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  • Portfolio Theory - Sharpe Index Model

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    Soumya0866
    16K просмотров36 страниц
    The document discusses portfolio theory and introduces the Capital Asset Pricing Model (CAPM) formula. The CAPM formula calculates the weight (Ci) of each stock in a portfolio based on the stock's beta (βi), the variance of the market index (σm2), the variance of the stock's unsystematic risk (σei2), and the expected return on the market index (Ri) minus the risk-free rate of return (Rf). The document provides an example calculation and solution to demonstrate how to apply the CAPM formula to determine optimal stock weights for a portfolio.

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    Portfolio Theory- Sharpe Index Model

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    The document discusses portfolio theory and introduces the Capital Asset Pricing Model (CAPM) formula. The CAPM formula calculates the weight (Ci) of each stock in a portfolio based on the stock's beta (βi), the variance of the market index (σm2), the variance of the stock's unsystematic risk (σei2), and the expected return on the market index (Ri) minus the risk-free rate of return (Rf). The document provides an example calculation and solution to demonstrate how to apply the CAPM formula to determine optimal stock weights for a portfolio.

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    Attribution Non-Commercial (BY-NC)
    Скачайте в формате PPT, PDF, TXT или читайте онлайн в Scribd
    Отметить как неприемлемый контент
    16K просмотров36 страниц

    Portfolio Theory - Sharpe Index Model

    Загружено:

    Soumya0866
    The document discusses portfolio theory and introduces the Capital Asset Pricing Model (CAPM) formula. The CAPM formula calculates the weight (Ci) of each stock in a portfolio based on the stock's beta (βi), the variance of the market index (σm2), the variance of the stock's unsystematic risk (σei2), and the expected return on the market index (Ri) minus the risk-free rate of return (Rf). The document provides an example calculation and solution to demonstrate how to apply the CAPM formula to determine optimal stock weights for a portfolio.

    Авторское право:

    Attribution Non-Commercial (BY-NC)
    Скачайте в формате PPT, PDF, TXT или читайте онлайн в Scribd
    Отметить как неприемлемый контент
    из 36

    FM 303

    SECURITY ANALYSIS & PORTFOLIO MGT.

    PROF. RANJAN DASGUPTA


    MODULE – 3:

    PORTFOLIO THEORY
    N

    σm2 (Ri ─ Rf)βi


    σei2
    i=1
    Ci = N

    1 + σ m2 βi2
    σei2

    i =1
    Where,
    σm2 = Variance of the Market Index
    σei2 = Variance of a stock’s movement that is not
    associated with the movement of Market
    Index i.e. stock’s unsystematic risk.
    EXAMPLE- 1:
    SOLUTION OF EXAMPLE- 1:
    SOLUTION OF EXAMPLE- 2:
    N

    σm2 (Ri ─ Rf)βi


    σei2
    i=1
    Ci = N

    1 + σ m2 βi2
    σei2

    i =1

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