Beta Management Company - The Case Centre

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them.
You can change your cookie settings at any time but parts of our site will not function correctly without them.

Prize winner

Compact case

Case

Reference no. 9-292-122

Subject category: Finance, Accounting and Control

Authors: Michael E Edleson (Harvard Business School)

Published by: Harvard Business Publishing

Originally published in: 1992

Version: 17 November 1993

Length: 5 pages

Data source: Generalised experience

Topics: Regression analysis; Efficient markets; Investment management; Portfolio management; Risk assessment; Diversification; Stocks

Share a link: https://casecent.re/p/46269

| No reviews for this item

View our pricing guide or login to see prices.

Abstract

A manager of a small investment company has been successfully using index funds for limited market timing. Growth has allowed her to move into picking stocks. She is considering two small and highly variable listed stocks, but is concerned about the risk that these investments might add to her portfolio. Provides a lead-in to the CAPM. Students learn about total risk, non-diversifiable or portfolio risk, and (CAPM) beta, and calculate variability of the stocks separately, and portfolio variance with and without the stocks, to see how an extremely risky (but low-beta) stock actually reduces risk; and calculate stock betas.

Industry:

Securities & investment banking

Other setting(s):

1991