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ERIC Number: EJ1170726
Record Type: Journal
Publication Date: 2018
Pages: 8
Abstractor: As Provided
ISSN: ISSN-1942-2504
Finding the Beta for a Portfolio Isn't Obvious: An Educational Example
Chong, James; Jennings, William P.; Phillips, G. Michael
American Journal of Business Education, v11 n1 p15-22 2018
When a portfolio is not actively managed to maintain a fixed investment percentage in each asset but rather maintains a fixed number of shares for each asset, the portfolio weights will change over time because the market returns of the different assets will not be the same. Consequently, portfolio betas computed as a linear combination of asset betas, which is the usual practice, will be different from betas computed using regression techniques on portfolio returns as is done when evaluating individual assets and mutual funds. The alternative approaches can result in quite different beta statistics and, consequently, inconsistent decisions depending on which method is used.
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Publication Type: Journal Articles; Reports - Research
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Grant or Contract Numbers: N/A