BUSI 2402U Lecture 1: Risk and Return in Capital Markets
Document Summary
Chapter 10 - risk and return in capital markets. You bought a stock one year ago for . 00 per share and sold it today for . 00 per share. Realized returns = 2% + 10% = 12. 0% The table below includes the realized return in each period. Variance: a method the variability of returns - the expected squared deviation of returns from the mean. Standard deviation: a common method used to measure the risk of probability distribution - the square root of the variance. Common risk: risk that is linked across outcomes. Independent risk: risk that bears no relation to other risk. If risks are independent, then knowing the outcome of one provides no information about the other. Diversification: the averaging of independent risks in a large portfolio. Stock prices are impacted by two types of news: company or industry - specific news, market - wide news.
