Calculating Beta of Portfolio after Portfolio Change

Capital Asset Pricing Model
Knowledge Center

  

Next Topic
Capital Asset Pricing Model > Forum > Calculating Beta of Portfolio after Portfolio Change

Calculating Beta of Portfolio after Portfolio Change
Charles Raphael

Please help me to solve this question: 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? (...) Read more? Sign up for free 		 

Please register now to read all responses and to join this discussion yourself. It's easy and 100% free.

Sign up for free     Log in

 
I Would Calculate the Weighted Average Beta of the Portfolio
Ramon, Consultant, Spain, Member

I calculate the weighted average and obtain a new beta of 1.1250.
 

 
CAPM of Changed Portfolio
santosh, Teacher, Nepal, Member

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.
 

 
Portfolio Beta
abdollah, Student (Other), Iran, Member

(...)
 

         
Special Interest Group Leader

Interested? Sign up for free.


Capital Asset Pricing Model
Summary
Forum
Best Practices


Capital Asset Pricing Model
Knowledge Center

  

Next Topic


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2020 12manage - The Executive Fast Track. V15.4 - Last updated: 1-4-2020. All names ™ of their owners.