EC3333 Midterm Formulas

expected return

variance

variance estimate

standard deviation

realized return

dividend yield

annual realized return

average annual return

compound annual return

standard error

95% confidence interval

expected portfolio return - risky only

covariance

covariance estimate

correlation

portfolio variance (2-asset)

portfolio variance (n-asset)

portfolio variance using each asset’s cov with the portfolio

portfolio volatility

minimum variance portfolio weights

minimize variance w.r.t weight s.t weights add to 1

expected portfolio return - complete

complete portfolio volatility

capital allocation line

Sharpe ratio

slope of CAL

optimal risky portfolio weights

maximize Sharpe ratio s.t. we are on the efficient frontier

required return

beta - individual stock

correlation using sharpe ratios of i and P

assumes P is efficient —> Sharpe ratio is maximized, E[Ri] = ri

market cap

value-weighted portfolio

beta - portfolio

SML

alpha

beta with stock changes vs. market portfolio changes

future value

present value

EAR

APR

relating EAR and APR

EAR with continuous compounding

PV using EAR

fisher reltaion

rule of 72

PV of perpetuity

PV of annuity

FV of annuity

NPV

PV of growing perpetuity

PV of growing annuity