Asset Analysis

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tions of the linear regression and a stability analysis must be performed.

The model can be interpreted as follows:

  • Alpha (intercept of the regression line) measures the systematic return of the stock (independent of the market.

  • Beta (slope of the regression line) measures the sensibility of the stock to the market.

  • R square of the model shows the proportion of the total variance of the stock price changes that can be explained by market movements. This R square is the market risk and 1 - R square is the unique risk (see diversification).

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Asset Allocation

  • Content
  • Introduction
  • Computing expected return
  • Measuring risks
  • Diversification & risks
  • Limits to diversification
  • Measuring price sensibility
  • Asset Allocation in practice

  • Examples
  • Compute your own risk profile
  • Related Books

     

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