Lecture 4 + Quotes

Question 1

Definition and difference in1. “hedge asset” and 2.”safe havens”

Answer 1

is an asset that is uncorrelated (or negatively correlated) with another asset or portfolio….

1. on average
2. in times of market stress or turmoil

Question 2

beta is equal to?

Answer 2

the co variance between the security’s return & the market’s return
/ the variance of the market portfolio.

Question 3

beta is a measure of?

Answer 3

of how a security’s return covaries with the market returns, normalized by the market variance.

Question 4

CAPM alternative, 3 methods used by Fama & French?

Answer 4

1. Size
2. Book(net book value of assets) to(/) market(price per share)
3. Beta