Risk and Return Flashcards
1
Q
Unsystematic Risk
A
Lowered through diver
2
Q
Capital market line
A
Consists of efficient complete portfolios; it is the new efficient frontier. All rational risk averse individual will rest on CML.
3
Q
Portfolio on the CML
A
mix of the market portfolio (M) + risk-free asset.
4
Q
Market portfolio
A
The point of tangency between the CML and the old efficient frontier. Theoretical best optimal mix of portfolios.
5
Q
Beta
A
Beta >1
6
Q
SML
A
how are people rewarded for risk?
7
Q
What type of relationship between stock price and expected return?
A
Inversely related.
8
Q
CML
A
portfolio only
9
Q
CAPM & SML
A
individual stocks (but can apply to portfolios)
10
Q
What is the Quantitative relationship between risk and return?
A
