财务管理课件chap011.ppt

Risk and Return
Chapter 11
0
Key Concepts and Skills
Know how to calculate expected returns
Understand the impact of diversification
Understand the systematic risk principle
Understand the security market line
Understand the risk-return trade-off
1
Chapter Outline
Expected Returns and Variances
Portfolios
Announcements, Surprises, and Expected Returns
Risk: Systematic and Unsystematic
Diversification and Portfolio Risk
Systematic Risk and Beta
The Security Market Line
The SML and the Cost of Capital: A Preview
2
Expected Returns
Expected returns are based on the probabilities of possible es
In this context, “expected” means average if the process is repeated many times
The “expected” return does not even have to be a possible return
3
Example: Expected Returns
Suppose you have predicted the following returns for stocks C and T in three possible states of nature. What are the expected returns?
State Probability C T
Boom
Normal
Recession ???
RC = .3(.15) + .5(.10) + .2(.02) = .099 = %
RT = .3(.25) + .5(.20) + .2(.01) = .177 = %
4
Variance and Standard Deviation
Variance and standard deviation still measure the volatility of returns
Using unequal probabilities for the entire range of possibilities
Weighted average of squared deviations
5
Example: Variance and Standard Deviation
Consider the previous example. What are the variance and standard deviation for each stock?
Stock C
2 = .3(.15-.099)2 + .5(.1-.099)2 + .2(.02-.099)2 = .002029
= .045
Stock T
2 = .3(.25-.177)2 + .5(.2-.177)2 + .2(.01-.177)2 = .007441
= .0863
6
Another Example
Consider the following information:
State Probability ABC, Inc.
Boom .25 .15
Normal .50 .08
Slowdown .15 .04
Recession .10 -.03
What is the expected return?
What is the variance?
What is the standard deviation?
7
Portfolios
A portfolio is a collection of assets
An asset’s risk and return is important in how it affects the risk and return of the portfolio
The risk-retu