If a company has a Beta = 1.7, this stock is riskier than the S&P 500 index. That means its price fluctuates more than the market average. We can also say that the company’s stock price is more volatile than average. What’s good about a Beta > 1 and what’s bad about it?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
1. If a company has a Beta = 1.7, this stock is riskier than the S&P 500 index. That means its price fluctuates more than the market average. We can also say that the company’s stock price is more volatile than average. What’s good about a Beta > 1 and what’s bad about it?
2. T or F? Higher risk investments give the investor a higher return. If this is true, why don’t we all invest in the riskiest investments we can find?
What’s the difference between fundamental analysis and technical analysis? Don’t simply define them both. Figure out what’s different.
3.
If the value > price, then BUY according to value investors
If the value < price, the DON’T BUY or maybe sell or hold according to value investors
Would “momentum” investors say Buy or Don’t Buy?
What would “income investors” want to know in order to make a BUY decision?
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