Select all that are takeaways with respect to risk and return in financial markets that we gleaned from historical data. In a competitive market, one should expect higher returns for taking on more risk In a competitive market, one will earn a higher return if they take on more risk Individual stocks and portfolios (of those individual stocks), by definition, exhibit the same risk-return trade offs We use historical data to quantify the risk-return relation because we know this same relation will hold in the future
Select all that are takeaways with respect to risk and return in financial markets that we gleaned from historical data. In a competitive market, one should expect higher returns for taking on more risk In a competitive market, one will earn a higher return if they take on more risk Individual stocks and portfolios (of those individual stocks), by definition, exhibit the same risk-return trade offs We use historical data to quantify the risk-return relation because we know this same relation will hold in the future
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter5: Risk Analysis
Section: Chapter Questions
Problem 11QE: Market equity beta measures the covariability of a firms returns with all shares traded on the...
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Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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Transcribed Image Text:Select all that are takeaways with respect to risk and return in financial markets that we gleaned from
historical data.
In a competitive market, one should expect higher returns for taking on more risk
In a competitive market, one will earn a higher return if they take on more risk
Individual stocks and portfolios (of those individual stocks), by definition, exhibit the same risk-return trade
offs
We use historical data to quantify the risk-return relation because we know this same relation will hold in
the future
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