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Unformatted text preview: rtfolio Proportion of Proportion of portfolio's total
Return portfolio's total
Return + dollar value
= dollar value
× on asset
× on asset + L + portfolio
1 represented by
2 asset 1
asset 2 Proportion of portfolio's total
Return n dollar value
× on asset
n represented by asset n Proportion of portfolio's total
Return dollar value
× on asset j represented by asset j rp = (w1 × r1 ) + (w2 × r2 ) + L + (wn × rn ) = ∑ (w
n j =1 j × rj ) Table 5.1 Expected Return, Average
Return, and Standard Deviation of
Returns for Portfolio XY
Returns Table 5.2 Expected Returns, Average
Returns, and Standard Deviations for Assets
X, Y, and Z and Portfolios XY and XZ
Why Diversification Works!
Why Correlation is a statistical measure of the relationship between two series of numbers representing data
Positively Correlated items move in the same direction
Negatively Correlated items move in opposite directions
Correlation Coefficient is a measure of the degree of correlation between two series of numbers representing data Correlation Coefficients
Correlation Perfectly Positively Correlated describes two positively correlated series having a correlation coefficient of +1
Perfectly Negatively Correlated describes two negatively correlated...
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This note was uploaded on 10/31/2012 for the course ECON 435 taught by Professor Staff during the Fall '08 term at Maryland.
- Fall '08