Portfolio Variance
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Definition of 'Portfolio Variance'
In finance, portfolio variance is a measure of the dispersion of returns of a portfolio. It is the expected value of the squared difference between the portfolio return and the expected portfolio return.
Portfolio variance is a measure of the risk of a portfolio. The higher the portfolio variance, the riskier the portfolio.
Portfolio variance can be calculated using the following formula:
```
sp^2 = ?(ri - r)^2 * wi
```
where:
* sp^2 is the portfolio variance
* ri is the return of asset i
* r is the expected return of the portfolio
* wi is the weight of asset i in the portfolio
Portfolio variance can be used to compare the risk of different portfolios. It can also be used to make decisions about how to invest a portfolio.
For example, an investor who is risk-averse may choose to invest in a portfolio with a lower portfolio variance. An investor who is willing to take on more risk may choose to invest in a portfolio with a higher portfolio variance.
Portfolio variance is an important concept in portfolio management. It is a measure of the risk of a portfolio and can be used to make decisions about how to invest a portfolio.
Portfolio variance is a measure of the risk of a portfolio. The higher the portfolio variance, the riskier the portfolio.
Portfolio variance can be calculated using the following formula:
```
sp^2 = ?(ri - r)^2 * wi
```
where:
* sp^2 is the portfolio variance
* ri is the return of asset i
* r is the expected return of the portfolio
* wi is the weight of asset i in the portfolio
Portfolio variance can be used to compare the risk of different portfolios. It can also be used to make decisions about how to invest a portfolio.
For example, an investor who is risk-averse may choose to invest in a portfolio with a lower portfolio variance. An investor who is willing to take on more risk may choose to invest in a portfolio with a higher portfolio variance.
Portfolio variance is an important concept in portfolio management. It is a measure of the risk of a portfolio and can be used to make decisions about how to invest a portfolio.
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