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 ?
offer can not be ensured making part, to assert its portfolio effect due to contracting consumption volume to achieve the most favorable offer price.
Trinidad said a Brexit scenario would have some portfolio effect as a so-called risk-off sentiment likely to prevail in the global markets would not spare Philippines financial markets.
The portfolio effect of maintaining five businesses in diverse markets and the continued focus of the group on further increasing returns on its investments means that the board remains confident of maintaining its track record of year-on-year increases in profitability in 2016.
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.
RESOLUTION The Commission ultimately settled for a package of divestitures to resolve both horizontal and portfolio effect concerns in particular geographic markets.
The only explanation of this can be the portfolio effect, since the content overlap had been eliminated.
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.
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