8 – L3 13 Summary V1

In this lesson, we learned how to calculate the expected return and variance of a portfolio risky assets. We study the properties of all possible portfolios of risky assets, and what happens when a risk-free asset is added. What you learn in this lesson is essential foundational knowledge. Once you understand it, you’ll be ready … Read more

7 – L3 09 Capital Market Line V2

In the last video, you learned about the efficient frontier. You know that any point on the efficient frontier represents the portfolio that gives you the best risk return trade-off, and that these portfolios are known as market portfolios. But is that it? Is there a way to do better than the efficient frontier? In … Read more

6 – L3 08 The Efficient Frontier V3

Okay. So far you’ve learned about the importance of diversification and how to calculate portfolio mean and variance. You may wonder, what are the best ways to assign to each stock in your portfolio. Before we dive into portfolio optimization, let’s take a look at the set of all possible portfolios. This will lead us … Read more

5 – L3 06 The Covariance Matrix And Quadratic Forms V1

Congratulations, on getting through the first five nodes. You’re now over a third of the way through this lesson. Because some of the topics in this lesson are so math heavy, we wanted to create content that contain the actual formulas. Beta testers suggested that content delivered as text is super-helpful. Be sure to let … Read more

4 – L3 04 Portfolio Variance V2

Now, let’s calculate a metric of the total risk inherent to the portfolio. We’ll measure risk with volatility or more specifically with the variance, the square of the volatility. Let’s review the formula for the variance of one asset. This is a slightly different formula for variance than we’ve seen before, but it’s similar in … Read more

3 – L3 03 Portfolio Mean V3

Let’s see how this works in more detail, by constructing a portfolio that contains two stocks and then calculating its mean and variance. Let’s put a fraction xA of our portfolio in stock A and the rest xB in stock B. We call xA and xB the weights on assets A and B in our … Read more

2 – L3 02 Diversification V3

Since you’ve studied the stocks in your universe now for a while, you might already know which stock has been performing the best. Let’s call it New Digital Corporation. At this point, you may want to put all your money in New Digital stock. But let’s say you do this and New Digital stock keeps … Read more

1 – L3 01 Intro V1

Welcome back. So, far in this module, you’ve learned about Indices and ETFs, their application in the real world and how they work on a transactional level. Now, we’re going to talk about the baskets of stocks that underlie these instruments and you will learn how to distribute money across the stocks in the basket. … Read more