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Risk and Return

Risk and Return

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Published by Asjad Jamshed
Risk and Return
subject: Risk Management Techniques
Risk and Return
subject: Risk Management Techniques

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Categories:Business/Law
Published by: Asjad Jamshed on Oct 09, 2010
Copyright:Attribution Non-commercial

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07/18/2013

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Risk and ReturnRisk and Return
Investors purchaseInvestors purchasefinancial assetsfinancial assetssuch as shares of such as shares of  stock because they desire to increase their wealth,stock because they desire to increase their wealth,i.e.,i.e.,earn aearn apositive rate of returnpositive rate of returnon theiron their investments. The future, however, is uncertain;investments. The future, however, is uncertain;investors do not know what rate of return theirinvestors do not know what rate of return theirinvestments will realize.investments will realize.
InInfinancefinance, we assume that individuals base their, we assume that individuals base their decisions on what theydecisions on what theyexpect to happenexpect to happenand theirand their assessment of how likely it is that what assessment of how likely it is that what actually occursactually occurs will be close to what they expected to happen.will be close to what they expected to happen.
www.imstudies.vze.com
 
Risk and ReturnRisk and Return
W
hen evaluating potential investments in
W
hen evaluating potential investments infinancial assets, these two dimensions of financial assets, these two dimensions of the decision making process are calledthe decision making process are calledexpected returnexpected returnandandriskrisk..
The concepts presented in this chapterThe concepts presented in this chapterinclude the development of measures of include the development of measures of expected return and riskexpected return and riskon an individualon an individualfinancial asset and on afinancial asset and on aportfolio of portfolio of  financial assetsfinancial assets, the principle of , the principle of  diversificationdiversification, and the, and theCapital Asset PricingCapital Asset Pricing Model (CAPM).Model (CAPM).
www.imstudies.vze.com
 
Risk and ReturnRisk and Return
ConceptsConcepts
1
.
1
.
Expected ReturnExpected Return
2.2.
Measures of RiskMeasures of Risk --Variance and Standard Variance and Standard DeviationDeviation
3.3.
Portfolio Risk and ReturnPortfolio Risk and Return
4.4.
DiversificationDiversification
5.5.
Capital Asset Pricing ModelCapital Asset Pricing Model--(CAPM)(CAPM)
www.imstudies.vze.com

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