Management and Organizational Studies 2310A/B Chapter 11: CHAPTER RECAP

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Danny Morrison

Document Summary

As financial managers, we must remember that investors hold our stock as part of a larger portfolio. It is important to understand how portfolios work and the implications for the return our investors expect on the stock of our company and the projects we undertake. : the fraction of the total investment in a portfolio held in each individual investment in the portfolio. = value of investment (i) / total value of portfolio. Portfolio weights add up to 100% so that they represent the way we have divided our money between the different individual investments in the portfolio. Once you know the portfolio weight, you can calculate the return on the portfolio. : the weighted average on the returns on the investments in a portfolio, where the weights correspond to the portfolio weights. = (weight1 x return 1) + (weight2 x return2) + ( weight n x return n )