3.1 Risk and Return for a single asset

Question 1

Markowitz portfolio theory builds on __ and __ as objects of choice.

Answer 1

mean
variance

Question 2

Defining returns:
(1) rt = (pt — po) / po
(2) Expected return for a given time interval
(3) How to measure risk?

Answer 2

(2) pi * return (of portfolio)

(3) use standard deviation

Question 3

___ is measurement of the stand-alone risk of an investment. The larger the ___, the higher the probability that the returns will be far higher or far below the expected return.

Answer 3

Standard deviation: