Exam2_FC3

Exam2_FC3 - The variability of returns for the portfolio...

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Standard Deviation Risk
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The possibility that an actual return will differ from our expected return; uncertainty in the distribution of possible outcomes. A measure of dispersion of possible outcomes; a scientific approach to measure risk.
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Portfolio Risk
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The greater the standard deviation, the greater the uncertainty, and therefore the greater the ____. Combining several securities into them can actually reduce overall risk.
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Diversification Negatively Correlated
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Unformatted text preview: The variability of returns for the portfolio moves in opposite ways (hard to find). Investing in more than one security to reduce risk. Perfectly Diversified No Effect on Diversification Two stocks are perfectly positively correlated. Two stocks are perfectly negatively correlated. Company-Unique Risk Market Risk Systematic risk that is non-diversifiable. Unsystematic risk that is diversifiable, so risk can be reduced through diversification....
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Exam2_FC3 - The variability of returns for the portfolio...

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