page 18, portfolio weight

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Joined: Mon Apr 09, 2012 9:02 am

page 18, portfolio weight

Postby dimbanker » Mon Apr 09, 2012 2:48 pm

Hello, Proff. Carol!

I wonder is it mistake or I don't understand smth. There is written on the page 18: "This is (the portfolio weight - my comment) positive for a long portfolio, negative for a short portfolio and it may be positive, negative or zero for a long-short portfolio". But if it's a short portfolio then the denominator (the sum of the product of asset prices and holdings) is negative and numerator (the product of i-th asset and i-th holidng) is also negative (since it's a short position). So the portfolio weight should be positive (since negative divided by negative makes positive). I'm a little bit confused of it.
Thank for your answer/attention in advance


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Joined: Sun Sep 28, 2008 10:30 pm

Re: page 18, portfolio weight

Postby coalexander » Tue Apr 10, 2012 5:56 pm

Hi Dimitry

I hadn't though of this and I understand your confusion. There should be an absolute value sign on the denominator in (I.2.25), as there is in (I.1.28) for dealing with long-short or short portfolios. I will amend in next printing.

Thanks, Carol

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