Lec 4. CH 11. Return and Risk
1. Individual Securities
 Expected return: The return that an individual expects a stock to earn over the next period. Only and expectation. An individual's expectation may simply be the average return per period a security has earned in the past.
 Variance and standard deviation: The volatility of a security's return.
 Covariance and correlation: Returns on individual securities are relate to one another. The relationship between two securities.
*Note!!! Correlation is a translated version of covariance. The two parameters always have the same sign (positive, negative, or 0)
2. Expected Return, Variance, and Covariance and Correlation
 Stock Fund  Bond Fund  
Scenario  Rate of Return  Squared Deviation  Rate of Return  Squared Deviation 
Recession  7%  0.0324  17%  0.0100 
Normal  12%  0.0001  7%  0.0000 
Boom  28%  0.0289  3%  0.0100 
Expected return  11.00% 
 7.00% 

Variance  0.0205 
 0.0067 

Standard Deviation  14.3% 



Scenario  Stock Deviation  Bond Deviation  Product of Deviation 




Recession  .18  .10  .0180 
Normal  0.1  0  .0000 
Boom  .17  .10  .0170 
Sum 

 .035 
Covariance 

 .0117 
Correlation
=> Strong negative
'MBA > FIN 500  Corporate Finnace' 카테고리의 다른 글
Lec 4. CH 11. Return and Risk (0)  2014.04.16 

Lec 1. Discounted Cash Flow Valuation (0)  2012.04.29 
댓글을 달아 주세요