Calculating Returns
Includes both capital gains/losses and dividend income amounts.
What is the dollar return.
A measure of the past return volatility, or risk of an investment.
What is the standard deviation?
Combining different types of investments to lower risk.
What is diversification?
The concept and process for combining securities in a portfolio to minimize risk.
What is modern portfolio theory.
The portfolio that achieves the highest return based on the investor's risk tolerance
What is an optimal portfolio?
Calculating based on dividing the total amount earned by the beginning investment.
What is the percentage return?
Includes both firm specific and market risk
What is total risk?
Risks such as labor strikes or component shortages.
What is firm-specific risk?
What is allocation?
Portfolios with the highest return possible at each risk level.
What are efficient portfolios?
The measure that summarizes the past performance of an investment.
What is the average return?
Standard Deviation raised to the power of 2.
What is variance?
Risks shared among on companies such as inflation.
What is market risk?
The line that shows all efficient portfolios.
What is the efficient frontier?
An investment in a portfolio that requires interest payments.
What is a loan or bond?
The mean return that is the equivalent return compounded by the number of periods.
What is the geometric return?
The riskiest asset class.
What are stocks?
The type of risk you do not receive rewards for.
What is firm-specific risk?
A measurement of the co-movement between two variables (or securities) ranging from +1 to -1.
What is correlation?
An investment portfolio that offers a better risk-return profile than all other available portfolios.
What is a dominent portfolio?
The last mathematical step in computing the geometric return.
What is subtracting 1?
Measures the tradeoff between risk and return.
What is the co-efficient of variation?
A combination of assets held by an investor.
What is a portfolio?
Calculating the return of a group of stocks held jointly.
What is the portfolio return?
Name of the person who won a Nobel Prize because of his Modern Portfolio Theory?