BU283 Study Guide - Midterm Guide: Dividend Yield, Standard Deviation, Weighted Arithmetic Mean
Document Summary
Each has different levels of expected return and different risks that is probabilities that these expected returns will be actually realized. Computing on a single asset: holding period return consists of the earnings from dividends paid plus the retrun from appreciation or capital gain in the shares price, dividend yield. Risk entails harm and uncertainty: standard deviation captures risk. Computing the risk of a single asset. Compute the expected return on a portfolio. Correlation means there"s a predictable relationship between two series of numbers. You can hold risky investments and by combing them end up with a portfolio less risky than if any of the investments were held by themselves. Naive diversification is not he most effective approach to portfolio creation. Risk free assets: standard deviation of returns is zero, correlation of risk free returns with the returns of any other asset is zero, common portfolio is called the market portfolio.
