Search results
Results from the WOW.Com Content Network
The expected return (or expected gain) on a financial investment is the expected value of its return (of the profit on the investment). It is a measure of the center of the distribution of the random variable that is the return. [1] It is calculated by using the following formula: [] = = where
The Capital Market Line says that the return from a portfolio is the risk-free rate plus risk premium. Risk premium is the product of the market price of risk and the quantity of risk, and the risk is the standard deviation of the portfolio. The CML equation is : R P = I RF + (R M – I RF)σ P /σ M. where, R P = expected return of portfolio
Merton's portfolio problem is a problem in continuous-time finance and in particular intertemporal portfolio choice. An investor must choose how much to consume and must allocate their wealth between stocks and a risk-free asset so as to maximize expected utility .
An investment’s “expected return” is a critical number, but in theory it is fairly simple: It is the total amount of money you can expect to gain or lose on an investment with a predictable ...
The MPT is a mean-variance theory, and it compares the expected (mean) return of a portfolio with the standard deviation of the same portfolio. The image shows expected return on the vertical axis, and the standard deviation on the horizontal axis (volatility). Volatility is described by standard deviation and it serves as a measure of risk. [7]
The Formula to Calculate Return on Investment (ROI) Return on investment is the ratio of the purchase price to the difference between the purchase price and the selling price. Even though it is a ...
Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective.The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.
By definition, the value-weighted average of all market-betas of all investable assets with respect to the value-weighted market index is 1. If an asset has a beta above 1, it indicates that its return moves more than 1-to-1 with the return of the market-portfolio, on average; that is, it is more volatile than the market.