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BENEFITS OF DOCUMENT
DOCUMENT DESCRIPTION
Portfolio Expected Return and Capital Asset Pricing Models (CAPM)
Lecture Outline
1. Portfolio Theory
2. Capital Asset Pricing Model (CAPM)
3. Efficient frontier
4. Capital Market Line (CML)
5. Market Line (SML)
6. Beta calculation
7. Arbitrage pricing theory
8. Fama-French 3-factor model
9. Portfolio Expected Return
10. Portfolio Standard Deviation
11. Attainable Portfolios with Risk-Free Asset
12. What are the assumptions of the CAPM?
13. The CML Equation
14. The SML Equation
15. Interpreting Regression Results
16. What is the relationship between stand-alone, market, and diversifiable risk.
17. What is the difference between the CAPM and the Arbitrage Pricing Theory (APT)?
As a well-informed investor, you naturally want to know the expected return of your portfolio—its anticipated performance and the overall profit or loss it's racking up. Expected return is just that: expected. It is not guaranteed, as it is based on historical returns and used to generate expectations, but it is not a prediction.
The expected return of a portfolio will depend on the expected returns of the individual securities within the portfolio on a weighted-average basis. A well-diversified portfolio will therefore need to take into account the expected returns of several assets.
1. To calculate a portfolio's expected return, an investor needs to calculate the expected return of each of its holdings, as well as the overall weight of each holding.
2. The basic expected return formula involves multiplying each asset's weight in the portfolio by its expected return, then adding all those figures together.
3. In other words, a portfolio's expected return is the weighted average of its individual components' returns.
4. The expected return is usually based on historical data and is therefore not guaranteed.
5. The standard deviation or riskiness of a portfolio is not as straightforward of a calculation as its expected return.
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Source: Best Practices in Portfolio Management PowerPoint Slides: Portfolio Expected Return and Capital Asset Pricing Models PowerPoint (PPT) Presentation, UJ Consulting
ABOUT THE AUTHOR: UJ CONSULTING
UJ Consulting
Untung Juanto ST., MM. Founder of UJ Consulting. He is professionally experienced business and management consultant in several local and multinational companies.
[read more]
He has an experience in managing an effective and efficient company with various approach methods adapted to different industries because He had a career from the lower management level as Supervisor before finally being at the top management level. His Top Management experience started from the position of General Manager, VP Operation, HR Director and Business Development Director
He completed his undergraduate education majoring in Architecture at Diponegoro University, Semarang, Central Java, Indonesia. After that, He continued to Master of Management level majoring in Human Resource Management with cum laude predicate with a GPA of 3.94 at Mercubuana University, Jakarta, Indonesia.
His last work experience as Deputy President Director at Hutahaean Group in charge of 14 business units engaged in various industries including CPO Production, Oil Palm Plantation, Cassava Plantation, Tapioca flour production, 4 and 5 star hotels, waterparks, golf courses and housing with a total of employees more than 3,000 employees.
His biggest achievement was in 2021 when He served as Deputy President Director at Hutahaean Group Indonesia by increasing the company's revenue from IDR 700 billion to IDR 1.1 trillion (y/y) and increasing the profit margin by more than 20%. Doing a turn around on business units that have lost in the last 5 years become profits. In addition, He have also succeeded in creating an efficient and effective management system by redesigning the Business Process Management (BPM), reviewing Standard Operating Procedures (SOP) and Work Instructions and compiling the appropriate Key Performance Indicator Management (KPIM) to increase employee productivity.
He is currently active as a part-time business and management consultant (online) at Enquire Corp. and Flevy Corp. In addition, He also teach part-time at several universities for courses in strategic management, human resource management, project management, entrepreneurship and business.
UJ Consulting has published 171 additional documents on Flevy.
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