Management and Organizational Studies 3311A/B Chapter Notes - Chapter 12: Systematic Risk, Uncorrelated Random Variables, Weighted Arithmetic Mean

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3311A/B
• Professor: Lucas Thung

Document Summary

Chapter 12: risk and return arbitrage pricing theory. Factor models: announcements, surprises and expected returns: return on any security consists of 2 parts, the expected or normal return. The return that sh in the market predict or expect and depends on all available information: the unexpected or risky return. The portion that comes from information that will be revealed in the month: examples of relevant information. News that company"s sales figures are higher than expected: a way to write the return on a stock in the coming month is: R= the actual total return in the month. U= the unexpected part of the return: announcements. Announcement= expected part + surprise: risk: systematic and unsystematic. True risk= the unexpected part of the return. Any risk that affects a large number of assets, each to a greater or lesser degree. Examples: uncertainty about general economic conditions ie. gnp, interest rates or inflation.