{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

07B Fin 301 Risk and return II - Risk and Return II What Is...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Risk and Return II 2 What Is the Market Portfolio? An asset’s contribution to a portfolio’s risk depends on its covariance with other asset’s in the portfolio Ultimate diversification: invest a fraction of your wealth in each available asset (in the entire world), i.e. hold the entire “market” Use market value weights: i.e. large weight on Microsoft and small weight on small firms Theory: market portfolio = collection of all available assets Practice: use TSE or S&P500 stock index 3 Risk 2 2 2 2 i M i i Systematic Idiosyncratic
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon