Business Finance Final-Appeadu
Unsystematic
A news flash just appeared that caused a dozen stocks to suddenly drop in value by 20 percent. What type of risk does this news flash best represent?
Percentage of the portfolio invested in each individual security, projected status of the economy, the performance of each security given various economic states, and probability of occurrence of each state of the economy.
Expected Return on a Portfolio considers?
Gambler's Fallacy
Heuristic that assumes a departure from the average will be corrected in the short-term
Strong form efficient
Inside information has the least value, when financial markets are
Risk Premium
Last year, T-bills returned 2 percent while your investment in large-company stocks earned an average of 5 percent. What term refers to the difference between these two rates of return
House Money
More likely to risk money that has been "won" than that which has been "earned"
Representativeness and Randomness
Perceiving patterns where none exist
The "Affect" Heuristic
Reliance on instinct or emotion
Representativeness Heuristic
Reliance on stereotypes or limited samples to form opinions of an entire group
Loss Aversion
Retain losing investments to long
Systematic Risk
Risk factors that affect a large number of assets, also known as non-diversifiable risk or market risk ex-GDP,inflation, interest rates, etc.
Market Risk Premium
Slope of the security market line
Principle of Diversification
Spreading of an investment across many diverse assets will eliminate some of the total risk
Volatility
Standard Deviation is a measure of...?
Geometric
The average compound return earned per year over a multiyear period is called the ________ average return
Variance of an investment's annual returns over a number of years
The average squared difference between the actual returns and the arithmetic average return
Return of a risky security minus the risk free rate
The excess return is computed as the
Small Company Stocks
Which one of the following categories of securities had the highest average return for the period 1926-2013
Regret Aversion
is the tendency to avoid making a decision because you fear that, in hindsight, the decision would have been less than optimal.
Endowment Effect
is the tendency to consider something that you own to be worth more than it would be if you did not own it
Myopic Loss Aversion
is the tendency to focus on avoiding short-term losses, even at the expense of long-term gains
Unsystematic Risk
risk factors that affect a limited number of assets ex-labor strikes, part shortages, etc.
Money Illusion
you are confused between real buying power and nominal buying power