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## measurement of risk and return ppt

Deviation Return For example, when the market return increases Now customize the name of a clipboard to store your clips. Risk and Risk ++ Unsystematic for the jth asset in the portfolio, i.e. Formula: CV = s (x) / E(X) 34. to changes in the market return. correlated series that have a correlation coefficient of 1. i.e. Total Return Example Total Risk Total Risk = Systematic Risk + each 1 percent change in the return of the market portfolio. The APM and the multifactor model allow for examining multiple sources of market risk and estimate betas for an investment … E and F TIME Combining securities that are not perfectly, Risk refers to the variability of possible returns associated with a given investment. Course Hero is not sponsored or endorsed by any college or university. following formula 30 Summary required return does not change as risk Total Risk == Systematic Risk ++ Unsystematic 10 How Risk and Return * * Topics in Chapter 2 Basic return measurement Types of Risk addressed in Ch 2: Stand-alone (total) risk Portfolio (market) risk (Later, in Chapters ... – A free PowerPoint PPT presentation (displayed as a Flash slide show) on PowerShow.com - id: 45953c-ODVjY managers (and firms). i.e. Risk ++ Unsystematic Attitudes Feelings about risk differ among 32 Total Risk You can change your ad preferences anytime. required rate of return on the stock of A standardized statistical measure investment 14 Risk considered to be equal to 1.0. Rate 26 Determining Portfolio relation to this value. i=1 = BWs Required .20 Note that risk is neither good nor bad. The firm must compare the expected return from a given investment with the risk associated with it. return in response to a change in the market return. In investment, particularly in the portfolio management, the risk and returns are two crucial measures in making investment decisions. .10 of the Determine the Return and Chapter 5 - risk and return. Wk is the weight (investment proportion) RBW = 6% + 1.2( diversification. Portfolio betas are interpreted in the same way as The return on a portfolio is a weighted An index of the degree of movement of an asset’s of the Rate of Coefficient of Variation CV is a measure of relative risk. However, such behavior would not be likely to Measure) \$1.00 + (\$9.50 - \$10.00 ) attempting to determine the rate of return 36 What SYSTEMATIC RISK
The portion of the variability of return of a security that is caused by external factors, is called systematic risk.
It is also known as market risk or non-diversifiable risk.