Topic 3 Risk Return And Sml

Return, Risk, and the Security Market Line

Outline ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Expected Returns ,[object Object],[object Object],[object Object]

Example: Expected Returns ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Variance and Standard Deviation ,[object Object],[object Object],[object Object]

Example: Variance and Standard Deviation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Another Example ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Portfolios ,[object Object],[object Object],[object Object]

Example: Portfolio Weights ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Portfolio Expected Returns ,[object Object],[object Object]

Example: Expected Portfolio Returns ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Portfolio Variance ,[object Object],[object Object],[object Object]

Example: Portfolio Variance ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Portfolio 12.5% 7.5%

Another Example ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Expected versus Unexpected Returns ,[object Object],[object Object],[object Object],[object Object]

Announcements and News ,[object Object],[object Object],[object Object]

Efficient Markets ,[object Object],[object Object],[object Object]

Systematic Risk ,[object Object],[object Object],[object Object]

Unsystematic Risk ,[object Object],[object Object],[object Object]

Returns ,[object Object],[object Object],[object Object],[object Object]

Diversification ,[object Object],[object Object],[object Object],[object Object]

The Principle of Diversification ,[object Object],[object Object],[object Object]

Diversifiable Risk ,[object Object],[object Object],[object Object]

Total Risk ,[object Object],[object Object],[object Object],[object Object]

Systematic Risk Principle ,[object Object],[object Object],[object Object]

Measuring Systematic Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Total versus Systematic Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Work the Web Example ,[object Object],[object Object],[object Object],[object Object],[object Object]

Example: Portfolio Betas ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Beta and the Risk Premium ,[object Object],[object Object],[object Object],[object Object]

Example: Portfolio Expected Returns and Betas R f E(R A )  A

Reward-to-Risk Ratio: Definition and Example ,[object Object],[object Object],[object Object],[object Object],[object Object]

Market Equilibrium ,[object Object]

Security Market Line ,[object Object],[object Object],[object Object],[object Object]

The Capital Asset Pricing Model (CAPM) ,[object Object],[object Object],[object Object],[object Object]

Factors Affecting Expected Return ,[object Object],[object Object],[object Object]

Example - CAPM ,[object Object],2.13 + 2.434(8.6) = 23.06% 2.434 KEI 2.13 + 2.161(8.6) = 20.71% 2.161 INTC 2.13 + 0.195(8.6) = 3.81% 0.195 KO 2.13 + 2.685(8.6) = 25.22% 2.685 DCLK Expected Return Beta Security

Quick Quiz ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Topic 3 Risk Return And Sml

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Topic 3 Risk Return And Sml