Applied Portfolio Management - Class 1 - Risk & Return

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Book Suggestions:

Burton Malkiel, A Random Walk Down Wall Street (2007) https://amzn.to/2Hr2SW1

Roger Lowenstein, Buffett: The Making of an American Capitalist (2008) https://amzn.to/3hUkFl6

Jack Schwager, Market Wizards Series https://amzn.to/3a89diH

Jack Schwager, Market Sense And Nonsense (2013) https://amzn.to/3jerS0Z

Nassim Nicholas Taleb, Fooled By Randomness (2007) https://amzn.to/365wN08

Victor Niederhoffer, Education of a Speculator (1998) https://amzn.to/2EuhMJZ

Victor Niederhoffer, Practical Speculation (2004) https://amzn.to/2Hr3nzn

Dimson, E., Marsh, P., and M. Staunton, Triumph of the Optimists: 101 Years of Global Investment Returns (2002) https://amzn.to/363JWXG

Roger Lowenstein, When Genius Failed (2001) https://amzn.to/364aHv7

Ivan Boesky, Merger Mania (1985) https://amzn.to/3crKszQ

Howard Marks, The Most Important Thing (2011) https://amzn.to/30n89EX

Frank Partnoy, F.I.A.S.C.O. (1999) https://amzn.to/366gGj4

Michael Lewis, Liars Poker (1989) - The Big Short (2010) https://amzn.to/3mPjhE1

Gregory Zuckerman, The Man Who Solved the Market (2019) https://amzn.to/2FVOZi8

Patricks' Books:

Statistics for Traders: https://amzn.to/3eerLA0

Financial Derivatives: https://amzn.to/307ByTb

Corporate Finance: https://amzn.to/3fn3rvC

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Risk & Return in Finance.

The higher the risk taken, the more greater the expected return should be, and conversely, the lower the risk, the more modest the expected return. In this class we learn about how traders and portfolio managers think about risk and return. We learn about indifference curves, diversification and the importance of correlation in building a portfolio. We learn about sharpe ratio, sortino ratio and beta.

Often people are confused by the idea of the risk return tradeoff. They think that taking a higher risk means that you are guaranteed a higher return. Of course, if this was the case, risk would not be risky. In finance what the risk return tradeoff is referring to is the idea that an investor would only agree to take greater risk, if they believed that the positive outcomes were greater than the positive outcomes achieved for low risk investments.