MKT 600 Lecture Notes - Lecture 10: Macroeconomics, Arbitrage, Capital Asset Pricing Model
16 Jun 2015
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Document Summary
Return on any stock traded in a financial market is composed of two parts: normal, or expected, return from the stock is the part of the return that investors predict or expect. Based on the markets understanding today of the important factors that will influence the stock in the coming year: uncertain, or risky part. Discounted news impact is already a part of the stock price because the market already knew about it. Innovation or the surprise difference between the actual result and the forecast. Analyst had been expecting significantly sharper declines situation was not a bad as previously thought. Key fact keep in mind about news and prices news about the future is what matters. Expected part of any announcement part of the information that the market uses to form the expectation e(r) of the return of the stock. Surprise news that influences the unanticipated return on the stock u.
