Chap012 - Chapter 12 Return Risk the Security Market Line...

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Chapter 12 Return, Risk, & the Security Market Line Slides 12-1 Fundamentals of Investments 12-2 Return, Risk, and the Security Market Line 12-3 Expected and Unexpected Returns 12-4 Announcements and News 12-5 Systematic and Unsystematic Risk 12-6 Systematic and Unsystematic Components of Return 12-7 Diversification and Risk 12-8 The Systematic Risk Principle 12-9 Measuring Systematic Risk 12-10 Measuring Systematic Risk 12-11 Portfolio Betas 12-12 Beta and the Risk Premium 12-13 Beta and the Risk Premium 12-14 Portfolio Expected Returns and Betas for Asset A 12-15 The Reward-to-Risk Ratio 12-16 The Basic Argument, I. 12-17 The Basic Argument, II. 12-18 Portfolio Expected Returns and Betas for Asset B 12-19 Portfolio Expected Returns and Betas for Both Assets 12-20 The Fundamental Result, I. 12-21 The Fundamental Result, II. 12-22 The Fundamental Result, III. 12-23 The Security Market Line, SML 12-24 The Security Market Line, II. 12-25 The Security Market Line, III. 12-26 The Security Market Line, IV. 12-27 Risk and Return Summary, I. 12-28 Risk and Return Summary, II. 12-29 A Closer Look at Beta 12-30 Decomposition of Total Returns 12-31 Unexpected Returns and Beta 12-32 Where Do Betas Come From? 12-33 Where Do Betas Come From? 12-34 Why Do Betas Differ? 12-35 Useful Internet Sites 12-36 Chapter Review, I. 12-37 Chapter Review, II.
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A-106 Chapter 12 Chapter Organization 12.1 Announcements, Surprises, and Expected Returns A. Expected and Unexpected Returns B. Announcements and News 12.2 Risk: Systematic and Unsystematic A. Systematic and Unsystematic Risk B. Systematic and Unsystematic Components of Return 12.3 Diversification, Systematic Risk, and Unsystematic Risk A. Diversification and Unsystematic Risk B. Diversification and Systematic Risk 12.4 Systematic Risk and Beta A. The Systematic Risk Principle B. Measuring Systematic Risk C. Portfolio Betas 12.5 The Security Market Line A. Beta and the Risk Premium B. The Reward-to-Risk Ratio C. The Basic Argument D. The Fundamental Result E. The Security Market Line 12.6 More on Beta A. A Closer Look at Beta B. Where do Betas Come From? C. Why do Betas Differ? 12.7 Summary and Conclusions Selected Web Sites 0. finance.yahoo.com (A terrific source of financial information) 1. www.theonlinelinvestor.com (source for an earnings calendar) 2. earnings.nasdaq.com (to see recent earnings surprises) 3. www.portfolioscience.com (helps you analyze risk) 4. www.ibbotson.com (A source to purchase betas) 5. www.money.com (Another source for betas) 6. www.fenews.com (for information on risk management) 7. www.moneychimp.com (for a CAPM calculator and other interesting tools)
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Return, Risk, and the Security Market Line A-107 Annotated Chapter Outline 12.1 Announcements, Surprises, and Expected Returns A. Expected and Unexpected Returns The return on a security is represented by: Total return - Expected return = Unexpected return Or R - E(R) = U It is important to note that the average value of the unexpected return is zero (otherwise, there would be a bias that investors could use to make profits).
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