Example sentences of "[art] market portfolio " in BNC.
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| 1 | The question of measuring the response of the futures market to changes in the rate of return on the market portfolio will be considered further in Chapter 7 . |
| 2 | For example , the available evidence suggests that commodity futures are subject to little systematic risk , while index futures have roughly the same systematic risk as the market portfolio , which is the portfolio of all shares in the market held in proportion to their market capitalization . |
| 3 | This linear relationship can be stated as E ( R i ) = r + [ E ( R M ) - r ] β i , where E ( R j ) is the expected return on the asset , E ( R M ) is the expected return on the market portfolio ( usually proxied by a stock market index ) and r is the risk-free interest rate . |
| 4 | The systematic risk of the i th asset is measured by where represents the variance of returns on the market portfolio . |
| 5 | Therefore , given the risk of the market portfolio ( ) , systematic risk is determined by the β i coefficient , which quantifies the extent to which returns on the asset are correlated with those of the market , that is , β i = Cov ( R i , R M ) /Var ( R M ) . |
| 6 | Ignoring dividends , she restated the security market line in terms of spot prices as [ E ( S t +1 ; ) - S t ( 1 + r ) ] /S t = [ E ( R M ) - r ] β i , where β i is the beta value of the asset underlying the future , with respect to the market portfolio . |
| 7 | The basket of shares in the index is seldom identical to the market portfolio and so the basket of shares corresponding to the index may have a beta value ( with respect to the market portfolio ) that differs from unity . |
| 8 | The basket of shares in the index is seldom identical to the market portfolio and so the basket of shares corresponding to the index may have a beta value ( with respect to the market portfolio ) that differs from unity . |
| 9 | Thus E ( R I ) = r + [ E ( R M ) - r ] β F , where R l is the return on the shares in the index , and F is the beta value of the portfolio of shares in the index , with respect to the market portfolio . |
| 10 | If the no-arbitrage condition applies , the beta value for the index portfolio with respect to the market portfolio ( β F ) is also the beta value of the future with respect to the market portfolio . |
| 11 | If the no-arbitrage condition applies , the beta value for the index portfolio with respect to the market portfolio ( β F ) is also the beta value of the future with respect to the market portfolio . |
| 12 | To the extent that the technological success is not highly correlated with the returns on the market portfolio , the project is not so risky for a well-diversified shareholder . |
| 13 | They will have varying proportions of the market portfolio and the risk-free asset to the extent that there will be lending and borrowing portfolios ( see Fig. 4.5 ) . |
| 14 | However , the main conclusion is that each investor , whatever his or her preferences as to risk aversion ( or otherwise ) , will have an investment in the market portfolio . |
| 15 | Therefore , it is appropriate to start at the market portfolio and consider it in some depth . |
| 16 | The market portfolio |
| 17 | Therefore it follows that the optimum portfolio ( which is called the ‘ market ’ portfolio ) will consist of all investment assets in the market and that each asset will be held in proportion to the ratio of its own market value to the total market value : where W i is the weight of asset i in the market portfolio . |
| 18 | This proposition may be illustrated by considering a situation in which an investor creates a portfolio consisting of share I and the market portfolio M. If the proportion invested in I is defined as W i ( in effect W i measures the excess demand for asset I when positive and excess supply of asset I when negative ; when W i is zero then the capital market is in equilibrium as there is neither excess demand nor excess supply of asset I ) and the proportion invested in M as ( ) , an infinite number of portfolios may be created where the weights for I may vary between +1and -1 . |
| 19 | At position M the weight of investment in security1 is zero ( i.e. ) and the investor has concentrated his investment solely in the market portfolio ( where the investor has only invested in I to the extent of the share 's capitalization compared to that of the market as a whole ) . |
| 20 | The market return minus the risk-free return is the risk premium that investors expect for investing in the market portfolio . |
| 21 | In the presence of the risk-free asset the market portfolio may be identified and diversification was reduced to a process of investment in the market portfolio and the risk-free assets to derive the required risk return attributes . |
| 22 | In the presence of the risk-free asset the market portfolio may be identified and diversification was reduced to a process of investment in the market portfolio and the risk-free assets to derive the required risk return attributes . |
| 23 | However , given the practical difficulties of identifying the risk free asset and identifying the market portfolio with the existence of brokerage and taxation , security selection and portfolio construction remains important . |
| 24 | Therefore , as the number of securities increased the portfolios would increasingly approximate the market portfolio and the total level of risk would asymptotically approach the market level . |
| 25 | The return on the portfolio consisting of security1 and the market portfolio may be expressed as , and the risk of the portfolio return as , . |
| 26 | However , if the above criticism of the partial equilibrium model is put to one side , the implication of Roll 's work is that the only valid test is one in which the various market indices , which are used as proxies for the market portfolio , are examined to see if they are mean variance efficient . |
| 27 | Roll pointed out that tests which used a market index as a proxy for the market portfolio could suffer from two types of error : |
| 28 | The proxy might be efficient when the market portfolio is inefficient . |
| 29 | The proxy might be inefficient when the market portfolio is efficient . |
| 30 | This may be manipulated by subtracting the riskless rate from both sides and dividing the result by the standard deviation of the portfolio 's returns to obtain , This may be interpreted as saying that , in equilibrium , the ex-post risk premiums per unit of risk on well-diversified portfolios should be the same as the risk premium per unit of risk for the market portfolio . |