16655 Lecture Notes - Lecture 1: Harry Markowitz, South Sydney Rabbitohs, Weighted Arithmetic Mean
Document Summary
If i place two bets which both have equal payoff one pays off if the rabbitohs win this weekend and one that pays off if they lose i have no risk on the outcome of the match. If i buy one investment that generally goes up with the market and another investment that generally goes down with the market, then i am less exposed to movements in the market. If i buy one stock, i"m exposed to things that make the asx200 go up and down, but very exposed to things that impact on that individual stock. Portfolio return: weighted average of each stock or asset in the portfolio: portfolio. Asset a stocks: weight 22. 5%, return 10% Asset b bonds: weight 67. 5%, return 6% Asset c real estates: weight 10. 0%, return 7: portfolio return (. 225x10) + (. 675x6) + (. 10x7) = 7%
