CFP CH10
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8 terms
Terms | Definitions |
|---|---|
 risk premium | the excess return required from an investment in a risky asset over that required from a risk-free investment |
| variance | the average squared difference between the actual return and the average return |
| standard deviation | the positive square root of the variance |
| normal distribution | the systematic, bell-shaped frequency distribution that is completely defined by its average and standard deviation |
| geometric average return | the average compound return earned per years over a multiyear period |
| arithmetic average return | the return earned in an average year over a multiyear period |
| efficient capital market | market in which security prices reflect available information |
| efficient markets hypothesis | the hypothesis that actual capital markets, such as the NYSE, are efficient |
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