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capital market theory assumption 1

Financial services; Finance

The first assumption of capital market theory is that all investors invest efficiently. This means that investors will remain in the investing frontier and will make choices that are rational and ...

Risk cannot really be defined by a fixed definition or formula but one can certainly calculate it to get a good idea about its implications. One way to do it is by calculating the standard deviation ...

dollar return

Financial services; Finance

Dollar return is a sum of return that investors gets from dividends and from capital gain which is influenced by the change in market value of an asset or an investment. It is calculated by taking a ...

standard deviation of return

Financial services; Finance

Standard deviation is a tool that is used to determine how volatile an investment is. Some analysts also call it historical volatility since it predicts future volatility by looking at historical ...

variance of return

Financial services; Finance

When standard deviation is squared, it gives the figure of variance. Variance of return can calculated by determining probability-weighted average of squared deviations from the expected value. It is ...

risk premium

Financial services; Finance

Risk premium is basically the excess that an investor earns over the risk free rate by investing in a risky asset or stock. It is considered as a reward for the investor who is willing to take a ...

average return

Financial services; Finance

Average return basically tells how much an investor has earned on his investment on average in a certain year over a certain period. It is calculated by dividing total return on investment by the ...