Somewhre in my notes, I had mentioned which of them create a band, cant find that snippet...
Diff cost of lending and borrowing
zero beta portfolio
transaction costs---this am sure creates a band
heterogenous expectations
can u guys tell abt others..?作者: Beatnik 时间: 2011-7-11 19:50
acer Wrote:
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> Somewhre in my notes, I had mentioned which of
> them create a band, cant find that snippet...
>
> Diff cost of lending and borrowing
==> Diminish returns due to the reverse kink
> zero beta portfolio
==> result in an SML with reverse risk -- no SYS but some UNSYS, starting at a higher intercept and flatter slope
> transaction costs---this am sure creates a band
> heterogenous expectations
==> results in a Band
^^^ may need corrections additions作者: JPSem 时间: 2011-7-11 19:50
This is very testable material, definitely came up in December if I remember correctly作者: joemoran 时间: 2011-7-11 19:50
> Diff cost of lending and borrowing
==> Diminish returns due to the reverse kink
Could somone please explain this one?作者: FVPV 时间: 2011-7-11 19:50
brafique Wrote:
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> > Diff cost of lending and borrowing
> ==> Diminish returns due to the reverse kink
>
>
> Could somone please explain this one?
I believe, and someone please correct me if I'm wrong, it is because the higher borrowing rate would eat into the return of a borrowing portfolio which creates a kink in the line as opposed to a straight line. I assume brafique referred to it as a reverse kink when compared to one of the chart in econ (demand curve for an oligopoly maybe?) which goes in the other direction.作者: marsilni 时间: 2011-7-11 19:50
