Ch. 11 Risk and Return

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Terms in this set (...)

Under what conditions will a company's announcement have no effect on common stock prices?
When the information in the announcement was fully expected (there was no surprise; all of the information had already been discounted)
What are the 2 basic types of returns?
Expected Returns
Unexpected Returns
What are the 2 basic types of risks?
Systematic Risk
Unsystematic Risk
What is the distinction between the 2 types of risks?
Systematic risk factors affect ALL stocks to some degree.
Unsystematic risk factors affect only one or a small group assets.
What happens to the standard deviation of return for a portfolio if we increase the number of securities in the portfolio?
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Principle of Diversification
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Why is some risk diversifiable?
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Why can't systematic risk be diversified away?
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