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Portfolio Management

Portfolio Management. 4. Return Measurement. 1. Historical Data AM : Arithmatic Mean = r = r1 + r2 +…..rn / n GM : Geometric Mean = (1 + r) n = (1 + r1)(1 + r2)…..(1 + rn) 2. Expected Data Expected Return Er = ∑ (ri × Pi) 3. Theoretical Data

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Portfolio Management

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  1. Portfolio Management

  2. 4. Return Measurement 1. Historical Data AM : Arithmatic Mean = r = r1 + r2 +…..rn / n GM : Geometric Mean = (1 + r)n = (1 + r1)(1 + r2)…..(1 + rn) 2. Expected Data Expected Return Er = ∑ (ri × Pi) 3. Theoretical Data CAL : Capital Allocation Line CML : Capital Market Line SML : Security Market Line ADL or Multi Factor Model www.Safeecollege.com

  3. Summary : AM = GM when return for each period are Same AM > GM when return for each period are different In fact more is the volatility between period returns, AM would be more deviated from GM. www.Safeecollege.com

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