Unformatted text preview: Hard to compute STD = Sigma(Ri) = Sigma I = squire root of variance Interpretation the unit of measure  % Find the P E(Ri) = summation of Ps X Ri,s E(Rp) = summation of Ps X Rp,s E(Rp) = Summation of Wi X E(Ri) = [Wa X E(Ra)]+[Wb X E(Rb)] Rp,1 = (0.6 X .17) + (0.4 X 0.01) = 10.6% Rp,2 = (0.6 X .1) + (0.4 X 0.08) = 9.2% Rp,3 = (0.6 X 0.02) + (0.4 X 0.16) = 5.2% The STD of P of 1.897% shows that diversification give less risk than any of the individual stocks....
View
Full Document
 '09
 Pagani,Marco
 Summation, Modern portfolio theory, Diversification Covariance Corr, variance Interpretation

Click to edit the document details