Loading....
Coupon Accepted Successfully!

 

Optimal portfolio

 

Optimal portfolio for each investor is the point where her indifference curve is tangent to the efficient frontier.

 

Systematic Risk:

  • Non diversifiable
  • Investors get compensation for taking systematic risk


Non-Systematic Risk:

  • Company specific risk
  • Investors are not compensated for taking non-systematic risk

      


M2:

  • Uses total risk.
  • Produces the same portfolio ranking as that of Sharpe ratio.



Jensen's Alpha:

  • Uses systematic risk (b).
  • Measures the percentage return over that of a portfolio with the same beta.





Test Your Skills Now!
Take a Quiz now
Reviewer Name