投资公司英文提案CHT08.pptVIP

Chapter 8 Optimal Risky Portfolios Risk Reduction with Diversification Two-Security Portfolio: Return Two-Security Portfolio: Risk Covariance Correlation Coefficients: Possible Values Three-Security Portfolio In General, For an n-Security Portfolio: Two-Security Portfolio Two-Security Portfolios withDifferent Correlations Portfolio Risk/Return Two Securities: Correlation Effects Relationship depends on correlation coefficient -1.0 ? +1.0 The smaller the correlation, the greater the risk reduction potential If???= +1.0, no risk reduction is possible Minimum-Variance Combination Minimum-Variance Combination: ? = .2 Minimum -Variance: Return and Risk with ? = .2 Minimum -Variance Combination: ? = -.3 Minimum -Variance: Return and Risk with ? = -.3 Extending Concepts to All Securities The optimal combinations result in lowest level of risk for a given return The optimal trade-off is described as the efficient frontier These portfolios are dominant The Minimum-Variance Frontierof Risky Assets Extending to Include Riskless Asset The optimal combination becomes linear A single combination of risky and riskless assets will dominate Alternative CALs Portfolio Selection Risk Aversion Efficient Frontier with Lending Borrowing ? The McGraw-Hill Companies, Inc., 1999 INVESTMENTS Fourth Edition Bodie Kane Marcus 8-* Number of Securities St. Deviation Market Risk Unique Risk rp = W1r1 + W2r2 W1 = Proportion of funds in Security 1 W2 = Proportion of funds in Security 2 r1 = Expected return on Security 1 r2 = Expected return on Security 2 ?p2 = w12?12 + w22?22 + 2W1W2 Cov(r1r2) ?12 = Variance of Security 1 ?22 = Variance of Security 2 Cov(r1r2) = Covariance of returns for Security 1 and Security 2 ?1,2 = Correlation coefficient of returns Cov(r1r2) = ?????1?2 ?1 = Standard deviation of returns for Security 1 ?2 = Standard deviation of returns for Security 2 Range of values for ?1,