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Lecture M2: Risk and Return

Lecture M2: Risk and Return. Learning outcomes How returns are measured How to compute returns from overseas investment What is risk and how it is measured How are risk and returns estimated via scenario analysis. How are returns measured. General concept of return Total dollar return

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Lecture M2: Risk and Return

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  1. Lecture M2: Risk and Return • Learning outcomes • How returns are measured • How to compute returns from overseas investment • What is risk and how it is measured • How are risk and returns estimated via scenario analysis

  2. How are returns measured • General concept of return • Total dollar return • Holding period return (HPR) • Annualised HPR • Return relative (RR)

  3. continue • Return from international investment • Historical rate of return • Arithmetic Return (AR) • Geometric Return (GR) • Expected rate of return (see scenario analysis)

  4. What is risk and how it is measured • Definition • Types of risk • Measuring risk using historical data • Range • Std deviation • CV • Measuring risk using scenario analysis (see scenario analysis)

  5. continue • Relationship between risk and return • Concepts of risk free return and risk premium

  6. Scenario analysis • Expected rate of return (ER) • Measuring risk under scenario analysis • Homework • Q 1 to Q11 • Q 17 and Q 18

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