This paper points out to loopholes in Modern Portfolio Theory (MPT) and fundamental flaws that question its validity and applicability not only for investment but for education as well. Using theoretical analysis, Monte Carlo simulations and market data I present and discuss theoretical, as well...

In this paper we present an application where advanced undergraduate students can solve the expected utility portfolio model with a risk-free and a risky asset with both up and down returns in the Stock Market. With real Stock Market data, we use Excel Solver to find the portfolio decision and...

Perhaps because of the prolonged stock market boom of the 1990's most macro principles textbooks have increased their coverage of the stock market, but there is very little analysis of how the economy affects the stock market. The present paper suggests a "GDP demand-side" approach to predicting...

Los últimos capítulos revisan los aspectos de la evaluación en sí, los mismos que incluyen: la construcción del flujo de caja, los indicadores de rentabilidad, los ranking de proyectos, la optimización de la rentabilidad, el riesgo, la determinación del costo de oportunidad del capital,...

En la primera parte de estos capítulos se encuentra una breve revisión teórica de las herramientas más importantes que deben ser tomadas en cuenta para resolver los ejercicios que se presentan a continuación. Luego se proponen y resuelven ejercicios vinculados con el tema. La mayor parte de...

This paper suggests an alternate approach to corporate finance in an interest free economy by looking beyond practiced Islamic finance and suggesting alternatives for corporate finance in sourcing funds i.e. i) Ijara with embedded options, ii) limited liability partnership, iii) equity modes...

The key insight from this analysis is that monetary policy should be responding more to negative shocks than positive shocks: optimal monetary policy is asymmetric. Moreover, if we take the stance that asset prices indicate a high cost of exposure to long-run risks, this has very interesting...

The equity risk premium is the price of risk in equity markets, and it is a key input in estimating costs of equity and capital in both corporate finance and valuation. Given its importance, it is surprising how haphazard the estimation of equity risk premiums remains in practice. We begin this...

Cross-sectional asset pricing tests with GMM can generate spuriously high explanatory power for factor models when the moment conditions are specified such that they allow the estimated factor means to substantially deviate from the observed sample averages. In fact, by shifting the weights on...