Page 74 - DCOM507_STOCK_MARKET_OPERATIONS

Mahesh Kumar Sarva, Lovely Professional University
Unit 4: Risk and Return

Unit 4: Risk and Return Notes

CONTENTS
Objectives

Introduction
4.1 Types of Investment Risk
4.1.1 Systematic versus Non-systematic Risk
4.1.2 International Risk
4.2 Measurement of Risk
4.2.1 Volatility
4.2.2 Standard Deviation
4.2.3 Probability Distributions
4.2.4 Beta

4.3 Risk and Expected Return
4.3.1 Determinants of the Rate of Return
4.4 Risk-return Relationship
4.5 Portfolio and Security Returns
4.6 Risk
4.7 Return and Risk of Portfolio
4.7.1 Return of Portfolio (Two Assets)

4.7.2 Risk of Portfolio (Two Assets)
4.8 Portfolio Diversification and Risk
4.8.1 Benefits of Diversification
4.9 Summary
4.10 Keywords
4.11 Review Questions
4.12 Further Readings

Objectives

After studying this unit, you will be able to:

Explain the different types of investment risks
Discuss the measurement of risks
Elaborate the risk and expected return
Discuss the return and risk of portfolio
Introduction

Every business planning involves risk, and an individual need to take risk according to his/her
risk appetite, so as to earn sufficient return on the amount being invested. Risk can be clearly

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