文档介绍：Principles of Corporate Finance Chapter 7 Introduction to Risk, Return, and the Opportunity Cost of Capital
Lu Yurong
Principles of Corporate Finance
Sixth Edition
Richard A1>. Brealey
Stewart C. Myers
Chapter 7
McGraw Hill/Irwin
Introduction to Risk, Return, and the Opportunity Cost of Capital
Topics Covered
75 Years of Capital Market History
Measuring Risk
Portfolio Risk
Beta and Unique Risk
Diversification
The Value of an Investment of $1 in 1926
Source: Ibbotson Associates
Index
Year End
1
6402
2587
Source: Ibbotson Associates
Index
Year End
1
660
267
Real returns
The Value of an Investment of $1 in 1926
Rates of Return 1926-2000
Source: Ibbotson Associates
Year
Percentage Return
Average Market Risk Premia (1999-2000)
Risk premium, %
Country
Measuring Risk
Variance - Average value of squared deviations from mean. A measure of volatility.
Standard Deviation - Average value of squared deviations from mean. A measure of volatility.
Measuring Risk
Coin Toss Game-calculating variance and standard deviation
Measuring Risk
Return %
# of Years
Histogram of Annual Stock Market Returns
Measuring Risk
Diversification - Strategy designed to reduce risk by spreading the portfolio across many investments.
Unique Risk - Risk factors affecting only that firm. Also called “diversifiable risk.”
Market Risk -