Asset on asset l portfolio represented by 1

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Unformatted text preview: rtfolio Proportion of Proportion of portfolio's total Return Return portfolio's total Return + dollar value on = dollar value × on asset × on asset + L + portfolio represented by 1 represented by 2 asset 1 asset 2 Proportion of portfolio's total Return n dollar value = × on asset ∑ j=1 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 Table Return, and Standard Deviation of Returns for Portfolio XY Returns Table 5.2 Expected Returns, Average Table Returns, and Standard Deviations for Assets X, Y, and Z and Portfolios XY and XZ X, Correlation: 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.

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