Lecture 4: Cost of capital and CAPM. First lecture
... Weighted average cost of capital = cost of debt proportion of debt in financing + cost of equity proportion of equity in financing ...
... Weighted average cost of capital = cost of debt proportion of debt in financing + cost of equity proportion of equity in financing ...
Inv Club 04_09_10 - Sites at Lafayette
... Oil prices ↓ by 96 cents Banks borrowing from Fed on a decline ...
... Oil prices ↓ by 96 cents Banks borrowing from Fed on a decline ...
Past performance does not guarantee future results.
... An investor should consider the Funds’ investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information can be found in the Funds’ prospectus. To obtain a prospectus, please call 800-432-7856 or visit heartlandadvisors.com. Plea ...
... An investor should consider the Funds’ investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information can be found in the Funds’ prospectus. To obtain a prospectus, please call 800-432-7856 or visit heartlandadvisors.com. Plea ...
Quarterly Newsletter - December 2001 : Pinney and Scofield : http
... The attacks of September 11 have very obviously increased the level of financial and political risk we face. The range of possible outcomes is wider now. The best outcome would be very much better than would have been imagined before the attacks, and the worst very much worse. The inevitable consequ ...
... The attacks of September 11 have very obviously increased the level of financial and political risk we face. The range of possible outcomes is wider now. The best outcome would be very much better than would have been imagined before the attacks, and the worst very much worse. The inevitable consequ ...
Introduction to Financial Management
... If = 1.0, stock has average risk If > 1.0, stock is riskier than average If < 1.0, stock is less risky than average Most stocks have betas in the range of 0.5 to 1.5 • Beta of the market = 1.0 • Beta of a T-Bill = 0 ...
... If = 1.0, stock has average risk If > 1.0, stock is riskier than average If < 1.0, stock is less risky than average Most stocks have betas in the range of 0.5 to 1.5 • Beta of the market = 1.0 • Beta of a T-Bill = 0 ...
Answers - UCSB Economics
... diversified assets actually maintains less risk then if all the asset was held individually. This is because in a diversified portfolio, one asset’s risk is partially nullify by the other assets held. b. The better diversified portfolio, which we expect to hold less risk is the one that contains sto ...
... diversified assets actually maintains less risk then if all the asset was held individually. This is because in a diversified portfolio, one asset’s risk is partially nullify by the other assets held. b. The better diversified portfolio, which we expect to hold less risk is the one that contains sto ...
top fund fortissimo - (c)
... Alpha is an indicator used to measure the value added by an active portfolio manager relative to a passive exposure to a benchmark. A positive alpha expresses an outperformance whereas a negative alpha indicates an underperformance. A simple way to calculate alpha is to subtract a portfolio’s expect ...
... Alpha is an indicator used to measure the value added by an active portfolio manager relative to a passive exposure to a benchmark. A positive alpha expresses an outperformance whereas a negative alpha indicates an underperformance. A simple way to calculate alpha is to subtract a portfolio’s expect ...
What`s so smart about smart beta?
... • Some companies may experience a rapid increase in stock price (and, therefore, their market cap) for reasons that are not related to the health of the company. For example, general excitement about the technology industry could cause all tech stocks to go up, regardless of their quality. These com ...
... • Some companies may experience a rapid increase in stock price (and, therefore, their market cap) for reasons that are not related to the health of the company. For example, general excitement about the technology industry could cause all tech stocks to go up, regardless of their quality. These com ...
LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
... 12) Highlight the features of Firm specific analysis under Fundamental factors. 13) What are the obstacles faced by an investment analyst? 14) On what basis efficient market theory is criticized? 15) What are the points to be considered in Portfolio evaluation? 16) Explain the constraints of the inv ...
... 12) Highlight the features of Firm specific analysis under Fundamental factors. 13) What are the obstacles faced by an investment analyst? 14) On what basis efficient market theory is criticized? 15) What are the points to be considered in Portfolio evaluation? 16) Explain the constraints of the inv ...
FREE Sample Here - We can offer most test bank and
... the students why they would buy a stock. The answers should revolve around dividends and price appreciation. Use these answers to stress future dividends and future price appreciation (capital gains), all properly discounted at the appropriate risk-adjusted rate. While Chapter 1 is too early in the ...
... the students why they would buy a stock. The answers should revolve around dividends and price appreciation. Use these answers to stress future dividends and future price appreciation (capital gains), all properly discounted at the appropriate risk-adjusted rate. While Chapter 1 is too early in the ...
High returns, low volatility
... with less volatility. So if it works as prescribed, it can be a win-win for an investor’s longterm portfolio. By Todd James ...
... with less volatility. So if it works as prescribed, it can be a win-win for an investor’s longterm portfolio. By Todd James ...
Document
... important” generally meaning delivering a bigger low-risk effect and subsuming other measures — it bolsters the leverage aversion explanation. If volatility or similar measures are more important, it bolsters the lottery preference story. That all sounds great but there’s a problem. The problem is t ...
... important” generally meaning delivering a bigger low-risk effect and subsuming other measures — it bolsters the leverage aversion explanation. If volatility or similar measures are more important, it bolsters the lottery preference story. That all sounds great but there’s a problem. The problem is t ...
Finance 332
... 23. If you were going to put all your money in only one of these assets, which asset would be least risky? a. Asset 1 b. Asset 2 c. Asset 3 d. They all have equal risk 24. Which asset’s beta are you most confident about in using? a. The one with the highest beta b. The one with the lowest standard d ...
... 23. If you were going to put all your money in only one of these assets, which asset would be least risky? a. Asset 1 b. Asset 2 c. Asset 3 d. They all have equal risk 24. Which asset’s beta are you most confident about in using? a. The one with the highest beta b. The one with the lowest standard d ...
The Investment Environment
... Banking industry gives high return but limited capital appericial. IT gives high return and high cap app but growth potential after 2002 is not ...
... Banking industry gives high return but limited capital appericial. IT gives high return and high cap app but growth potential after 2002 is not ...
APPENDIX D
... information. Therefore, the beta of a particular company, because it is usually derived with five years of historical data, is slow to change to current (i.e., forward-looking) conditions, and some price abnormality that may have happened four years ago could substantially affect beta while, current ...
... information. Therefore, the beta of a particular company, because it is usually derived with five years of historical data, is slow to change to current (i.e., forward-looking) conditions, and some price abnormality that may have happened four years ago could substantially affect beta while, current ...
Using the CAPM
... We usually treat the market risk premium (Rm – Rf) as one value rather than two. This is because it is really not a function of the market, but of investors’ attitudes towards risk. The market risk premium asks the question: How much extra return must the market offer investors to entice the averag ...
... We usually treat the market risk premium (Rm – Rf) as one value rather than two. This is because it is really not a function of the market, but of investors’ attitudes towards risk. The market risk premium asks the question: How much extra return must the market offer investors to entice the averag ...
1. value: 3.00 points Investors expect the market rate of return this
... At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calcul your answer to 2 decimal places.) ...
... At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calcul your answer to 2 decimal places.) ...
Portfolio consists of assets with varying expected returns, risks and
... define a region bounded by a hyperbola called the Efficient Frontier which represents portfolios with the lowest risk for a given level of expected return, or equivalently portfolios with the highest expected return for given risk level. The Markowitz portfolio theory says that every rational invest ...
... define a region bounded by a hyperbola called the Efficient Frontier which represents portfolios with the lowest risk for a given level of expected return, or equivalently portfolios with the highest expected return for given risk level. The Markowitz portfolio theory says that every rational invest ...
Exam 3 Review Slides
... Expected return of single stock and portfolio Total risk (variance, standard deviation) of single stock and portfolio Systematic risk (beta) Reward-to-risk ratio Expected return using CAPM ...
... Expected return of single stock and portfolio Total risk (variance, standard deviation) of single stock and portfolio Systematic risk (beta) Reward-to-risk ratio Expected return using CAPM ...
GEM * Majeure Gestion d*Actifs
... You are a portfolio manager. The economic research team has given you the following expectations for the risk free rate, 2%, and the market return 8% with a variance of 18%. You can invest in a stock AA which has a covariance to the market portfolio of 0.56. 1) Graph the CML and situate the stock. W ...
... You are a portfolio manager. The economic research team has given you the following expectations for the risk free rate, 2%, and the market return 8% with a variance of 18%. You can invest in a stock AA which has a covariance to the market portfolio of 0.56. 1) Graph the CML and situate the stock. W ...
Lecture 7
... to assess a physical investment project for an all equity financed firm We use ERi because it reflects the riskiness of the firm’s new investment project – provided the ‘new’ investment project has the same ‘business risk’ characteristics as the firm’s existing project. This is because ERi reflects ...
... to assess a physical investment project for an all equity financed firm We use ERi because it reflects the riskiness of the firm’s new investment project – provided the ‘new’ investment project has the same ‘business risk’ characteristics as the firm’s existing project. This is because ERi reflects ...
the great risk/return inversion - who loses out?
... condition is that if a security doubles in price and the investor is half-weight, the mismatch doubles; if he is double-weighted and the price halves, the mismatch halves also. Underweight positions in large, risky securities therefore have the greatest potential to cause the manager grief. The effe ...
... condition is that if a security doubles in price and the investor is half-weight, the mismatch doubles; if he is double-weighted and the price halves, the mismatch halves also. Underweight positions in large, risky securities therefore have the greatest potential to cause the manager grief. The effe ...
Structure Determines Performance = + + + +
... 1. Source: Dimensional Fund Advisors study (2002) of forty-four institutional equity pension plans with $452 billion total assets. Factor analysis run over various time periods, averaging nine years. Total assets based on total plan dollar amounts as of December 31, 2001. ...
... 1. Source: Dimensional Fund Advisors study (2002) of forty-four institutional equity pension plans with $452 billion total assets. Factor analysis run over various time periods, averaging nine years. Total assets based on total plan dollar amounts as of December 31, 2001. ...
Exam 2
... a. Calculate the expected returns and the standard deviations of the two securities. E(Ra)=.6*4+.4*16=8.8%; E(Rb)=.6*3+.4*3=3% Variance(Alpha) = .6(4-8.8)2+.4(16-8.8)2=13.824+20.736=34.56 Standard Dev.(Alpha)=5.87%; Variance(Beta)=0 b. You have $10,000 to invest. Calculate the expected return and st ...
... a. Calculate the expected returns and the standard deviations of the two securities. E(Ra)=.6*4+.4*16=8.8%; E(Rb)=.6*3+.4*3=3% Variance(Alpha) = .6(4-8.8)2+.4(16-8.8)2=13.824+20.736=34.56 Standard Dev.(Alpha)=5.87%; Variance(Beta)=0 b. You have $10,000 to invest. Calculate the expected return and st ...
Beta (finance)
In finance, the beta (β) of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market. An example of the first is a treasury bill: the price does not go up or down a lot, so it has a low beta. An example of the second is gold. The price of gold does go up and down a lot, but not in the same direction or at the same time as the market.A beta greater than one generally means that the asset both is volatile and tends to move up and down with the market. An example is a stock in a big technology company. Negative betas are possible for investments that tend to go down when the market goes up, and vice versa. There are few fundamental investments with consistent and significant negative betas, but some derivatives like equity put options can have large negative betas.Beta is important because it measures the risk of an investment that cannot be reduced by diversification. It does not measure the risk of an investment held on a stand-alone basis, but the amount of risk the investment adds to an already-diversified portfolio. In the capital asset pricing model, beta risk is the only kind of risk for which investors should receive an expected return higher than the risk-free rate of interest.The definition above covers only theoretical beta. The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio. Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types.Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the market beta. It is an example of regression toward the mean.