Risk and Return

Risk and Return - Good Time to Talk about Risk Stock Market...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Good Time to Talk about Risk Stock Market European Crisis Financial Meltdown in 2008
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 Risk Definitions A measure of uncertainty about the outcome from a given event.   The greater the variability of possible outcomes, on both the  high side and the low side, the greater the risk. The chance of financial loss, or more formally, the variability of  return associated with a given asset. Risk is determined by the uncertainty of future cash flows, and  this uncertainty is the result of factors peculiar to each asset.
Background image of page 2
3
Background image of page 3

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

View Full DocumentRight Arrow Icon
4
Background image of page 4
5 Defining and Measuring Risk Risk is the chance that an outcome  other than expected will occur Probability distribution is a listing of all  possible outcomes with a probability  assigned to each must sum to 1.0  (100%)
Background image of page 5

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

View Full DocumentRight Arrow Icon
6 Risk and Return Risk and return are correlated, more  risk, more return HPR (Holding period return) is  computed Current yield Capital gain Expected return – weighted average of all  possible returns
Background image of page 6
7 Probability Distributions Martin Products and U. S. Electric
Background image of page 7

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

View Full DocumentRight Arrow Icon
8 Expected Rate of Return The rate of return expected to be  realized from an investment over a long  period of time The mean value of the probability  distribution of possible returns The weighted average of the outcomes,  where the weights are the probabilities
Background image of page 8
9 Expected Rate of Return
Background image of page 9

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

View Full DocumentRight Arrow Icon
10 Expected Rate of Return P
Background image of page 10
11 Continuous Probability  Distributions
Background image of page 11

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

View Full DocumentRight Arrow Icon
12 Measuring Risk:  The Standard Deviation A measure of the tightness, or  variability, of a set of outcomes
Background image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 34

Risk and Return - Good Time to Talk about Risk Stock Market...

This preview shows document pages 1 - 13. Sign up to view the full document.

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