Hi All,could someone take me through why the portfolio variance can be written like this [$]x'Mx[$] in matrix form? where [$]M[$] is the cov matrix and [$]x[$] the assets weights. Is there any mathematical rule behind that?[$]Var(x'R) [$]= [$]x'Mx[$], where [$]R[$] are the assets returnsAlso a similar thing, the cov of 2 portfolio returns as [$]x'My[$] , where [$]y[$] are the weights of the other portfolio. Thanks

Last edited by borabora on July 10th, 2015, 10:00 pm, edited 1 time in total.

Jhammer on google many mention the formulae to compute the variance but I could not find a singer author explaining in detail the maths behind why Var(x'R) = x'Mx.

Last edited by borabora on July 8th, 2015, 10:00 pm, edited 1 time in total.

- kermittfrog
**Posts:**63**Joined:****Location:**Frankfurt

At the risk of feeding trollshttp://faculty.washington.edu/ezivot/econ424/portfolioTheoryMatrix.pdf

QuoteOriginally posted by: boraboraHi All,could someone take me thorough why the portfolio variance can be written like this [$]x'Mx[$] in matrix form? where [$]M[$] is the cov matrix and [$]x[$] the assets weights. Is there any mathematical rule behind that?[$]Var(x'R) [$]= [$]x'Mx[$], where [$]R[$] are the assets returnsAlso a similar thing, the cov of 2 portfolio returns as [$]x'My[$] , where [$]y[$] are the weights of the other portfolio. ThanksCoursera: Financial Engineering + others, explain this equation, check them up

I will have a look...

Last edited by borabora on July 10th, 2015, 10:00 pm, edited 1 time in total.

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