Capital Asset Pricing Model (CAPM) is a rich source of intuition and
also the basis of many practical decisions. But teaching it as if there
were no alternatives, has been recently criticised as unethical due to
unrealistic assumptions and faulty conclusions of CAPM.
In this seminar, Thorsten Hens will clarify the strengths and
weaknesses of CAPM. While up-to-date versions of CAPM do
reasobaly well in explaining asset prices simple heuristics like 1/N do
better as investment rules.
Evolutionary portfolio theory models the competiton of rational and
behavioral investment rules and can exlplain why in real life markets
simple heuristics beat sophisticated optimization. Therefore, the
evolutionary portfolio theory is an alternative complementing CAPM.
Thorsten’s talk is built around rigorous financial market theory and will
illustrate empirical examples and real life case studies. The
presentation aims at achieving a higher consciousness for
practitioners having to deal with real world financial markets which
are permanently evolving.