CHRiskandRatesofReturn(财务管理,英文版).pptxVIP

CHAPTER 6 Risk and Rates of ReturnStand-alone riskPortfolio riskRisk return: CAPM/SMLWhat is investment risk?Investment risk pertains to the probability of actually earning a low or negative return.The greater the chance of low or negative returns, the riskier the investment.Probability distributionFirm XFirm YRate ofreturn (%)xpected Rate of ReturnAnnual Total Returns,1926-1998Average StandardReturn Deviation DistributionSmall-companystocks 17.4% 33.8%Large-companystocks 13.2 20.3Long-termcorporate bonds 6.1 8.6