BUSI 2402U Lecture Notes - Lecture 2: Stock Market, Market Capitalization, Westjet
Document Summary
Chapter 11 - systematic risk and the equity risk premium. Portfolio weights: the fraction of the total investment in a portfolio held in each individual investment in the portfolio, portfolio weights add up to 100% (that is, w1 + w2 + wn = 100%) Return on a portfolio: the weighted average of the returns on the investments in a portfolio, where the weights correspond to the portfolio weights, *slide 8 - for the example of the return* 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, *slide 19 - for the example of expected return* Investors care about return, but also risk: when we combine stocks in a portfolio, some risk is eliminated through diversification. Remaining risk depends upon the degree to which the stocks share common risk.
