About This Chapter
Return, Risk, & the Security Market Line - Chapter Summary and Learning Objectives
Our experienced instructors show you ways in which investors look at assets to determine if they are desirable for portfolio inclusion by estimating risks and projecting likely returns. Use the written lesson transcripts in conjunction with the videos and lesson quizzes to enhance your comprehension and retention of key information. This chapter will introduce you to the following:
- Portfolio weights
- Return and variance
- Expected and unexpected returns
- Systematic and unsystematic risk
- Systematic risk principle
- Portfolio beta
- The security market line
|Portfolio Weight, Return & Variance: Definition & Examples||Learn about portfolio weights, expected returns, and variance.|
|Expected & Unexpected Returns on Assets: Definition & Examples||See the difference between expected and unexpected returns.|
|Systematic & Unsystematic Risk: Definition & Examples||Study the components of return, systematic and unsystematic risk.|
|Using the Systematic Risk Principle & Portfolio Beta||Explore the systematic risk principle, measuring risk, and portfolio betas.|
|The Security Market Line: Definition & Uses||Discover how to relate beta to the security market line to aid in asset evaluation.|
1. Portfolio Weight, Return & Variance: Definition & Examples
A portfolio can be designed in several different ways. It is important to understand the basics of a portfolio before building and managing one. In this lesson, we will go over the weight, return, and variance of a portfolio.
2. Expected & Unexpected Returns on Assets: Definition & Examples
Investment means trying to guess what the return on an asset will be. But sometimes, that can be tricky. In this lesson, we'll examine the expected and unexpected returns, including their relationship to news and how they relate to efficient markets.
3. Systematic & Unsystematic Risk: Definition & Examples
In financial markets, risk is an important concept to understand. If you hope to make money, you must risk money. In this lesson, we'll learn the difference between systematic and unsystematic risk, which will help you develop your investing strategy.
4. Using the Systematic Risk Principle & Portfolio Beta
In this lesson, we'll discuss how investors must understand the systematic risk principle in their portfolio. We'll also explain how investors can measure and define the risk of their portfolios using betas.
5. The Security Market Line: Definition & Uses
How do you evaluate an asset's risk profile compared to the market as a whole? In this lesson, we'll examine what beta is and how the security market line (or SML) can help investors compare the risk of a specific asset to that of the market.
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Other chapters within the Finance 101: Principles of Finance course
- Introduction to Corporate Finance
- Financial Statements, Taxes & Cash Flow
- Financial Statement Basics
- Long-Term Financial Planning & Growth
- Introduction to Valuation Methods
- Discounted Cash Flow Valuation
- Interest Rates & Bond Valuation
- Stock Valuation
- Net Present Value & Investment Basics
- Capital Investment Decisions
- Accounting Risk & Return
- Options & Corporate Finance
- Cost of Capital
- Financial Leverage & Capital Structure
- Dividends & Dividend Policy
- Short-Term Financing & Planning
- Cash & Liquidity Management
- Credit & Inventory Management
- International Corporate Finance
- Studying for Finance 101