Summary Synthèse - Evaluation risque d'un portefeuille

Chapter 1: portfolio risk and return


Guillaume Baechler, Associate Professor, Université Paris-Saclay




1

,Overview & learning outcomes

PORTFOLIO EXPECTED DIVERSIFICATION AND
RETURN AND RISK PORTFOLIO RISK




SYSTEMATIC AND PORTFOLIO BETA
IDIOSYNCRATIC RISKS




Recommended homework: Read Chapters 10 & 11 of Berk and
De Marzo and practice end-of-chapter exercises

2

,Portfolio risk and expected return

• We have learned to estimate the expected return and risk of an
asset if we know the distribution of its returns.
• Now suppose we know the distribution of returns for several
assets, and want to know the expected return and risk of a
portfolio of these assets.
• We will see that:
à Calculating portfolio expected return is easy
à Calculating portfolio risk is less easy – we need to
remember some mathematics first
• We will obtain the general result with a portfolio of S assets,
but the intuition should become clear from considering a
portfolio of only two assets. 3

, Portfolio intuition

30%
monthly returns, 7/2014-7/2019 FACEBOOK INC
25%
WALMART INC
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Oct-15




Oct-16




Oct-18
Oct-14




Jan-17
Jan-15




Jan-16




Jan-18




Jan-19
Oct-17
Apr-15




Apr-16




Apr-18




Apr-19
Apr-17

Jul-17
Jul-15




Jul-16




Jul-18
Jul-14




Average return (annualized) Standard deviation
(annualized)
Facebook 24.07% Facebook 24.41%
Walmart 12.10% Walmart 18.97%
4
50/50 Portfolio 18.09% 50/50 Portfolio 16.51%