12.1 Portfolio Analysis (Quick Intro)

  • Investment is a process of maximising wealth.

  • We want to maximise expected return

  • We want to minimise the risk

  • Risk Premium: Difference between returns of a risky asset and risk free asset \(R_{p}-R_{f}\)

  • Diversification: Process of diversifying risk in a portfolio.

  • See Chatper-16 from Ruppert (2015) for further details.


Ruppert, David. 2015. Statistics and Data Analysis for Financial Engineering. 2nd ed. Vol. 13. Springer.