09.1207 Misc. Topics

09.1207 Misc. Topics - Misc Topics December 7 2009 1 Size...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Misc. Topics December 7, 2009 1. Size Adjustment in CAPM a. R = R f  +  (r β M -r f ) + r s b. r is size adjustment. 2. Torpedo Effect   a. Avoid stocks that are highly valued, have high expectations and are vulnerable to severe drops on minor disappointments. These we call “torpedo stocks” and they destroy the compounding effect. Bad earnings = bad price . growth stocks perform similarly to other stocks in response to positive earnings surprises, but that growth stocks exhibit a much larger negative response to negative earnings surprises. 3. Return/Risk Summary – Morningstar Cells a. Returns i. Given the same risk, Value outperforms Growth.  ii. Given the same risk, Small outperforms Large. b. Risk i. Small > Large (Small gets higher return for higher risk) ii. Value/Growth – no strong effect (value gets higher return for same risk –  Free Lunch!) 4. Growth / Value Metrics N/A A company with no earnings has an
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/08/2010 for the course BUS 172B at San Jose State.

Page1 / 2

09.1207 Misc. Topics - Misc Topics December 7 2009 1 Size...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online