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Level 82

Systematic Risk & the Equity Risk Premium


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Portfolio Weights
The fraction of the total investment in a portfolio held in each individual investment in the portfolio.
Return of a Portfolio
The weighted average of the returns on the investments in a portfolio, where the weights correspond to the portfolio weights.
Expected Return of a Portfolio
The weighted average of the expected returns of the investments in a portfolio, where the weights correspond to the portfolio weights.
Volatility of a portfolio
The total risk, measured as standard deviation, of a portfolio.
correlation
the extent to which variables are related
Equally Weighted Portfolio
A portfolio in which the same amount of money is invested in each stock.
Market Portfolio
The portfolio of all risky investments, held in proportion to their value.
market capitalization
number of shares issued by listed corporations multiplied by current share prices
Value-Weighted Portfolio
A Portfolio in which each security is held in proportion to its market capitalization.