Calculate the market portfolio, Marketing Management

(a)   Since APPL and MSFT account for the entire large cap technology component of S&P 500 and their proportion of index is based on their weights, this large cap technology sector is 5% (3% + 2%) or 0.05 of the total portfolio.  

(b)  The beta of the large cap technology sector can be determined as follows.

Portfolio beta = ∑Wiβi

In the current case, the portfolio is large cap technology sector where AAPL occupies 3/5 weight and MSFT occupies 2/5 weight of the portfolio. With the given betas,

Portfolio beta = (3/5)*1.04 + (2/5)*1.05 = 0.624 + 0.42 = 1.044

The beta of this large cap technology sector is 1.044.

(c)   The beta of the market portfolio is generally 1. Since the S&P 500 is the market portfolio, its beta is 1.

(d)  The weight or fraction of the remaining stocks in S&P is 1 - 5% = 95%. With the formula in (b), the combined beta of these two stocks is

Beta = 0.03*1.04 + 0.02*1.05 = 0.0522

Portfolio beta = 1

Hence beta of remaining stocks = 1 - 0.0522 = 0.9478

The beta of the remaining stocks in the S&P is 0.9478.

Posted Date: 3/8/2013 6:10:01 AM | Location : United States

Related Discussions:- Calculate the market portfolio, Assignment Help, Ask Question on Calculate the market portfolio, Get Answer, Expert's Help, Calculate the market portfolio Discussions

Write discussion on Calculate the market portfolio
Your posts are moderated
Related Questions
Problem 1 You are the marketing manager of a bank and you want to persuade the general manager that it is important to include advertising in your organizations marketing commu

What is productive service in marketing? Choices are comprises physical objects, persons, services, places, ideas and organizations. Similarly, the service is any activity or b

what is test marketing? explain the various approaches that are followed by fmcg companies in test marketing?

Question 1: Leading edge companies are driving to increase profits from high yield customers. They aim to acquire and retain profitable customers and get them to spend more. Th

Marketing planning: Meaning and definition: marketing planning is a part of the process of overall planning of a business and industrial enterprise. Marketing planning includ

Many service sector businesses fail because their marketing managers do not have any experience in the marketing of services. They often have been previously involved in the mark

Question 1: (i) Distinguish between global marketing and international marketing. (ii) Explain the similarities and differences of a free trade area, a customs union, a comm

What is Form Utility in marketing? Form Utility: This utility is created while raw material is converted within a finished product. For instant, Britannia industry convert

can anybody tell me where (a+b)2 is applicable in real world