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Definition
Return on a risky asset expected in the future |
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Group of assets such as stocks and bonds held by an investor |
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Percentage of a portfolio's total value in a particular asset |
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Definition
A risk that influences a large number of assets. |
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Definition
A risk that affects at most a small number of assets. |
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Principle of Diversification |
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Definition
Spreading an investment across a number of assets will eliminate some, bu not all, of the risk |
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Systematic risk principle |
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Definition
The expected return on a risky asset depends only on that asset's systematic risk |
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Definition
Amount of systematic ris present in a particular risky asset relative to that in an average risky asset. |
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Security Market Line (SML) |
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Definition
Positively sloped straight line displaying the relationship between expected return and beta |
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Definition
Slop of the SML, the difference between the expected return on a market portfolio and the risk-free rate |
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Capital Asset Pricing Model (CAPM) |
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Definition
Equation of the SML showing the relationship between expected return and beta |
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Definition
The minimum required return on a new investment |
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Definition
The reward for bearing risk |
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