Portfolio Management
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Portfolio Management
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Portfolio Management. 15. How to Calculate ß arket Risk or Systematic Risk. ßi = Beta of Asset `i` ßi = COV ( ri, rm) Return of Market Portfolio σ m 2 Variance of Market Portfolio Equate value of Covariance : - PowerPoint PPT Presentation
Transcript of Portfolio Management
Portfolio Management
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15. How to Calculate ß arket Risk or Systematic Risk
ßi = Beta of Asset `i`
ßi = COV ( ri, rm) Return of Market Portfolio
σm2 Variance of Market Portfolio
Equate value of Covariance :
ßi = σi ri,m Total Risk of `i` × Correlation Coefficient with `m`
σm Total Risk of `m`
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ß =
ß with market risk of asset `i` with respect to market risk of `m` (index). Therefore it measures relative Systematic risk (or market risk) [Beta is not an absolute measure of risk]
Systematic Risk of `i`
Systematic Risk of `m`