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The return an investor expects on an asset over the next pesod would be called its retum. 52 Standard deviation shows of retums. 53 A

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The return an investor expects on an asset over the next pesod would be called its retum. 52 Standard deviation shows of retums. 53 A high signs would indicate more predictable retums (t/t). 55 54 A large cap stock would be more liicely to have a high sigma (1/9). A low sigma would indicate less predictable returns (t/h) A small cap stock would be more likely to heve a low sigma (t/8). 57 The ratio shows the premium (reward) above average market retums for taking more risk 56 shows variability of retums. 59 equals sigana squared. 60 Beta abowsk vs 61 A small cap company typically has a lower beta (t/h) 62 A large cap company typically has a higher heta (t/f). 63 Alpha shows from nosaltums. 64 A company with a positive alpha would be undervalued (c/). 65 A company with a negatve alatha would be cervalued (t/f). shows how two assets move together in tens of risk. A portfolio manager would want negative covariance in 2 portfolio of assets (t/h). 62 68 A postolo manager would warst reytive correlation of returns in a portfolio of assets (t/f). 69 Covariance deals more with the risk va, retums of a portfolio (t/f). 70 Correlation deals more with the retums vs. risk of a portfolio (t/4. 71 Small cap stocks historically have outperformed larpe cap stocks t/6) 72 The rate of return cat bills is essentially a risk free rate (t/t). 73 The difference berween the setum oat-bills and stocks is the for investing in stock 74 Generally speaking, stocks would have a lower bets than corpotate bonds (t/4). 75 Generally speaking, stocks would have a lower heta than government bonds (+/+). CAPM investigates the relationship between risk and retum ca individual stocks when held as a part of a large

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