Flashcards in Week 3 - Capital markets And The Pricing Of Risk Deck (5)
As the number of securities in a portfolio goes up, the portfolio risk goes...
What are the Two types of risk and what do they mean?
- The unique risk of each security in a portfolio.
- Unsystematic risk can be diversified away.
- The risk to the market as a whole.
- Systematic risk is unavoidable.
How is the portfolio weighting calculated?
Wi = Value of Investment/ Total Value of Portfolio
What is the covariance of two stocks?
The degree to which two stocks face the same risks.