Ch 12 Flashcards
(19 cards)
arithmetic return
(Ending price-inital price+dividends)/inital price or (dividend yields+capital gains yield)
arithmetic avg.
sum of stock % / years
Variance
(1/t-1)(return 1-arithmetic avg.)^2+(return 2-arithemtic avg.^2)….
Standard deviation
square-root(variance)
avg. risk premium
sum of all percentages/years
geometric avg. return
[(1+return%)(1+return%)…]^(1/t)-1
securities that had the highest average annual return for the period 1926–2022?
small-company stocks
the rate of return usually makes this security a risk-free rate of return
treasury bills
the difference between two returns
risk premium
To convince investors to accept greater volatility, an investment must:
increase the risk premium
what is defined by its mean and its standard deviation?
normal distribution
The return earned in an average year over a multiyear period is called the __________blank average return.
arithmetic return
the most likely reason why a stock price might not react at all on the day that new information related to the stock’s issuer is released? Assume the market is semistrong form efficient.
information was expected
What form of market efficiency would most likely offer the greatest profit potential to an unusually skillful professional stock analyst?
weak
components of total return
Income yield
Capital gains yield
Dividend yield
current yield
Investors may accept an asset with greater risk, only if the asset
______.
offers a greater risk premium
A normal distribution is defined by _____.
mean
standard deviation
The Weak form of market efficiency indicates _____ is useless.
technical analysis
Insiders could make profit from insider trading in _______.
a weak form efficient market
a semi-strong form efficient market
