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lecture notes on investment management. CFA level 1 $5.72   Add to cart
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lecture notes on investment management. CFA level 1
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  • Course
  • (ACC200)
  • Institution
  • University Of Johannesburg (UJ)

summary notes on portfolio and risk . it is also included in the CFA level 1 exams. it describes the depth of portfolio into easy concept. and easy formulas to use.

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Document information

  • November 17, 2023
  • 4
  • 2023/2024
  • Class notes
  • Abigail ncube
  • All classes

Subjects

  • portfolio risk and return

Written for

  • University of Johannesburg (UJ)
  • (ACC200)

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PORTFOLIO RISK AND RETURN

We determine investment characteristics of assets in terms of their return and risk.

1. Returns
-return comes in two forms which includes Periodic Income through interest payments or dividends,
Capital Gains when the price of the asset you hold rises.

RETURNS CALCULATION/MEASURE

Holding period : is the return earned on an asset during the period it was held. It os calculated as the
sum of price appreciation and periodic income.

A capital gain of 5 percent and a dividend yield of 2 percent is computed in the example.




What is the 3-year holding period return if the annual returns are 7%, 9%, and –5%?

R 1  R1 1  R2 1  R3   1
1  .07 (1  .09)(1   .05)  1 .1080 10.80%

AVERAGE RETURNS

When assets have returns for multiple holding periods, we should aggregate those returns into one
overall return for ease of comparison and understanding.

Arithmetic Mean: the average of all holding period returns. Assume you have three stocks A, B, C with
returns 10%,20%,30%. Return on stock would be (10+j20+30)/3=20%.

Geometric Mean: it is always greater than or equal to Arithmetic return.




Money weighted return

Is the internal rate of return on money invested that considers the cash flows and calculates actual
investment. The internal rate of return is the discount rate at which the sum of present values of these
cash flows will equal zero.

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