Chapter6-Risk,Return,andCAPM.ppt

《Chapter6-Risk,Return,andCAPM.ppt》由会员上传分享，免费在线阅读，更多相关内容在教育资源-天天文库。

1、Thefutureisuncertain,andsoistheperformanceofaninvestment(withournotedexceptionthattheU.S.Treasurybillisassumedtoberisk-free).Wewishtobeabletoexamineandquantifytheriskassociatedwithparticularinvestmentstodetermineifwewouldbecomfortablemakingthoseparticularinvestments.Ifth

2、ereisenoughcompensation(intheformofreturn)wemaywishtotakeonriskyinvestments.Chapter6Return,Risk,andtheCapitalAssetPricingModelExpectedreturn(E[R]),oftencalledthemean():WEIGHTEDaverageofallpossiblereturns:EachreturnisweightedbythePROBABILITYthateachreturnwilloccur.Wecann

3、otpossiblyaccountforallpossiblereturns,sowelimitthepossibilitiestoamanageablefew,oftenrelatingreturnstovariousstatesoftheeconomy):Boom,Normal,Bust,etc.Risk:POTENTIALVARIABILITYinthefuturecashflows(thewordUNCERTAINTYisvirtuallysynonymouswithrisk).Variance(2):weightedaver

4、ageofeachpossiblereturn’sSQUAREDDEVIATIONfromtheexpectedreturn,.Standarddeviation:squarerootofthevariance(measuredinthesameunitsasreturns).Example6.1(meanandstandarddeviation)ReturnsonPDQ,Inc.areforecasttobethefollowing(wearelettingtheincrediblycomplexworldberepresented

5、bythreepossiblestates):StateProbabilityReturnBoom.25.30Normal.50.10Bust.25–.106.1a(Mean):Calculatetheexpectedreturn.Note:Mean=Prob(Return1)xReturn1+Prob(Return2)xReturn2+…+Prob(Returnn)xReturnnExample6.1(Cont.)(meanandstandarddeviation)StateProbabilityReturnBoom.25.30Nor

6、mal.50.10Bust.25–.10So,PDQ’sexpectedreturn(mean),,is:(.25x.30)+(.50x.10)+(.25x-.10)=.106.1b(Variance):Takeaprobability-weightedaverageofthesquareddeviationsofpossibleoutcomesaboutthemean:2=p1*(R1–mean)2+p2*(R2–mean)2+…+pn*(Rn–mean)2ForPDQ,wehave3statesoftheeconomy,thus

7、3outcomes,so3terms…Example6.1(Cont.)(meanandstandarddeviation)Variance:2=.25x(.3–.1)2+.5x(.1–.1)2+.25x(-.1–.1)2=.01+0+.01=.026.1c(StandardDeviation):=.02=.1414=14.14%Let’srounditoffto14%.Note:stockreturnsareapproximatelynormallydistributed(atleastforsmalltimeperiods).L

8、et’sassumeanormaldistributionunlesstoldotherwise.“TheNormalDistribution”Example6.2(normalprobabilities