Week 5: Risk and Return in Capital Markets

Learning objectives:

By the end of the fifth week of the course, students should have the ability to

• explain the implications of modern portfolio theory (MPT),
• critically evaluate the use of standard deviation as a proxy for risk,
• distinquish between market (systemic) and unique (non-systemic) risks,
• discuss how globalization may be impacting the role of international diversification,
• explain the role of stock market indexes in the construction of portfolios
• broadly discuss the financial markets, including the role of the Federal Reserve System.