Generally--
The study guide is just that: a guide. Many of us have yet to come
across a perfect guide.
Cheers!
mmckenne@ins.state.pa.us wrote:
<snip>
Page 164 of the text states, "Ford's contribution to portfolio risk
depends on its relative importance in the portfolio and its average
covariance with stocks in the portfolio." It then defines this and the
"proportion of the risk that comes from the Ford holding," as its
proportion times its Beta (relative to the portfolio). However, in the
study guide, the "contribution to portfolio risk," was just Beta.
It is my opinion that when one is asked a security's "contribution to
portfio risk," the answer is the proportion times the Beta (relative to
the portfolio). Otherwise, the whole does not equal the sum of its
parts. I think the study guide made yet another error in this example.
<snip>
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