portfolio effect

Portfolio Effect

The reduction in the value of a portfolio relative to the reduction in value of the individual assets represented in that portfolio. The portfolio effect is weighted for the percentage of the portfolio each asset represents. For example, suppose a portfolio consists of 50% of stock A and 25% each of stocks B and C. If stock A declines 10% and B and C each decline 20%, then the portfolio effect is calculated as:

portfolio effect = (.5(.1) + .25(.2) + .25(.2)) * 100 = 15% decline

portfolio effect

A reduction in the variation of returns on a combination of assets compared with the average of the variations of the individual assets. This effect measures the extent to which variations in returns on a portion of assets held are partially canceled by variations in returns on other assets held in the same portfolio.
References in periodicals archive ?
This highlights what is known as "the portfolio effect," making it more reasonable for European financial companies to move to other assets outside Europe, hence further depressing the euro.
We are confident, however, that the portfolio effect of our diverse, substantially contract-based business model will nonetheless enable the group to continue to make progress.
In developing a framework that appraisers can use for incorporating historical transactions and that includes portfolios of assets, the first step is to consider the potential for a portfolio effect itself.
Where the depressing effect on organizational performance of organizational misfit is counteracted by some other portfolio factor buoying performance, this can be termed a portfolio effect.
During normal periods, the portfolio effect dominates and diversity reduces unemployment.
Dominguez find that pure intervention has a statistically detectable portfolio effect, but that the effect is not large when the intervention is not announced.
In return, growth in these resource options gives us added flexibility when managing the variable output from renewable power, essentially creating a portfolio effect that strengthens grid reliability.
It's called the portfolio effect or, in less esoteric circles, chicken or beef.
The absence of a portfolio effect from the money demand function is more difficult to motivate pedagogically because of the need to derive and discuss the adding-up conditions.
The ratings also consider that the three phases of CSF are effectively located at one large site subject to a single wind regime, eliminating any benefits of a portfolio effect.
Supply Risk: Energy production may fall below the sponsor's projections due to lower than expected wind conditions at a single site project that does not benefit from a portfolio effect.
Full browser ?