Summary Investment Management 254 Notes for A1,A2, A3
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Course
Investment Management 254
Institution
Stellenbosch University (SUN)
Detailed summarised notes on investment management 254 module based on class examples, lecture notes and textbook. The notes are precise and helped me achieve a distinction. Includes all chapters - 1,2,3,4,5,6,7,8,9,10,12,15,17,18,22 as well as a statistics section.
Chapter 7 - capital asset pricing model
7.1 The CAPM
•
formula used to calculate the expected return of a given
security given
,
its level of systematic risk
Beta
-
sensitivity of a stocks return to the return on the
market portfolio
-
Market risk exposure
market Portfolio
portfolio all assets in the
-
of
economy
a
total Risk
✓
am
1. Non -
systematic risk
-
diverifiable
1 diversity away ,
be investing in more
eider
-
.si?iabl,erik- - -
,
,
securities )
market risk
2. Market Risk -
constant can't , get
away from it
-
.
✓
n
Market ✗ unique risk
Beta (B)
risk
The higher B. thehigher systematic
•
•
measures degree of systematic risk relative
to market portfolio
"" " M security / Market portfolio)
2µg
13=1 →
average
portfolio
B) I → aggressive : security with above average market risk
↳ more volatile compared to market portfolio
risk
Bel → Defensive : a security with below average market
psi
↳ less volatile compared to market portfolio
time
work out Beta ( B )
t.pi.dstokmturna.piM.ca/tp??pm
to
2 way p
market portfolio
p
,
A market stock Varl Rm )
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