BASS oF poRTFalio THEoRY

Scicte of seled:.

riSK
oY sliehs
Meaiyt povtlio
Rvestdet tols i vigll
prepovton to optium
uvestmt made
cBjectives
Aweout lestl

" Secutics iuveste!

+0'versikeiom sk
 tuvestand to goals
Relowming iuvestt
SK

Deusion
asset
portiolio petoeule

Basts (Basis bis evei

Adive) (o'scyete Discve

 Povlllio Tveslt
T Risk - Free porttali
Bomds
Low- Risk porttolis
sdocks
Hih- Risk pertfdl

bt is povttolio Retaru?
tvestmet
mvestaets
Swerel ty
tle yest
the isk
t s S
toeran vest oY s ta
povttolie

to
uveslel 8ovttelie
Losscs tiwe
avestors Swet
Lwwestmet

to baloe
wetet oVey ime
 (s sed to descrile

twestwet poxlais

vallikdy aud
llwtis.
pollolio isx Mewageweat is tle poles

sisks -5Sodt witl mitigtiy

tuvestnct

Uudersl-dig
yiSKS is csaeti
to
isKs wi thiy
tuveslmets.
yMorket RisK This is so kaown
Systematic siSk yisk tut a
deliu
MecYo l c o o e putons tie
ulie Meskut
Tese tors uele ity est rt
ators
eConomi ele ssions risK a t
diersifiatiog
westent to Some deyr
2Cheit Risk Tis isk (wolws
me tLat will delie iu vale d
ssueY

Ho iustumed
debt
Tis is most
SSue s worty
boudsy the
ness
deterinot
bod's
RisK Tis risK uvolves
tuvesthe
to void lasses
olws wle tle isa
Le Mar ket o wl
waluhe,
hel eslete
RisK iTus isk
ivestmet tle
will decline due -to iueYease s

Cose
Te most

bouds
Itoust Rate Risk Te hisk mvolvee
iMVestmet tud will
to
delie
des Tlis
 more tLa
lvestnets, Slh aS. Lo nd,
lnvesl muh
RisKTLe visk els to tle
velue iuvestd
{Lt in delie due
lo
íuvestos
patialar,
Lold iteio luvest wds

pol:til Risk Tis (sk heles to iaest

will
to govmet pelics,
quation, oY
tustlty
8, Penvest et RisK Tis ri SK may lome
in the torm fute asl
imvestent tat will be
vestel Lowey hate etury
HLis is helavat oy inves tors
boud s oy olly
iveste dte.
 Model
fey Mo kowity
JHady Max Mako wity
Aeicay cloomist

Lest Kuo toy lis

He is
Work Moden
Matkowitz
asst hisk, ht
divensi fi tiou
invstet povtio
Marko wit Model
"h Maskowity
Cssene
YA iavesty as
yA Cutai hot

wt lwest Sigle dimy

se Lekscen dilleret iwwstne
2Ye Con clse
l:ke 8tocks,
Rovt lio The investmt
o

vt
3/ The deisiou
tle te
tisk.
 Mavko wit Model
4e seleion
vadios Rass

Loosing the tHM Model slat

ex-ctly topetlsy tles risk,
tavestor s Lao to elue
Also Kown
two stocky
is less 4o one
stock Bt opti mad fpor
vexy to
phovides

lios.
sdetion tle best portfolio ut of
Set.

plo Vides 4le tools

’Marko wit (42) wlid Jve the
iediying
viSK

to axKo wib, on iuveslor

ACcovdiy -ssety he
slds isk belo
an
 riSk, ttade to tle

Martosi
elivel
Los fostive
heion,ov Lette
loltion

lorheltl t
to

ede pvlelio isk

tunas.
is
Jiensi fati on Cosides ssts
Cotheltion s lowey tle
Moe will Le Sk
heltiou Marto witz dwes
kdion.
eko wit; Divevsifati
Martko i t s Divesi
ctiou
plio isk
 Assuptious
Mav ket is llicent e all uvetos love
bout stock Mar ke

AlL tuestors Laye Comeon

Ysk averse
LnvestoY$ :k to Marin n e ot ye
Hinvestet
’Rte SD 2re tnt
invest e t deusion
By Cambis essets , visk 5e miise
Le mariiye.
tle eturs
-Tuvesto sliouls Le to
tor SisK
S«t
the optial
koiHiger
ning
Medern povt alio Theory lkcint Froie
Elkit Frodicr,tle
Tetusn

coh dol s -Tuose clos est

to the el|;iet Bauticr
praide retest da
with le est Yisk.

LoweY Risk /votty

(steudar4 Duviio
TLe G-pu is allel Elkcied Froti
FYon he bave
Froi povtlio
Yeturus toy Lavel
YSk risKk

Fhoutiey
Yprestdiu ol al passiLL ombi.
tiou sky Seuritis
evel
level yisk.
A toud "RReY povtin
te lwxve iS
Moiww enptes
Levd isk

FYong lhe bove

esets to
Fhouliey Lave the potur
to PAodce Tveatest
Cowest xisk.
Tu ebove
Cuve sLouimy oud Coes fo
Vais us
6tedond
 X-wis etusns
potte Y-ois
Moxko wty Co Vahiau
Vaeaule for two
Seuties -

X. R

Retrnn
XX- potfolio ivestel
Epetes Retur

Co-Vaenle

Coelotiou
3

p: potl:o visk or stendard devisti

Pholems:
to
VFoll. uiyaSset
perdiclavs stock X stock y
137.

standad Jeviationl 37

peatltolio wtun (x) o.ys

Colatiou laclliied ol tuo stock

o-s (A)
Calalte pttali. isk
clultia
Rr x Ry t Xy Ry

13.4s

Risk - steudavd Javietion c)

xy(ayy
 /(o us)'. (3)'+ oss (a)'42- o.us. o-sr (3.2.o)
()t.6ulohs4)+ og 41s L3)
op-o2olr
pNoaotr
4|.21
Ll.g22
4.sl?s

9.125

Le yilded
yetuus p-st
Yers Retusus x
22

lo

cnpctes isk &yetun ol

mede
yo. Y.
Calultin
(udividul Security xi
Yers Retuus (x) (x- n)
(a-1b93)4930 2332
(-36

3 l4(t4-l693) : -2. 330

(22-l6.93)- 5120 26-723

(Is-lb.93): 1-330 3.343

(2o-16.93)- 31to o-cs

X :lb93 41-92
-l6:9 3
Vaiene (x-) 2

nf (C)

Isb 2.14

devitioul-vene
3"4eo
 (A-4)
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oh
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h
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1 (-u.93) (6-33):-30S13
2. 72|
2 C11) (2 33)
3 (-2.83) (-1-47) : 4.42c|
4 o) (-s1) -24.3131
(-3.62)
( (3.14o) (2-33): 4-396)
-38-3334

- 38.3334

Hka wity Risk - petn

Rp X. Ryt Xy R
Rp : (lk. 93) (ot)4 1s-44.(o.4)
 Riskslad itio

e)(34su) (o.uy(u.ou)t 2. ob.e.b (-4. 12)

o.49o (-+44)
plo36o -|2-(3s t o-lber b.s us4

Tp 3.33y

3, Stocks LEM have yildes the tollsui

fos tle two y<s

Yers Rtrns
L M

|2
2o12
Po ytfolia wede
wlt is Cpetd elun
-, eut

stoada deuitign
, Fiud at
the

te CoVaule
wlet is LaM?
Grreliou letucn Stokes

uo
mede
Yers XL

)=-3
ad2 ls . (9l3-ls: 3 12-13 2-1 (3)-)-36

sludavd duvieion
-3

Coveian Ce
stock
-L
Yers
lm Cov Lm

1-3
3K1 wlat
ade
leulation Ratarn:
b Fiud

wlet
(i7) (oc) 4 03) (.u)
mode
1):-3.
-)-3 Riski

(o.u)".()4 2 Ca ) (o.w) (3)oye)

(oc) (3)u
(o-lu) () 4 o.4s(-3)
-o3e (4)4
3.94 t o. l6t (-l.ue)

stock

Yers ReturnoY
|2

2 e 19 2o

yol.
made
out tl stodeyd devition
L, Fiud
stock

isk
Lslt is
mode
 (2
(a-a)(y-) (r
-2.46 (-2.6)--3)
7(-o.66):
(3)

Zo-[-40 E3.u H.Isse (3-39.

(o)o

stndd Jeviation
- la.6bo
3

CoVeyenle

Llo.34o 1-3.446
3
(aliox Colfut)

(24) (2.u1)
 o344

(-269-3
ldatia Rtur
l-o66).
(3)

(334). R
(o)o
(o.u) t (s) (o4)
- (l666 )

claleti
42

l) (o22)+ (o:34) (r.117) (oi) (at-1)

 Consbd aud Cvtion
Constuin Minim
Risk

cousbuctio bosd
PAudites visk,
witlin Le
Lelame
Couge -lose ptlsls
tlou, mast
back as imie Lisboria
date wel
Cestais set el
wanle S.
bull ees ket iu bobds
tle eYY uit o d
Cquities Litueen

kil . Conshei

teeigues
isSue
xedey, ow
Woud have
dedie -lLe Loud haet
tail- evut wold Lave
Sce
Lave
ot Leen
ten

Sienlti avid
 wil Le -Lu to
vebiesed Cous

Awalyed portplas seleitios

Vaian e pstolia
Cousttiou
loinis
to
eretes
witl(le loest
Lens to
risk (vld: lity)
PAo mounlel
3set cla sses.
2, Miniwn lobeltio aYelations
Asset asseswitl asset asss
haltive
the

lses
wudeg
vela titty
Coreltio
Lwe Luave ed
to otlis
Single Siuce Le
dvaces
he
 eveluate

3, Most (HDp)a
fo lases
vosiic tiou ral.

veletikty to its

ctiou
4, RisK Te Conlet

slad! Coiaisut
isk to the o eal

Sh bond,
t La

(vp)
Ssct (s iuverse
Hoits the
to Swn
ae -lo

Val-thty csety
Seluites Mis