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The CAPM offers a decomposition of total portfolio risk into systematic (market related) and idiosyncratic risk (firm-specific). 1. Briefly describe each type of risk
The CAPM offers a decomposition of total portfolio risk into systematic (market related) and idiosyncratic risk (firm-specific). 1. Briefly describe each type of risk and how it is measured in the CAPM. 2. Assume that the CAPM holds. Argue why we cannot have E[i] > r if = 0, i.e. why is there no compensation for idiosyncratic risk?
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Classical Electrodynamics
Authors: John David Jackson
3rd Edition
047130932X, 978-0471309321
