I admit this assumption seems more solid - comparing trust historical market data than trust Buffett's historical performance. But I am yet convinced this is a much better practice.
@theWebWizrd6 ай бұрын
Yes, at its core it is not coherent to question whether Buffet's future performance will be similar to his past performance while at the same time building a whole theory on stock returns being static and unchanging. In fact, baked into their assumption is that Berkshire Hathaway will perform similarly in the future to the past.The market quite obviously does not behave the way this model is suggesting, so it is very difficult to see its use and limitations clearly.
@MrSyCoe10 жыл бұрын
There is a typo on Slide 37 at 4:18. wIBM should be wIBM-squared.
@janelledavis83093 жыл бұрын
I noticed as well. Yes it should be squared
@dhruvjoshi87445 жыл бұрын
i ain't switiching side but i just love this professor.
@ultimatedilan10 жыл бұрын
why do they have names on their desk
@user-st6is9ml4x3 жыл бұрын
1:01:20 and continue-- 'held in proportion to their market value'... I didn't get it..does this mean their weight proportions compared to entire market capitalisation??
@bluesbros839 жыл бұрын
I wish I could go to this university
@luisfco.martymatos54317 жыл бұрын
Me, too.
@nerd19004 жыл бұрын
@@luisfco.martymatos5431 me three
@pingctt3 жыл бұрын
@@nerd1900 gzz
@kozlowsiki20009 жыл бұрын
Fantastic!
@chuanqisun6 ай бұрын
Are their online visualization tools for us to play with the portfolio theory? I really want to put in a few stocks and see my risk-reward tradeoff options.
@cheukchan29682 ай бұрын
How do you draw a portfolio with 3 stocks on a curve? The weighting vector has a dimension of 3, [w1, w2, w3], even w3=1-w1-w2, you still need w1 and w2, it will be a portfolio surface instead of curve
@zvzivz10 жыл бұрын
Love it!
@arguy3376 жыл бұрын
15:33 Capital Market Line
@ibraheemmoosa3 жыл бұрын
Is there any reason that this portfolio theory is restricted to public equity and T-bills? There are many classes of assets beyond these two. For example, corporate bonds, gold, private equity etc. How do these figure into this theory?
@mariasmoczynska8937 Жыл бұрын
It's not restricted. For example you can consider gold as a risk-free asset and corporate bonds as a risky asset etc. You just need the data. However, T-bills are considered "the most risk-free asset" and that is the reason they are being used so frequently.
@herp_derpingson5 жыл бұрын
41:50 The indifference curve is in the third dimension. It is all possible portfolios you can construct whose tangent-line-frontier point is same.
@victormundia74386 жыл бұрын
enjoyed the class lesson
@christopher82209 жыл бұрын
@4:25- Shouldn't the weight for IBM be wIBM^2, like Motorola and GM's weights?
@janelledavis83093 жыл бұрын
correct
@heohonhen8 жыл бұрын
it's good, thanks teacher
@rakeshsurampalli Жыл бұрын
how to create the parabola or the curve?
@hl36412 жыл бұрын
57:00 ab, professor seemed to like high fee active managing mutual fund over zero fee warren buffet… also, acc. to SPIVA 90% mutual funds underperform 0.03% fee sp500 index etf .. so.. prof. Lo wrong?
@craigshilton6672 жыл бұрын
Totally agree a room full of people laughing at warren buffet. Thank god time has proved them all wrong 🙏. In the short team the market and life is a voting machine over long term its a weighing machine.
@theWebWizrd6 ай бұрын
Well, mutual fonds don't hold the market portfolio, they try to deviate from it. So they are not on that tangent line. So in a sense, this model captures why mutual funds fail. It was theory like this that gave us market cap weighted index funds to begin with, as the professor mentioned.
@iSk00L9 жыл бұрын
Good lecture - although I would have preferred if he explored an example of the calculation of the tangency portfolio given a risk-free rate.
@philippmayer53838 жыл бұрын
+iSk00L Yes he should have shown up a calculation for the tangency portfolio. But let me help you. In this model everyone (every market participant) invests either in the tangency portfolio or in T-Bills (risk free asset)...or in a combination of those two. So if everyone invests in the tangency portfolio how can the market be in equilibrium? For example: Can the equilibrium be 50% of the porftolio is IBM and 50% is Motorola? No, because if everyone only invests in those two stocks the price of GM would be zero. Why would someone not buy a stock for zero dollars if one would have the opportunity to generate dividends from that stock. So the market participants would also buy Motorola. The price wouldnt be zero. And that procedure would be repeatet until every stock has a fair value. And the outcome is, that everyone would have the stock in exactly the same ratio as its market capitalization....So every portfolio includes k*IBM, k*Motorola, k*GM....To sum it up: Tangency-Portfolio = every asset on the market 1*.....And that is exactly what ETFs try to make a replica of.
@iSk00L8 жыл бұрын
Philipp Mayer thanks, but I know already and passed the exam. But thanks anyway
@kunalchakraborty56046 жыл бұрын
Is it actually possible to have zero weight in a particular stock in market portfolio? Because a zero weight implies that nobody wants it which will actually lead to decrease in price and hence an increase in its expected return. Any insights on this ?
@Elaba_3 жыл бұрын
If a stock price is going to zero or a very low price there's a propably a good fundamental reason for that. Only if it's undervalued you might expect a positive return within the next 10 years.
@farzan8486 жыл бұрын
Informative
@ramotenamosolodi298711 жыл бұрын
this is helpful
@rahuldevgun87035 ай бұрын
Superb
@crimony30547 жыл бұрын
If you conceptualize a company as an aggregation of different business lines, where each business line has its own rate of return, then each business, like IBM, GM, and Motorola, is already a portfolio of other businesses. Consequently, the idea that you never want all your money in one company is a slippery concept. Assembling companies into one bottom line results in either a portfolio, or a mutual fund, or a diversified corporation itself. What distinguishes each of these baskets of assets is how much control you have in shifting the proportion of each constituent asset. If it's your portfolio, you can change it each day. If it's a mutual fund, the fund managers decide how much of each company to own. If it's the company itself, the directors decide which lines of business will be expanded or sold off. The market force that's always at work is risk==return. Hence, if you believe that diversification is desirable, just know that the lower risk comes with a lower expected return. Markets will always return to efficiency. But in the near term, you can achieve economic profits from market inefficiencies.
@user-ew1uo5ev4e3 жыл бұрын
What’s a bonbon?
@loganonlygreentrades26472 жыл бұрын
I’m a bone head… I’ve been long $TMV (inverse 20 yr bond) and I’m up +40% in 4 weeks. Crazy cycle!
@unknownx2k78 жыл бұрын
Very good
@RahulSingh-ij8fs8 жыл бұрын
સ
@fransronaldcarbajalgamboa2006 жыл бұрын
Nice!!
@LoveMsLindi10 жыл бұрын
I've been wondering whether the idea of diminishing marginal returns applies to people with addictions (Frank Gallagher) and ocd and if it applies to money. Can one ever get less satisfaction from accumulating more and more money (Warren Buffet, Bill Gates) or does it only apply to goods money can buy?
@mihal.22766 жыл бұрын
If you have 0 dollars and i give you 100 dollars, how happy would you be? Now if you have 100.000 dollars and i give you 100 dollars, how much would that increase your satisfaction?
@michaelbrynda16035 жыл бұрын
mo money mo problems
@phyllismaulidi43589 жыл бұрын
great
@pinakinjaiswal79846 жыл бұрын
In the example of 3 stocks the return of Motorola is the highest. So if you combine the other two stocks with Motorola how can there be return higher than that of Motorola. Because return on a Portfolio is simply the weighted avg. of each portfolio. So how is it that the 'efficient frontier' (3 stocks) if passes ABOVE motorola ? Even if you borrow to buy Motorola still the efficient frontier should pass through Motorola.
@ringeringering5 жыл бұрын
Because of the correlation/covariance between the stocks within this 3-stock portfolio. Due to how portfolio returns and portfolio variance are calculated, a portfolio return can be higher than any individual stock within while the portfolio variance is lower than some of the of the stocks' variances. More specifically this is due to the correlation between stocks within portfolios and the fact that low correlations result in low variances. Portfolio returns don't take into account the correlations between the stocks, so while the variance is decreased from the correlations, the returns are not.
@JJGS_4 жыл бұрын
You are absolutly correct. That graph is incorrect. it does not matter if short sales are allowed, the efficient frontier must pass by Motorola.
@DougFischer3 жыл бұрын
@@JJGS_ he mentioned it in the previous lecture. The more assets in the portfolio the more cross varience terms in the equation. The coefients of these are the level of correlation so the more you add the more non perfectly correlated stocks, which shifts the curve to the left.
@hl36412 жыл бұрын
I’ll never go to grad school if I knew better, fun and much economic class like this…lol
@carlosdanielcruzconceicao92514 жыл бұрын
so i guess amazon and all those technological stocks are negatively correlated to the markets? in these days
@HonestFranklin3 жыл бұрын
세무회계도 미국세법 참고한거라 번역의 문제
@ABCDEF-jh5bp4 жыл бұрын
is this class have recitation ?
@mitocw4 жыл бұрын
There are written recitations, see ocw.mit.edu/courses/sloan-school-of-management/15-401-finance-theory-i-fall-2008/recitations. Best wishes on your studies!
@ABCDEF-jh5bp4 жыл бұрын
@@mitocw thanks you so mucn
@t60300565 жыл бұрын
LSE student watching this instead of FM300
@adamkershski5 жыл бұрын
Reading student using this for revision ;)
@danielklein55605 жыл бұрын
5 year old preparing for the harsh job market
@dmon112us12 жыл бұрын
Next Warren Buffet = Mark Cuban = Michael Sailor = Jay Clayton
@newclear55114 ай бұрын
1:05:06
@madridmusic39485 жыл бұрын
37:45 Alpha
@hamdanyoshida59184 ай бұрын
55:44 10 years later and Prof just got burned on shorting Warren Buffet
@ashutoshtiwari80883 ай бұрын
Frr ! 😂this is the comment I’m looking for !
@mbaye50110 жыл бұрын
take it easy gym teachers
@HonestFranklin3 жыл бұрын
외국어는 한글로 번역해야 함축된 의미를 되뇌어서 내 지식으로 변환가능 그래프 그리는게 시간낭비 너만의 부교재 워크북 재무관리는 번역의 문제때문에 어려운것이지 재무회계하고는 다르다
@dmon112us12 жыл бұрын
Cryptocurrency negative correlation with positive return new asset class
@pinakinjaiswal79846 жыл бұрын
The comment is for the "Bullet" frontier
@TheHunnyRunner7 жыл бұрын
Past return and expected return are not equivalent. Doesn't make sense that IBM, or any of the other companies have a future expected return that is equivalent to their past. New CEOs, new marketplace, new market players, new competitors, new technology. Mean variance optimization works fantastic in hindsight, but does not have any predictive power.
@NGE00017 жыл бұрын
yea i think every teach should present their return on investment before every lecture.
@TheHunnyRunner7 жыл бұрын
The problem with that is that past success is not a predictor of future success. IE if someone happens to be on the right side of a normal distribution by picking a single stock that lies within an index, it does not tell us anything about whether that was luck or skill, or whether the results are repeatable.
@NGE00017 жыл бұрын
and yet they use past for almost everything in investments / modeling. they even use it's for job hiring and job promotion. but more over i would not judge anyone by a one of stock but many over many years. I don't think it's too much for some to practice what they preach and show the success that comes. If the guy teaching it cannot make it work then why would I be able to...
@TheHunnyRunner6 жыл бұрын
We have to use the past for data, but we should do so understanding the importance of statistical significance, the scientific method, and peer-review. As well as a strong understanding of the principles of mathematics (correlations, etc.) before misusing them.
@NGE00016 жыл бұрын
Yes i get that and that's great. But only useful if you make money from it If the teacher is a poor investor i want to know is that too much to ask?
@ArtMaknev5 жыл бұрын
I tried to apply those formulas to Bitcoin, got totally rekt!
@jeavon697 ай бұрын
God 3:33
@johnosandra41512 жыл бұрын
We're hedge fund managers, boys.
@davisoneill7 жыл бұрын
Sadly, CAPM doesn't actually work.
@AlexChine897 жыл бұрын
au contraire, they still find it applicable in certain industries
@AndrewChen-yh9ku6 жыл бұрын
actually CAPM does work, which is the basis of how ETF works.
@No_BS_policy Жыл бұрын
Yeah sadly. In general, any finance theory that relies on std deviation as measure of risk is doomed to fail. VAR, CAPM, Sharpe ratio, Beta etc all failed.
@MrBTie11 жыл бұрын
"those who can't teach teach gym" HEUHEUEHUE brbr
@bjartegunarsson28528 жыл бұрын
Those who cant do teach Those who cant teach teach gym
@jacktaylor59374 жыл бұрын
Why don't they shut up with all of those questions and let Prof. Lee talk!
@RaylinRecords3 жыл бұрын
lol class participation is a % of the grade so they have to
@traleyton80574 жыл бұрын
A fifteen minutes lecture painfully prolonged to 1 1/4 hr. Yet the students struggles to comprehend.
@No_BS_policy Жыл бұрын
And yet you struggled with basic english grammar🤦♂️