1. 1 II. The Two Security Case and The Case of Multiple Assets

2. 2 Can calculate from past data For future can only estimate with uncertainty How Proceed Simple Example Develop Equations of Portfolio Analysis Return

3. 3 Return R 1 Probability 0.00.10 0.12.80 0.24.10 How Summarize

4. 4 0.00.10.12.80.24.10

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7. 7

8. 8

9. 9 RP.0.01E(R) =.12.06.16 =.00144.12.66.18.16.24.01

10. 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.

11. 11

12. 12 THREE QUALITIES THAT ARE IMPORTANT 1.EXPECTED RETURN 2.STANDARD DEVIATION 3.CORRELATION

13. 13

14. 14 More than two securities 1. 2.

15. 15 1. 3. OR Basis of every product and insight in portfolio management since Markowitz.