risk reurn and cos of caial风险回报和资本成本.pptxVIP

. Types of Returns . 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 . Summary and Conclusions Return, Risk, and the Security Market Line Types of Returns n Total Monetary return = Dividend Income + Capital Gain u Eg an investment of £1000 rises in value to £1500 providing a capital gain of £500. Over the same period the dividend income is 5% = £50. Total return is then £500 +£50 = £550. u Total monetary return is an absolute measure of returns. It tells you how much money you have made in £’s. It is often more useful to know the Percentage Return. n The Percentage Return is the total monetary return divided by the amount of capital invested. n Percentage Return = Dividends + Capital Gains amount invested Or R it = D it + (Pit – Pit-1) = Div. Yield + % capital gain Pit-1 Expected Returns and Variances: Basic Ideas . The quantification of risk and return is a crucial aspect of modern finance. It is not possible to make “good” (i.e., value-maximizing) financial decisions unless one understands the relationship between risk and return. . Rational investors like returns and dislike risk. . Consider the following proxies for return and risk: Expected return - weighted average of the distribution of possible returns in the future. Variance of returns - a measure of the dispersion of the distribution of possible returns in the future. How do we calculate these measures?. i pi x Ri i=1 -1.25% i=2 7.5% i=3 8.75% State of Economy +1% change in GNP +2% change in GNP +3% change in GNP Calculating the Expected Return. Example 1 pi Probability of state i .25 .50 .25 Ri Return in state i -5% 15% 35% Expected return = (-1.25 + 7.50 + 8.75) =