Session 18: Portfolio Management: Capital Market
Theory and the Portfolio Management Process
Reading 64: Portfolio Concepts
LOS a, (Part 1): Discuss mean–variance analysis and its assumptions.
Mean-variance analysis assumes that investor preferences depend on all of the following EXCEPT:
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[此贴子已经被作者于2010-4-13 20:47:43编辑过]
Mean-variance analysis assumes that investor preferences depend on all of the following EXCEPT:
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Mean-variance analysis assumes that investors only need to know expected returns, variances, and covariances in order create optimal portfolios. The skewness of the distribution of expected returns can be ignored.
One of the assumptions of mean-variance analysis is that all investors are risk-averse, which means they:
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One of the assumptions of mean-variance analysis is that all investors are risk-averse, which means they:
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In mean-variance analysis we assume that all investors are risk averse, which means they prefer less risk to more for any given level of expected return (NOT for any given level of volatility.) It does NOT mean that they are unwilling to take on any risk.
Joe Janikowski owns a portfolio consisting of 2 stocks. Janikowski has compiled the following information:
Stock |
Topper Manufacturing |
Base Construction | |
Expected Return (percent |
12 |
11 | |
Standard Deviation (percent) |
10 |
15 | |
Portfolio Weighting (percent) |
75 |
25 | |
Correlation |
0.22 |
The expected return for the portfolio is:
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Expected return is computed by weighting each stock as a percentage of the entire portfolio, and then multiplying each stock by the expected return. The expected return is: ((0.75 × 12) + (0.25 × 11) =) 11.75.
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Joe Janikowski owns a portfolio consisting of 2 stocks. Janikowski has compiled the following information:
Stock |
Topper Manufacturing |
Base Construction | |
Expected Return (percent |
12 |
11 | |
Standard Deviation (percent) |
10 |
15 | |
Portfolio Weighting (percent) |
75 |
25 | |
Correlation |
0.22 |
The expected return for the portfolio is:
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Expected return is computed by weighting each stock as a percentage of the entire portfolio, and then multiplying each stock by the expected return. The expected return is: ((0.75 × 12) + (0.25 × 11) =) 11.75.
The standard deviation of the portfolio is closest to:
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The formula for the standard deviation of a two-stock portfolio is: the square root of [((0.75)2 × (0.10)2) + ((0.25)2 × (0.15)2) + (2 × (0.75) × (0.25) × (0.22) × (0.15) × (0.10)) =] 0.0909.
[此贴子已经被作者于2010-4-13 20:56:27编辑过]
Which of the following statements is least accurate regarding modern portfolio theory?
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Which of the following statements is least accurate regarding modern portfolio theory?
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All portfolios on the capital allocation line are perfectly positively correlated. Both remaining statements are each true.
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