F420-4 - Click to edit Master subtitle style BUS-F420...

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Unformatted text preview: Click to edit Master subtitle style BUS-F420 Optimal Risky Portfolios January 25, 2010 Announcements: Case due next Tuesday (2/1) Spreadsheet of tables in ONCOURSE case folder Work on the case with your group, bring your write-up to class and be prepared to discuss your answers after the presentation Additionally, If you are presenting, bring slides and be prepared to present for 10-15 minutes If you are acting as management be prepared to ask questions Announcements: For the rest of you, pay attention and be prepared to fill out evaluations on ONCOURSE (in the assignments folder) Everybody (regardless of assignment) will need to fill out peer evaluations for other members of their groups on ONCOURSE (in the assignments folder) Today: Optimal Risky Portfolios Portfolios of Risky Assets Diversification Optimal Portfolios Markowitz Portfolio Selection Model In the previous lecture we saw that we can reduce total risk by adding risk free assets to our portfolio Can we do the same thing using only risky assets? If we hold both ExxonMobil and Apple, for example, can we reduce risk? Portfolios Diversification Some risks affect all stocks: On September 17, 2001, of 7,553 traded stocks 5,837 fell in price Other risks affect a small number of stocks Kmarts decision to file for bankruptcy probably didnt affect many other stocks The first type of risk is called: market risk systematic risk nondiversifiable risk The second type of risk is called: unique risk firm-specific risk nonsystematic risk diversifiable risk Diversification Portfolio Risk as a Function of the Number of Stocks in the Portfolio...
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This note was uploaded on 02/07/2011 for the course BUS-F 420 taught by Professor Israelison during the Spring '11 term at Indiana.

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F420-4 - Click to edit Master subtitle style BUS-F420...

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