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Unformatted text preview: diversification. Unsystematic risk: the proportion of risk of individual assets that can be eliminated through diversification What really matters is systematic risk…. how a group of assets move together. Risk and Return Revisited • For the various asset classes, a trade-off arises between risk and return. The Trade-off Between Risk and Return The Power of Diversification Summary Group 10 Financial Management • Investment performance is measured by total return. • Trade-off between risk and return for assets: historically, stocks have higher returns and volatility than bonds and bills. • One measure of volatility: standard deviation • Systematic risk: risk that cannot be eliminated through diversification...
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- Spring '11