This question relates to the two types of risk and to diversification. a)What is specific risk? b)What is market risk? c)What is meant by diversification?
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This question relates to the two types of risk and to diversification.
a)What is specific risk?
b)What is market risk?
c)What is meant by diversification?
d)Explain why diversification is a useful tool to manage specific risk but not market risk. Be sure you answer clearly both why diversification can help manages specific risk as well as why it is not useful in managing market risk.
e)Approximately how many stocks in a portfolio do you need to be fully diversified?
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- an investment market, understanding the concept of undervalued and overvalued stocks is very important. Hence, a prudent investor must have good knowledge about Beta, Market Rate of Return and Risk Free Rate of Return. b) Give a graphical example to present the positioning of: Systematic risk Risk free rate of return Market rate of return, and Risk premium.Explain Systematic (market risk) and Business-specific risk. Can diversification of the portfolio reduce each? please explain to me as simply as possible.an investment market, understanding the concept of undervalued and overvalued stocks is very important. Hence, a prudent investor must have good knowledge about Beta, Market Rate of Return and Risk Free Rate of Return. Give a graphical example to present the positioning of: Systematic risk
- When forming a portfolio, investors need to consider liquidity of the financial security. A famous financial economist Maureen O’Hara emphasizes how difficult it is to define liquidity. One of the common measures of liquidity is bid-ask spread (a difference between bid and ask price). Why do you think bid-ask spread is considered as a measure of liquidity? How else can you measure a stock’s liquidity?: What is risk and how is it measured? How is risk measured in a portfolio compared to risk in a stand-alone stock? How do you measure the relevant risk in a portfolio?Which of the following statements are true about systematic risk? Select one or more: a. Beta is a measure of systematic risk in ALL asset pricing models b. Systematic risk can be fully eliminated by diversification С. Systematic risk can be traded among financial entities but cannot be destroyed or eliminated d. All stocks must have the same exposure/factor loading on systematic risk e. Systematic risk is priced f. The premia on systematic risk must always be higher than the risk-free rate Which statements are true of optimization? Select one or more: a. It is a general mathematical tool and can be used not only in portfolio optimization but many business problems b. When applied in real world setting we often use computers to estimate the optimum numerically rather than doing calculus by hand с. One of the earliest applications of optimization to business problems is Augustin Cournot's 1838 duopoly pricing model d. Optimization can only ever be as effective as the description of the…
- in broad terms, why are some risks diversifiable? Why are some risks non- diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk? Substantiate your answer with real world examplesConcepts of Risk. In broad terms, why is some risk diversifiable? Why are some risks non-diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?If market is efficient, in managing an equity portfolio, you will adopt a. Indexing strategy b. Stock rotation strategy c. Security selection strategy d. Market timing strategy
- Investors can use certain metrics to assess a stock or stock portfolio's risk. One of them is the Sortino ratio. What is this ratio and what is unique in its measurement?an investment market, understanding the concept of undervalued and overvalued stocks is very important. Hence, a prudent investor must have good knowledge about Beta, Market Rate of Return and Risk Free Rate of Return. Give a graphical example to present the positioning of:Market rate of returnWhich statement is not true regarding the market portfolio? Group of answer choices a. It includes all publicly-traded financial assets. b. It lies on the efficient frontier. c. All securities in the market portfolio are held in proportion to their market values. d. It is the tangency point between the capital market line and the indifference curve.