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Beta (finance) Expected change in price of a stock relative to the whole market. In finance, the beta (β or market beta or beta coefficient) is a statistic that measures the expected increase or decrease of an individual stock price in proportion to movements of the stock market as a whole. Beta can be used to indicate the contribution of an ...
Securities with a negative beta, which is unusual, will typically move inversely to the market. So when the market goes up, these securities fall, and vice versa. So when the market goes up, these ...
Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is less risky than owning ...
Security market line (SML) is the representation of the capital asset pricing model. It displays the expected rate of return of an individual security as a function of systematic, non-diversifiable risk. The risk of an individual risky security reflects the volatility of the return from the security rather than the return of the market portfolio.
Negative-beta stocks, however, have odd behavior because they tend to move in the direction opposite the market's movement. Most frequently, discussions of negative beta will center around bonds ...
Risk premium. A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. [1] It is used widely in finance and economics, the general definition being the expected risky return less the risk-free return, as demonstrated by the formula below.
In investing, downside beta is the beta that measures a stock's association with the overall stock market only on days when the market’s return is negative. Downside beta was first proposed by Roy 1952 [ 1 ] and then popularized in an investment book by Markowitz (1959) .
The reflection effect is an identified pattern of opposite preferences between negative as opposed to positive prospects: people tend to avoid risk when the gamble is between gains, and to seek risks when the gamble is between losses. [18] For example, most people prefer a certain gain of 3,000 to an 80% chance of a gain of 4,000.