chapter 7 optimal risky portfolioL课件.pptVIP

Optimal Risky Portfolio;Outline ;1 Diversification and Portfolio Risk;;Unsystematic (Asset Specific) Risk;The Effect of Diversification;Figure 7.1 Portfolio Risk as a Function of the Number of Stocks in the Portfolio;Figure 7.2 Portfolio Diversification;Types of Diversification;Concept Review;2 Portfolios of Two Risky Assets;Two-Security Portfolio: Return;Expected Return on the Two- Security Portfolio;Two-Security Portfolio: Risk;COV(ri,ri)= The variance of the portfolio is a weighted sum of covariances Each weight is the product of the portfolio proportions of the pair of assets in the covariance term.;Variance is reduced if the covariance term is negative. Even if the covariance term is positive, the portfolio standard deviation still is less than the weighted average of the individual security standard deviations, unless the two securities are perfectly positively correlated.;Table 7.2 Computation of Portfolio Variance From the Covariance Matrix;?D,E = Correlation coefficient of returns ;Range of values for ?1,2 :;If r =1, then;If r1, then;The expected return is the weighted average of its component expected return ,which is unaffected by correlation between returns. The standard deviation is less than the weighted average of the component standard deviation. The lower the correlation between the assets, the greater the gain in efficiency.;If r=-1, then;Then a perfectly hedged position can be obtained by choosing the portfolio proportions to solve:;Descriptive statistics for two risky portfolios;蹬俭添绎异猖胖基补理淹轮廓拓魏譬豌腊众网阂粱劫醋郴剔气赃早沦不匙chapter 7 optimal risky portfolioL课件chapter 7 optimal risky portfolioL课件;Figure 7.3 Portfolio Expected Return as a Function of Investment Proportions;What is the minimum level to which portfolio s can be hold?;Minimum-Variance Portfolio;　;Figure 7.4 Portfolio Standard Deviation as a Function of Investment Proportions;Figure 7.5 Portfolio Expected Return as a Function of Standard Deviation ;Relationship depends on correlation coefficien