In: Finance
Stock | % of Portfolio | Beta | Expected Return |
Walmart | 20 | 1.00 | 16% |
Borders | 30 | 0.85 | 14% |
Hasbro | 15 | 1.2 | 20% |
Five Below | 25 | .6 | 12% |
Outback | 10 | 1.6 | 24% |
What is the portfolio beta?
Beta of portfolio is weighted average of the beta of components within the portfolio.
Beta = w1 * Beta1 + w2 * Beta2 + w3 * Beta3 + w4 * Beta4 + w5 * Beta5
Beta = 20% * 1 + 30% * 0.85 + 15% * 1.2 + 25% * 0.6 + 10% * 1.6
Beta = 0.2 + 0.255 + 0.18 + 0.15 + 0.16
Beta = 0.945
Beta = 0.95