Surprise component that affects a stocks it price and

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Unformatted text preview: eturn price This is very obvious when we watch how stock This prices move when an unexpected announcement is made or earnings are different than anticipated than 17 17 Efficient Markets Efficient markets are a result of investors Efficient trading on the unexpected portion of announcements announcements The easier it is to trade on surprises, the The more efficient markets should be more Efficient markets involve random price Efficient changes because we cannot predict surprises surprises 18 18 Systematic Risk Risk factors that affect a large number of Risk assets assets Also known as non-diversifiable risk or Also market risk market Includes such things as changes in GDP, Includes inflation, interest rates, etc. inflation, 19 19 Unsystematic Risk Risk factors that affect a limited number of Risk assets assets Also known as unique risk and assetspecific risk Includes such things as labor strikes, part Includes shortages, etc. shortages, 20 20 Returns Total Return = expected return + unexpected Total return retu...
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This document was uploaded on 03/01/2014 for the course FINANCE 250 at Indiana.

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