The following stock price information has been collected for stock XYZ: Closing price End of year 2023 2022 2021 2020 2019 $127 $119 $123 $118 $121 XYZ has a correlation with the market portfolio of 0.60. The S&P 500 market portfolio has a standard deviation of 20%. An investor purchase XYZ at the end of 2019 (when it was $121). What is the average annual holding period return (geometric mean) for this investor if he/she held XYZ until the end of 2023?
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.
The following stock price information has been collected for stock XYZ: \table[[End of year,Closing price],[2023,$127
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