Equity Risk and Expected Returns

To understand how risk is viewed in corporate finance, we will present the analysis in three steps. First, we will define risk in terms of the distribution of actual returns around an expected return. Second, we will differentiate between risk that is specific to an investment or a few investments and risk that affects a much wider cross section of investments. We will argue that when the marginal investor is well diversified, it is only the latter risk, called market risk that will be rewarded. Third, we will look at alternative models for measuring this market risk and the expected returns that go with this risk.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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