portfolio management
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Portfolio Management. 7. How to calculate Return of a Portfolio (rp) and Risk of a Portfolio ( σ p). rp = Weighted Average Return of Individual Asset - PowerPoint PPT PresentationTRANSCRIPT
Portfolio Management
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7. How to calculate Return of a Portfolio (rp) and Risk of a Portfolio (σp)
rp = Weighted Average Return of Individual Asset
The risk of a Portfolio is always lower than weighted average risk of Individual Asses except where correlation coefficient is equal to one.
As per Markowitz, the risk (σp2) of a portfolio consisting of n assets is given by :
Σ2p = ∑i∑j [ xi × xj × σi × σj × rij ]
Weight SD Correlation Coefficient