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1 II. The Two Security Case and The Case of Multiple Assets
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2 Can calculate from past data For future can only estimate with uncertainty How Proceed Simple Example Develop Equations of Portfolio Analysis Return
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3 Return R 1 Probability 0.00.10 0.12.80 0.24.10 How Summarize
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4 0.00.10.12.80.24.10
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9 RP.0.01E(R) =.12.06.16 =.00144.12.66.18.16.24.01
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10 DERIVATION OF PORTFOLIO CHARACTERIESTICS 2 SECURTITIES R p = X A R A + X B R B 1.E(R p ) = X A E (R A ) + X B E (R B ) 2. 3.
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12 THREE QUALITIES THAT ARE IMPORTANT 1.EXPECTED RETURN 2.STANDARD DEVIATION 3.CORRELATION
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14 More than two securities 1. 2.
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15 1. 3. OR Basis of every product and insight in portfolio management since Markowitz.
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