 # Calculating Beta of Portfolio after Portfolio Change  5 Charles Raphael, Malaysia

Calculating Beta of Portfolio after Portfolio Change

You have \$2 million portfolio consisting of a \$100,000 investment in each of 20 different stock. The portfolio has a beta equal to 1.1. You are considering selling \$100,000 worth of one stock which has a beta equal to 0.9 and using the proceeds buy another stock which has beta equal to 1.4. What will be the new beta of your portfolio following this transaction?

Rating   0 Ramon
Consultant, Spain

I Would Calculate the Weighted Average Beta of the Portfolio

I calculate the weighted average and obtain a new beta of 1.1250.   1 santosh
Teacher, Nepal

CAPM of Changed Portfolio

Please calculate the weighted beta of remaining 19 stocks using 19/20 as their weight and 1/20 as the weight of stock to be removed.
Use as equation: 19/20*b +1/20*0.9 = 1.1. Determine the value of b which is the weighted beta of 19 stocks.
Then again calculate the weighted beta of 20 stocks portfolio as 19/20*b +1/20*1.4.   0 abdollah
Student (Other), Iran

Portfolio Beta Leave a comment

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