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Foreword | |

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Acknowledgments | |

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Introduction | |

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The Time Value of Money | |

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Introduction | |

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Interest Rates: Interpretation | |

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The Future Value of a Single Cash Flow | |

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The Frequency of Compounding | |

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Continuous Compounding | |

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Stated and Effective Rates | |

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The Future Value of a Series of Cash Flows | |

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Equal Cash Flows-Ordinary Annuity | |

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Unequal Cash Flows | |

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The Present Value of a Single Cash Flow | |

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Finding the Present Value of a Single Cash Flow | |

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The Frequency of Compounding | |

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The Present Value of a Series of Cash Flows | |

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The Present Value of a Series of Equal Cash Flows | |

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The Present Value of an Infinite Series of Equal Cash Flows-Perpetuity | |

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Present Values Indexed at Times Other Than t = 0 | |

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The Present Value of a Series of Unequal Cash Flows | |

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Solving for Rates, Number of Periods, or Size of Annuity Payments | |

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Solving for Interest Rates and Growth Rates | |

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Solving for the Number of Periods | |

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Solving for the Size of Annuity Payments | |

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Review of Present and Future Value Equivalence | |

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The Cash Flow Additivity Principle | |

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Discounted Cash Flow Applications | |

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Introduction | |

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Net Present Value and Internal Rate of Return | |

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Net Present Value and the Net Present Value Rule | |

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The Internal Rate of Return and the Internal Rate of Return Rule | |

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Problems with the IRR Rule | |

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Portfolio Return Measurement | |

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Money-Weighted Rate of Return | |

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Time-Weighted Rate of Return | |

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Money Market Yields | |

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Statistical Concepts and Market Returns | |

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Introduction | |

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Some Fundamental Concepts | |

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The Nature of Statistics | |

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Populations and Samples | |

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Measurement Scales | |

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Summarizing Data Using Frequency Distributions | |

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The Graphic Presentation of Data | |

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The Histogram | |

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The Frequency Polygon and the Cumulative Frequency Distribution | |

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Measures of Central Tendency | |

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The Arithmetic Mean | |

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The Median | |

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The Mode | |

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Other Concepts of Mean | |

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Other Measures of Location: Quantiles | |

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Quartiles, Quintiles, Deciles, and Percentiles | |

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Quantiles in Investment Practice | |

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Measures of Dispersion | |

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The Range | |

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The Mean Absolute Deviation | |

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Population Variance and Population Standard Deviation | |

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Sample Variance and Sample Standard Deviation | |

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Semivariance, Semideviation, and Related Concepts | |

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Chebyshev's Inequality | |

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Coefficient of Variation | |

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The Sharpe Ratio | |

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Symmetry and Skewness in Return Distributions | |

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Kurtosis in Return Distributions | |

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Using Geometric and Arithmetic Means | |

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Probability Concepts | |

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Introduction | |

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Probability, Expected Value, and Variance | |

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Portfolio Expected Return and Variance of Return | |

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Topics in Probability | |

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Bayes' Formula | |

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Principles of Counting | |

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Common Probability Distributions | |

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Introduction | |

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Discrete Random Variables | |

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The Discrete Uniform Distribution | |

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The Binomial Distribution | |

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Continuous Random Variables | |

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Continuous Uniform Distribution | |

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The Normal Distribution | |

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Applications of the Normal Distribution | |

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The Lognormal Distribution | |

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Monte Carlo Simulation | |

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Sampling and Estimation | |

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Introduction | |

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Sampling | |

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Simple Random Sampling | |

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Stratified Random Sampling | |

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Time-Series and Cross-Sectional Data | |

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Distribution of the Sample Mean | |

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The Central Limit Theorem | |

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Point and Interval Estimates of the Population Mean | |

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Point Estimators | |

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Confidence Intervals for the Population Mean | |

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Selection of Sample Size | |

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More on Sampling | |

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Data-Mining Bias | |

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Sample Selection Bias | |

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Look-Ahead Bias | |

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Time-Period Bias | |

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Hypothesis Testing | |

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Introduction | |

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Hypothesis Testing | |

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Hypothesis Tests Concerning the Mean | |

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Tests Concerning a Single Mean | |

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Tests Concerning Differences between Means | |

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Tests Concerning Mean Differences | |

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Hypothesis Tests Concerning Variance | |

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Tests Concerning a Single Variance | |

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Tests Concerning the Equality (Inequality) of Two Variances | |

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Other Issues: Nonparametric Inference | |

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Tests Concerning Correlation: The Spearman Rank Correlation Coefficient | |

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Nonparametric Inference: Summary | |

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Correlation and Regression | |

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Introduction | |

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Correlation Analysis | |

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Scatter Plots | |

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Correlation Analysis | |

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Calculating and Interpreting the Correlation Coefficient | |

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Limitations of Correlation Analysis | |

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Uses of Correlation Analysis | |

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Testing the Significance of the Correlation Coefficient | |

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Linear Regression | |

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Linear Regression with One Independent Variable | |

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Assumptions of the Linear Regression Model | |

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The Standard Error of Estimate | |

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The Coefficient of Determination | |

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Hypothesis Testing | |

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Analysis of Variance in a Regression with One Independent Variable | |

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Prediction Intervals | |

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Limitations of Regression Analysis | |

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Multiple Regression and Issues in Regression Analysis | |

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Introduction | |

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Multiple Linear Regression | |

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Assumptions of the Multiple Linear Regression Model | |

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Predicting the Dependent Variable in a Multiple Regression Model | |

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Testing Whether All Population Regression Coefficients Equal Zero | |

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Adjusted R[superscript 2] | |

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Using Dummy Variables in Regressions | |

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Violations of Regression Assumptions | |

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Heteroskedasticity | |

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Serial Correlation | |

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Multicollinearity | |

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Heteroskedasticity, Serial Correlation, Multicollinearity: Summarizing the Issues | |

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Model Specification and Errors in Specification | |

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Principles of Model Specification | |

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Misspecified Functional Form | |

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Time-Series Misspecification (Independent Variables Correlated with Errors) | |

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Other Types of Time-Series Misspecification | |

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Models with Qualitative Dependent Variables | |

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Time-Series Analysis | |

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Introduction | |

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Challenges of Working with Time Series | |

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Trend Models | |

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Linear Trend Models | |

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Log-Linear Trend Models | |

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Trend Models and Testing for Correlated Errors | |

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Autoregressive (AR) Time-Series Models | |

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Covariance-Stationary Series | |

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Detecting Serially Correlated Errors in an Autoregressive Model | |

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Mean Reversion | |

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Multiperiod Forecasts and the Chain Rule of Forecasting | |

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Comparing Forecast Model Performance | |

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Instability of Regression Coefficients | |

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Random Walks and Unit Roots | |

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Random Walks | |

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The Unit Root Test of Nonstationarity | |

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Moving-Average Time-Series Models | |

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Smoothing Past Values with an n-Period Moving Average | |

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Moving-Average Time-Series Models for Forecasting | |

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Seasonality in Time-Series Models | |

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Autoregressive Moving-Average Models | |

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Autoregressive Conditional Heteroskedasticity Models | |

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Regressions with More than One Time Series | |

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Other Issues in Time Series | |

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Suggested Steps in Time-Series Forecasting | |

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Portfolio Concepts | |

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Introduction | |

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Mean-Variance Analysis | |

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The Minimum-Variance Frontier and Related Concepts | |

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Extension to the Three-Asset Case | |

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Determining the Minimum-Variance Frontier for Many Assets | |

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Diversification and Portfolio Size | |

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Portfolio Choice with a Risk-Free Asset | |

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The Capital Asset Pricing Model | |

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Mean-Variance Portfolio Choice Rules: An Introduction | |

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Practical Issues in Mean-Variance Analysis | |

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Estimating Inputs for Mean-Variance Optimization | |

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Instability in the Minimum-Variance Frontier | |

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Multifactor Models | |

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Factors and Types of Multifactor Models | |

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The Structure of Macroeconomic Factor Models | |

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Arbitrage Pricing Theory and the Factor Model | |

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The Structure of Fundamental Factor Models | |

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Multifactor Models in Current Practice | |

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Applications | |

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Concluding Remarks | |

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Appendices | |

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References | |

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Glossary | |

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About the CFA Program | |

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About the Authors | |

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Index | |