The Efficient set

The efficient set of risky assets can be combined with

riskless borrowing and lending.

Expected Return & Variance

CAPM
Expected return on the market

Expected return on individual securites

Expected return is the part of the return that stakeholders in

the market predict or expect
Unexpected return = systematic portion + unsystematic portion
Expect & unexpected return

Uncertain or risky return on the stock is the portion that

comes from information that will be revealed within the
months

Total Return = expected return + systematic portion +

unsystematic portion

Total risk = systematic risk + unsystematic risk