Chap 8 Flashcards
1
Q
Which will always be higher, the arithmetic mean or the geometric mean?
A
Artithmetic
2
Q
What is variance?
A
It measures the extent to which possible realized returns differ from expected return
3
Q
What is standard deviation?
A
The square root of variance - shows how spread out returns are with respect to the average
4
Q
Beta
A
Links risk of individual equity securities or portfolio of equities to the market as a whole. Market beta=1
5
Q
What is duration?
A
Measure of sensitivity of bond’s price to changes in interest rate
6
Q
In a bull market, is it better to have higher or lower beta stocks?
A
Higher
7
Q
Alpha
A
Excess return earned on portfolio from expected beta due to fund manager’s stock picking skills
