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![]() In finance and statistics, the greek letter rho squared represents variance. The return of our fruit portfolio could be modeled as a sum of the weighted average of each fruit’s expected return. We decided to invest in all three, because the previous chapters on diversification had a profound impact on our investment strategy, and we now understand that diversifiable risk doesn’t pay a risk premium, so we try to eliminate it.Ī Fruitful Portfolio: How would you calculate the expected return on this portfolio? Let’s say that we have a portfolio that consists of three assets, and we’ll call them Apples, Bananas, and Cherries. It is implied that all the individual weights add to 1.
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