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💡 Based from Coursera Videos, Live Lectures, and Office Hours (as applicable)
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Learning Objectives:
- Understand the implications of the Separation Theorem of investments
- Understand and use the Capital Asset Pricing Module (CAPM)
- Analyze regressions of stock returns
- Estimate and interpret the ALPHA (α) and BETA (β) of a security
Lesson 2-2: Separation Theorem of Investments
- Return-volatility tradeoffs with two risky assets and one risk-free asset
- Tangency Portfolio & Separation Theorem
- How to construct efficient portfolios with or without shorting assets
Three Reward-Volatility Frontiers

- Combination of Two Asset Types
- The Large and Small Combinations can help show which combination will give a higher rate of returns than Small and RF combination returns for a given level of risk.
Tangency Portfolio

Optimal Capital Allocation Line and Tangency Portfolio