Hi -
In T2, Miller Chapter 3 on basic statistics, the author demonstrates an equation (2.29) which I don't understand. This appears to be the standard equation to calculate portfolio variance, however, it excludes the weights; which would seem to give you different results than you would otherwise obtain if you use the formula with weights. He then introduces the weights (2.35) but then returns to the weightless calculation in (2.36).
Ultimately, I'm trying to understand how he arrives at (2.36), since his formula would seem to assume a weight of 1 for Asset A, and then adding in the weight of H, the result would have a total weight either greater than or less than 100%.
Am I missing something?
In T2, Miller Chapter 3 on basic statistics, the author demonstrates an equation (2.29) which I don't understand. This appears to be the standard equation to calculate portfolio variance, however, it excludes the weights; which would seem to give you different results than you would otherwise obtain if you use the formula with weights. He then introduces the weights (2.35) but then returns to the weightless calculation in (2.36).
Ultimately, I'm trying to understand how he arrives at (2.36), since his formula would seem to assume a weight of 1 for Asset A, and then adding in the weight of H, the result would have a total weight either greater than or less than 100%.
Am I missing something?
