Welcome to the second section on financial portfolios.
And given the U.S. name Modern Portfolio Theory an asset pricing one could expect a rather theoretical
section here.
But the main focus is still on working with financial data and coding and pandas and therefore we will
derive for the most fundamental finance theories and models in a unique and very intuitive way.
And therefore we do not extensively use formulas.
And we also do not mathematically derive or explain Modern Portfolio Theory or asset pricing models
like the cap and model.
And typically when working with models that simplify reality you want us to make a restrictive model
assumptions.
And that's exactly what we will avoid here.
So no strange assumptions.
And finally we will also not try to predict the future.
So what will we do in this section.
And actually we only analyze historical data for our small subset.
So we have our six stocks and with the historical data for our six stocks we try to find patterns and
relationships and the historical data and with this approach we actually get the most easy and practical
intuition or understanding on concepts like risk diversification.
So there is a difference between systematic risk and and systematic risk.
Then we intuitively understand the Capital Asset Pricing Model or shop cap m.
And finally we will also calculate the better effect of a stock and also the alpha so that's the plan
for the next videos.
And I hope to see you there by.