RSM230H1 Lecture Notes - Lecture 8: Total Return, Capital Loss, Expected Return
Document Summary
Income yield: return earned by investors as periodic cash flow. Capital gain: appreciation in price of asset from some starting price (usually purchase price/price at start of year) Total return: income yield plus capital gain/loss yield. Paper losses: capital losses people do not accept as losses until the actually sell and realize them. Unconcerned about rates of return, paper losses over short period5. Mark to market: carrying securities at current market value regardless of whether they are sold (over relevant time horizon) Total return includes paper gains/losses on securities not yet sold. Market value is value that can be reinvested elsewhere. Arithmetic mean: sum of all returns divided by total number of observations. Geometric mean: average or compound growth rate over multiple time periods. Standard deviation: measure of risk over all observations; square root of variance ( ) Arithmetic mean if measuring for one year; geometric mean for several years. Expected returns: estimated future returns ri=estimated return, scenario i.
