Question

In: Finance

If I have two portfolios and each of them has a beta of 2, can I...

If I have two portfolios and each of them has a beta of 2, can I conclude that they have the same risk?

Solutions

Expert Solution

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. In other words, beta gives a sense of a stock's market risk compared to the greater market. Beta is also used to compare a stock's market risk to that of other stocks.

Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.
So, i would like to conclude that the portfolio's with same beta value have same risk involve in it. some times beta values may go wrong because volatility of stocks depends on many factors like news based, trend etc which are actully not considered by beta.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

I have 2 populations of people (only 3 people in each) and I give them a...
I have 2 populations of people (only 3 people in each) and I give them a memory test with 20 items and get the number of words they can recall.   For the first data set the number of items recalled is 10,13,and 16 and for the second dataset the scores are 9,12, and 15. A.   What would be the most appropriate measure of central tendency to use for both data sets.   Compute that number and describe the results and conclusion...
I have the following information on 6 sets of two assets portfolios Expected Return portfolio ,...
I have the following information on 6 sets of two assets portfolios Expected Return portfolio , Covariance , Correlation, portfolio variance, portfolio std dev. I have also calculated the risk adjusted return for each portfolio If I had to make a recommendation to an investor what would I be looking for to minimize the portfolio risk ?
Suppose that there are two workers, i = 1, 2, and each can “work” (si =...
Suppose that there are two workers, i = 1, 2, and each can “work” (si = 1) or “shirk” (si = 0). The total output of the team is 4(s1+s2) and is shared equally between the two workers. Each worker incurs private cost 3 while working and 0 while shirking. Write down this as a normal-form game. Check whether there is any dominated strategy or not. Does iterated elimination of strictly dominated strategy give us any solution?
I have 2 10-sided die and I roll them both. If the sum of the die...
I have 2 10-sided die and I roll them both. If the sum of the die is greater than a target value (not less than or equal to) you make the difference in dollars. The target value is 14. Using all the money I make from this game, I also buy a race track. I bought 25 of the nicest horses. I have a 5 lane race track as well. Let A be the amount of money (in cents) you...
I need this in java on textpad. There are two files, both have instructions in them...
I need this in java on textpad. There are two files, both have instructions in them on what to add in the code. They are posted below. public class MyArrayForDouble { double[] nums; int numElements; public MyArrayForDouble() { // Constructor. automatically called when creating an instance numElements = 0; nums = new double[5]; } public MyArrayForDouble(int capacity) { // Constructor. automatically called when creating an instance numElements = 0; nums = new double[capacity]; } public MyArrayForDouble(double[] nums1) { nums =...
Player I and player II each have two pennies. Each player holds 0, 1, or 2...
Player I and player II each have two pennies. Each player holds 0, 1, or 2 pennies in his left hand and the remainder of the pennies (2, 1, or 0 respectively) in his right hand. Each player reveals both hands simultaneously. If the number of coins in one of player I's hands is greater than the number of coins in the respective hand of player II, player I wins the difference in pennies; otherwise, no money is exchanged. (a)....
I have two questions that need to be answered, I can't figure them out: 1) Steve...
I have two questions that need to be answered, I can't figure them out: 1) Steve Coleman has just won the state lottery and has the following three payout options for afterminus?tax prize? money:1. $ 152 comma 000$152,000 per year at the end of each of the next six years2. $ 318 comma 000$318,000 ?(lump sum) now3. $ 500 comma 000$500,000 ?(lump sum) six years from now The annual discount rate is? 9%. Compute the present value of the second...
How do i Analyze the risk and return of two portfolios and recommend a choice to...
How do i Analyze the risk and return of two portfolios and recommend a choice to a client, providing justifications.
In the market for melons, there are two identical firms: Alpha and Beta. Each firm has...
In the market for melons, there are two identical firms: Alpha and Beta. Each firm has a constant marginal cost of $0.28 and no fixed cost (so the average cost is equal to marginal cost). The demand in the market is ?=1,000−1,000∙?. a) What is the Cournot equilibrium (output and profit)? Show your work. b) What is the Stackelberg equilibrium (output and profit) (assume Alpha decides first its output)?
In the market for melons, there are two identical firms: Alpha and Beta. Each firm has...
In the market for melons, there are two identical firms: Alpha and Beta. Each firm has a constant marginal cost of $0.28 and no fixed cost (so the average cost is equal to marginal cost). The demand in the market is ?=1,000−1,000∙?. a) What is the Cournot equilibrium (output and profit)? Show your work. b) What is the Stackelberg equilibrium (output and profit) (assume Alpha decides first its output)? Show your work.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT