Fundamentals Flashcards
Should you ever consider the risk of an asset in isolation?
“You should not consider the risk of an asset in isolation. Rather, you should evaluate its risk in terms of its diversification benefit—how its addition to a portfolio affects the risk level of the entire portfolio.”
What does expected return mean?
The return or gain that is expected.
What is volatility?
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured as either the standard deviation or variance between returns from that same security or market index.
What does the distribution of returns convey?
The shape of the distribution of the returns
What is tax efficiency?
How gains for an asset are taxed
What is unsystematic risk?
Risk unique to a stock which can be diversified away.
How do you measure relative risk?
Sharpe Ratio
