Title | November 23 notes |
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Author | Parm Se |
Course | The Economics of Capital Assets and Project Evaluation |
Institution | Langara College |
Pages | 4 |
File Size | 96.3 KB |
File Type | |
Total Downloads | 70 |
Total Views | 134 |
in class notes from the white board...
CAPM – Capital asset pricing model Goal risk premium rA (return on risk a) – rF (risk free rate)
1. What is risk? Table 12.1 a. Variance std, var b. Historical/expected 2. How can we avoid risk a. Diversification b. Portfolio - Correlation/covariance 3. What risk can we not avoid a. Market risk b. Market portfolio 4. What is the risk premium on the market portfolio? a. Rm (expected return on market portfolio) – rf (risk free) on market portfolio which has βm market risk of market portfolio = 1 unit b. Google β = 0.91 (if the economy does poorly, the stock does poorly) 5. How much market risk does my stock have? a. Β>1 b. 0...