25300 Lecture Notes - Lecture 7: Trend Analysis, Capital Market, Dividend Yield
Document Summary
Risk & return: historical and expected risk & return for a single asset and portfolio. Investment: purchase of an asset, expectation of making future returns. Should compensate investor for time, inflation and risk. *government bonds and bank bills are risk free. *never look at the return value (must consider risk) Capital gains yield = 10% (110 100 +5) / 100 = 15% Measuring historical returns: must convert each to a percentage. Measuring expected return: *e(r) = sum of probability x return. E(r) = probability of return r. Calculate risk using variance and standard deviation for an asset. Larger the standard deviation = greater dispersion of returns/risk. For investors, given a normal distribution there is about 1 in 3 chance that the return will be outside one std. deviation. *returns from shares (risks) = dividend yield, capital gain/loss: understand the dividend and capital gain yields. *capital gains yield = price at end price at start / price at start.
