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12 Cards in this Set
- Front
- Back
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Expected rate of return |
the average of all possible rates of return, where each possible return is weighted by the probability that it might occur. |
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Holding period of return |
the rate of return earned by investing for a specific period of time, such as one year or one month. Also known as rate of return. |
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Standard deviation |
the square root of the variance |
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variance |
the average of the squared difference in possible rates of return and the expected rate of return as such, the variance is a measure of the average squared difference in possible and expected rates of return. |
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arithmetic average return |
the sum of the set of returns divided by their number. |
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geometric or compound average returns |
the rate of return earned on an investment that incorporates consideration for the effects of compound interest. |
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efficient market |
a market in which prices quickly respond to the announcement of new information. |
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semi-strong form efficient market |
a market in which all publicly available information is quickly and accurately reflected in prices. |
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Strong-form efficient market |
a market in which even private information is fully and quickly reflected in market prices. (insider information is known) |
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weak-form efficient market |
a market in which current prices quickly and accurately reflect information that can be derived from patterns in past security prices and trading volumes. (difficult to make abnormal returns) |
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Inefficient market |
takes weeks or months for markets to make the right price or they overreact to news. |
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The U.S. market is |
a weak to semi, but not strong form due to insider trading being illegal. |
