Management and Organizational Studies 2310A/B Chapter Notes - Chapter 13: Capital Asset Pricing Model, Risk-Free Interest Rate, Economic Equilibrium

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Stacey Hann

Document Summary

Chapter 13 return, risk, and the security market line. Variance and standard deviation: variance and standard deviation still measure the volatility of returns, you can use unequal probabilities for the entire range of possibilities, weighted average of squared deviations, use projected future returns and their associated probabilities. Portfolios: portfolio group of assets such as stocks and bonds held by an investor. Portfolio weights: portfolio weights percentage of a portfolio"s total value in a particular asset. Portfolio standard deviation and diversification: correlation the returns on two assets move together, perfect positive correlation does not imply that the slope is one, rather, it implies. If the return is positive, then the assets are positively correlated. If the return is negative, then the assets are negatively correlated. In equilibrium, all assets and portfolios must have the same reward-to-risk ratio and they all must equal the reward-to-risk for the market.