Midterm II Review Bullet Points Fall 2018.pdf

Midterm II Review Bullet Points Fall 2018.pdf - FINC-241...

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FINC-241: Principle of Investments Prof. Quan Wen Midterm II Review Only focus on the highlighted lecture notes for Midterm II Risk and Return (Lecture 2) Holding period return (HPR) Arithmetic and geometric average How to compute? What’s the difference between the two? Annualized holding period return (AHPR) Use AHPR to compare rates of return for different investment horizons Effective annual rate (EAR) and annual percentage rate (APR) U.S. Capital market history: 1926-2009 Which group of asset delivers the highest return but also the highest risk? Intuitively, why? Standard deviation, Normal distribution, Skewness and Kurtosis What does it mean when a stock is positively skewed? (right skewness) What does it mean when a stock is negatively skewed? (left skewness) The pricing implications of volatility, skewness, and kurtosis for stock returns. Skim through “Lecture 2 - Theory and Empirical Literature on Return Moments” Sharpe ratio Definition and intuition Expected return, measuring risk using probability What’s the relation between monthly standard deviation (sigma) and yearly standard deviation (sigma)? Computing expected return and risk from historical data Risk premium and risk aversion Portfolio Risk and Return, One Risky Asset (Lecture 3) Formulas for portfolio risk and return with one risky asset, and one risk free asset Capital allocation line (CAL) Definition In the lecture notes, what does point F mean? Point P? What about the points to the right of portfolio P? What does leverage mean?
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  • Spring '14
  • TuranBali
  • Modern portfolio theory, sharpe ratio, Prof. Quan Wen

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