portfolio theory- sharpe index model
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FM 303
SECURITY ANALYSIS & PORTFOLIO MGT.
PROF. RANJAN DASGUPTA
MODULE – 3:
PORTFOLIO THEORY
NN σσmm
22 (R (Rii ─ R ─ Rff)β)βii σσeiei
22
i=1i=1CCii = N = N 1 + σ1 + σmm
22 β βii22
σσeiei22
i =1i =1
Where,σm
2 = 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:
NN σσmm
22 (R (Rii ─ R ─ Rff)β)βii σσeiei
22
i=1i=1CCii = N = N 1 + σ1 + σmm
22 β βii22
σσeiei22
i =1i =1
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