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Risk & Returns On Investment PDF
Risk & Returns On Investment PDF
Damodaran
66
Aswath
Damodaran
67
The
noJon
of
a
benchmark
68
Aswath
Damodaran
68
What
is
Risk?
69
Aswath
Damodaran
69
A
good
risk
and
return
model
should
70
Aswath
Damodaran
70
The
Capital
Asset
Pricing
Model
71
Aswath
Damodaran
71
The
Mean-Variance
Framework
72
Expected Return
Aswath
Damodaran
72
How
risky
is
Disney?
A
look
at
the
past
73
Aswath
Damodaran
73
Do
you
live
in
a
mean-variance
world?
74
Aswath
Damodaran
74
The
Importance
of
DiversicaJon:
Risk
Types
75
Competition
may be stronger
or weaker than Exchange rate
anticipated and Political
risk
Projects may
do better or Interest rate,
worse than Entire Sector Inflation &
may be affected news about
expected by action economy
Firm-specific Market
Aswath
Damodaran
75
The
Eects
of
DiversicaJon
76
Aswath
Damodaran
76
The
Role
of
the
Marginal
Investor
77
Aswath
Damodaran
77
IdenJfying
the
Marginal
Investor
in
your
rm
78
Aswath
Damodaran
78
Analyzing
the
investor
bases
79
Aswath
Damodaran
79
Looking
at
Disneys
top
stockholders
in
2009
(again)
80
Aswath
Damodaran
80
And
the
top
investors
in
Deutsche
and
Aracruz
81
Aswath
Damodaran
81
Taking
a
closer
look
at
Tata
Chemicals
82
Aswath
Damodaran
83
The
Risk
of
an
Individual
Asset
84
The
risk
of
any
asset
is
the
risk
that
it
adds
to
the
market
poreolio
StaJsJcally,
this
risk
can
be
measured
by
how
much
an
asset
moves
with
the
market
(called
the
covariance)
Beta
is
a
standardized
measure
of
this
covariance,
obtained
by
dividing
the
covariance
of
any
asset
with
the
market
by
the
variance
of
the
market.
It
is
a
measure
of
the
non-
diversiable
risk
for
any
asset
can
be
measured
by
the
covariance
of
its
returns
with
returns
on
a
market
index,
which
is
dened
to
be
the
asset's
beta.
The
required
return
on
an
investment
will
be
a
linear
funcJon
of
its
beta:
Expected
Return
=
Riskfree
Rate+
Beta
*
(Expected
Return
on
the
Market
Poreolio
-
Riskfree
Rate)
Aswath
Damodaran
84
LimitaJons
of
the
CAPM
85
Aswath
Damodaran
86
Why
the
CAPM
persists
87
Aswath
Damodaran
87
ApplicaJon
Test:
Who
is
the
marginal
investor
in
your
rm?
88
An individual investor
An insider
Aswath
Damodaran
88