FIN 010 Lecture Notes - Lecture 13: Probability Distribution, Weighted Arithmetic Mean, Santa Barbara City College
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It shows the total risk that is associated with a particular venture derived from historical data. Low sd means number are a very close range, High sd means numbers are spread out. The shadowed area is the probability, approximately 68%, that return on company x is between -0. 06% and 60. 06%. Measuring risk: standard deviation (forecasted data- apply probability) Measuring risk: coefficient of variation (standardizing measure of risk) Lower cv is better option, as this means that there is a lower risk but high return. Useful in investments where risk and expected returns differ. Portfolio return is the weighted average return of constituents. A combination or collection of investment securities. Tina has a self-managed superannuation fund which holds three hypothetic stocks, bba. ax, wew. ax and tlt. ax. Annual returns of tina"s three stocks between 2011 and 2015 are given. Risk of tina"s portfolio same procedure as cba. A combination or collection of financial assets. In the same asset class (e. g. share portfolio)