which is the best measure of risk for assets with the same expected returns course hero

How will an investor get maximum risk reduction by combining?

An investor will get maximum risk reduction by combining assets that are negatively correlated a negative coefficient implies that asset returns tend to move in opposite directions The portfolio standard deviation will always be less than the standard deviation of any asset in the portfolio False

Does a portfolio with less risk always have less risk?

A portfolio will always have less risk than the riskiest asset in it if the correlation of assets is less than perfectly positive True Most financial assets have correlation coefficients between 0 and 1 True Recommended textbook explanations Principles of Economics

Do asset returns tend to move in the opposite directions?

asset returns tend to move in opposite directions The portfolio standard deviation will always be less than the standard deviation of any asset in the portfolio False The standard deviation of a portfolio is always just the weighted average standard deviations of assets in the portfolio False

What is the difference between risk-seeking and risk-neutral?

Risk-neutral If a manager prefers a higher return investment regardless of its risk, then he is following a Risk-seeking If a manager prefers investments with greater risk even if they have lower expected returns, then he is following a ________ strategy

Which is the best measure of risk for a single asset?

The coefficient of variation can best measure the risk of an individual asset. It helps the investor determine the risk assumed by investing in a single financial investment with its expected returns. The Beta is the best measure for estimating the risk of an investment belonging to a diversified portfolio.

Which is the best risk measure for a single asset held in isolation and which is the best measure for a diversified portfolio?

Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio? Coefficient of variation; beta.

How should you measure the risk of an asset that is held as part of diversified portfolio?

The proper measure of the risk of a single asset is its contribution to the risk of a diversified portfolio. Only market risk is relevant because it can not be diversified. Therefore, only market risk will be compensated with a higher return.

What type of return is expected for taking on more risk?

Generally, the higher the potential return of an investment, the higher the risk. There is no guarantee that you will actually get a higher return by accepting more risk. Diversification enables you to reduce the risk of your portfolio without sacrificing potential returns.

Which is the best measure of risk for a single asset held in isolation and which is the best measure for an asset held in a diversified portfolio quizlet?

Which is the best measure of risk for a single asset held in isolation, and which is the best measure for an asset held in a diversified portfolio? Coefficient of variation; beta. A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio.

Which is the best measure of risk asset held in isolation and which?

Answer and Explanation: The correct answer is d) Coefficient of variation; beta.

What is the measure of risk of an asset?

The five measures include the alpha, beta, R-squared, standard deviation, and Sharpe ratio. Risk measures can be used individually or together to perform a risk assessment. When comparing two potential investments, it is wise to compare like for like to determine which investment holds the most risk.

Which best defines the risk of a financial asset?

Ans. A) It is the uncertainty about the gain or loss from an investment. Financial risk refers to the risks associated with financial transactions....

How do you measure risk and return?

Risk is measured by the amount of volatility, that is, the difference between actual returns and average (expected) returns.

How is historical risk and expected return is measured?

Investors study historical return data when trying to forecast future returns or to estimate how a security might react in a situation. Calculating the historical return is done by subtracting the most recent price from the oldest price and divide the result by the oldest price.

What is systematic risk and unsystematic risk?

Unsystematic risk is a risk specific to a company or industry, while systematic risk is the risk tied to the broader market. Systematic risk is attributed to broad market factors and is the investment portfolio risk that is not based on individual investments.

Which of the following is a measure of risk?

Some common measurements of risk include standard deviation, Sharpe ratio, beta, value at risk (VaR), conditional value at risk (CVaR), and R-squared.

What is expected return theory?

that can take any values within a given range. The expected return is based on historical data, which may or may not provide reliable forecasting of future returns. Hence, the outcome is not guaranteed.

Is tossing a coin a discrete distribution?

Tossing a coin has two possible outcomes and is thus an example of a discrete distribution. A distribution of the height of adult males, which can take any possible value within a stated range, is a continuous probability distribution. Expected Return.

Is expected return a predictor of stock performance?

Although not a guaranteed predictor of stock performance, the expected return formula has proven to be an excellent analytical tool that helps investors forecast probable investment returns and assess portfolio risk and diversification.