BU283 Chapter Notes - Chapter 5: Standard Deviation, Weighted Arithmetic Mean, Squared Deviations From The Mean
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Investors study an asset to determine if the risk will match the return. The more uncertain the investor is, the riskier the investment. Causes of uncertainty: factors that are difficult to predict, but affect the future. The price of the asset is adjusted to compensate the investor for the risk, so they will be more likely to purchase it. The harder task is determining the risk of a portfolio of assets. Lo2: computing the return of a single asset. Holding period return the earnings from dividends paid plus the return from appreciation in the share"s price. You can separate dividends/beginning price from the equation and find the price appreciation, and the dividend yield. Compound average when you have a sample of returns you can use arithmetic average return or geometric (compound) average return. Pr the probability of occurrence of the ith outcome. Lo3: evaluating the risk of holding a single asset.
