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What is a dominant portfolio?
Dominant Portfolio is part of the efficient frontier in modern porfolio theory. If a portfolio has a higher expected return than another portfolio with the same level of risk, a lower level of expected risk than another portfolio with equal expected return or a higher expected return and lower expected risk than the the portfolio is dominant.
What is role of portfolio manager?
Deciding the Best Investment plan for an individual by considering income ,age and capability to take risk. Risk diversification Efficient portfolio Asset Allocation Beta Estimation Rebalncing Portfolio Portfolio Revision Risk and Return Analysis of a security.
What Portfolio is located on the capital market line to the left of the market portfolio?
a portfolio with a long position in risk free assest
What type of risk is avoidable through proper diversification?
portfolio risk
Sharpex index model of optimum portfolio with examples?
The Sharpe Index Model, also known as the Capital Asset Pricing Model (CAPM), is used to find the optimal portfolio by balancing risk and return. It measures the excess return of a portfolio compared to a risk-free rate per unit of risk (beta). An example would be constructing a portfolio of diversified assets that maximizes return for a given level of risk, based on the relationship between the portfolio's expected return, the risk-free rate, and the market risk premium.
What is the difference between an efficient portfolio and the optimal portfolio?
The difference is that an efficient portfolio is one that offers the lowest risk for the greatest return or vice versa. An optimal portfolio is one that is preferred by investors because it is tailored specifically to the individual's risk preferences.
A primary advantage associated with holding a diversified portfolio of financial assets is the reduction of risk The relevant risk a particular stock would contribute to?
A primary advantage associated with holding a diversified portfolio of financial assets is the reduction of risk. The relevant risk a particular stock would contribute to a well-diversified portfolio is the stock.
What is portfolio revision?
Portfolio revision is the process of reviewing and making changes to an investment portfolio. This may involve rebalancing the portfolio to maintain desired asset allocation, adding or removing investments based on market conditions or changing investment goals, or adjusting the risk level of the portfolio. Portfolio revision is important to ensure that the portfolio continues to align with the investor's objectives and risk tolerance.
What is the three types of investment portfolio?
Based on your risk tolerance level we can form 3 basic kinds of portfolios. 1. Aggressive Portfolio - For individuals with high risk tolerance 2. Balanced Portfolio - For individuals with average risk tolerance 3. Conservative Portfolio - For individuals with low risk tolerance You have to decide in which category you would fall into. It is not mandatory to choose only these 3 portfolio's. You can opt to be somewhere between an aggressive and balanced portfolio wherein your investments would neither fall under aggressive category nor would they fall under balanced. Your investment objective & horizon and risk taking ability would determine the kind of portfolio that would suit you.
What is the best measure of risk for an asset held in a well-diversified portfolio?
The measure of risk for an asset in a diversified portfolio is greatly dependent on the type of asset it is. And to narrow it down further, the name of the asset is vital to a complete answer. The best answer on the information provided is what percentage of the portfolio does the asset comprise of the portfolio.
What is the appropriate measure of risk for an asset held in a diversified portfolio?
The appropriate measure of risk for an asset held in a diversified portfolio is its systematic risk, often quantified by beta. Beta reflects the asset's sensitivity to market movements and indicates how much the asset's returns are expected to change in relation to changes in the overall market. Unlike total risk, which includes unsystematic risk that can be mitigated through diversification, systematic risk captures the inherent risk associated with market-wide factors. Thus, for investors in a diversified portfolio, beta is the key metric for assessing an asset's contribution to overall portfolio risk.
How a given investors chooses an optimal portfolio?
An investor chooses an optimal portfolio by assessing their risk tolerance, investment goals, and time horizon. They typically use modern portfolio theory to balance expected returns against risk, aiming to maximize returns for a given level of risk or minimize risk for a desired return. Diversification across asset classes is also key to reducing overall portfolio volatility. Finally, regular re-evaluation and adjustment of the portfolio help to align it with changing market conditions and personal circumstances.
