Portfolio theory

What is portfolio theory?

• Mathematical modelling of portfolio investment outcomes

• Modelling of portfolios with no maths involved

• A model of portfolio returns but not risk

What are defensive assets?

• Low risk, low return

• Low risk, high return

• High risk, low return

• High risk, high return

What are growth or aggressive assets?

• Low risk, low return

• Low risk, high return

• High risk, low return

• High risk, high return

How would you define beta?

• A measure of risk

• A measure of return

• A metric of portfolio diversification

• A portfolio coefficient

What is upside risk?

• The risk that a poor return will materialise

• The risk that a good return will not materialise

What is downside risk?

• The risk that a poor return will materialise

• The risk that a good return will not materialise

How can you reduce your portfolio risk?

• Diversifying the portfolio into different types of property and security

• Buying more properties

• Buying properties that complement each other

• All of these

What is correlation? (two answers)

• A measure of how different assets return

• A measure of how closely assets perform under different world scenarios

• A measure of the similarity of risk for different assets in different world scenarios

• A measure of the similarity of returns for different assets in different world scenarios

How is correlation measured numerically?

• From 0 to 1

• From 0-10

• From -1 to +1

• From 0 to 100

Is a high (positive) correlation considered to be good or bad from a risk point of view?

• Bad

• Neutral

• Good