FinancialMarketsChap13

FinancialMarketsChap13 - Chapter 13 Efficient portfolio: a...

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Chapter 13 - Efficient portfolio : a portfolio that offers the highest return for a given level of risk - Expected return : The central tendency or mean of a probability distribution of returns - Probability distribution : a listing (table or formula) of possible values of random variables and the likelihood that they will occur - Symmetrical distribution : dispersion of returns on one side of the expected return is the same as the dispersion on the other side. - Skewness : Dispersion not equal on sides of expected return - Variance : The mean of the squared deviation of the differences between possible values and the distribution’s mean - Standard deviation : Square root of a distribution’s variance - Total risk : The standard deviation of returns to an asset or portfolio of assets - Diversifiable risk : The variability in an asset’s returns that, when it is grouped with other assets in a portfolio, will be reduced or offset by variation in the returns of other members of the portfolio. This term is another name for unsystematic risk - Systematic risk : The variability in an asset’s returns that derives from its relationship to the general market for securities and cannot be eliminated by inclusion of the asset in a portfolio - Unsystematic risk : The portion of the variability in an asset’s returns that reflects only the situations unique or specific to the firm that issued that issued the security. -
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This note was uploaded on 01/27/2010 for the course ECON 252 taught by Professor Robertshiller during the Spring '08 term at Yale.

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FinancialMarketsChap13 - Chapter 13 Efficient portfolio: a...

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