Combining Investments Example 8
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Dear Sir,
We say that b is the systematic risk and the risk for all the companies in the sector. Then we say in the example that by considering new project overall b is changing. I kind of got confused. if companies in the sector undertake differeent projects, their b will be different. Could you please explain where I go wrong in my reasoning.
If we are looking at (for example) an investment in shipping, then we need the beta of the shipping industry. Ideally this would be the beta’s of companies that were all invested only in shipping. However in practice it is perfectly true that many companies in the shipping sector may well have investments in other industries as well. All we can do is take the average beta for the shipping sector and assume that the other investments have lower betas in some cases and higher betas in other cases – in which case the average beta of the companies will represent the average beta for shipping.
can’t play the videos
The videos are working fine.
The problem must be at your end and so please go to the support page – the link is above (where it says “Technical Problems”)
In the Example 7 there is coefficient of correlation provided. In order to solve the problem, we need to know formula (which in not given): corr(x,y) = cov(x,y)/(sx*sy).
Dear lecturer, please kindly advice if we need to know the relationship between correlation and covariance for exam?
The last but one examiner did ask this once or twice, but it is very unlikely that the current examiner would want it 馃檪
hi, i am struggling with example 7, can you please help?
The answers are at the back of the lectures notes, so say which bit of the answer you are not happy with.
(And do read the previous comment – it is most unlikely that the current examiner would ever want this.)
Thank you , excellent lecture:).
Great work there. Easy and comprehensive.
Nice going!
Very clear and helpful, thanks a lot
very helpful. thank you.
Very Good
excellent
excellent!