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6 Cards in this Set
- Front
- Back
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Expected return
Page 89 |
The return expected on an asset during a future period; also known as expected rate of return.
This rate of return also takes into account taxes and so on. |
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Risk
Page 90 |
The degree of uncertainty in the return on an asset.
The asset could go down as did with the Facebook stock with its initial IPO. |
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Diversification
Page 92 |
Dividing wealth among many different assets to reduce risk. For example, you can have your wealth in all different assets such stock, bond, or any security.
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Market (or systematic) risk
Page 93 |
Risk that is common to all assets of a certain tye, such as the increase and decrease in stocks resulting from the business cycle. The are natural such as economic recessions or expansions.
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Idiosyncratic (or unsystematic) risk
Page 93 |
Risk that pertains to a particular asset rather than to the market as a whole, as when the price of a particular firm's stock fluctuates because of the success or failure of a new product. Such as the death of the polaroid camera and the digital camera arose.
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Fisher effect
Page 105 |
The assertion by irving fisher that the nominal interest rises or falls point-for-point with changes in the expected inflation rate.
Because people sell their bonds or purchase them with this rate. |
