The market risk premium is the amount by which the market return exceeds the risk-free rate for that reason, sometimes people call it the excess Market return. So it’s calculated as follows. We take the rate of return that’s expected for the marke…
Remember that beta is the expected percentage change in a securities return given that there's a 1% change in the market index . So if a company has a beta of 2 in the market index was to go up by 1% you'd expect a 2% increase in that s…
Table of Content 1. Calculation of Covariance 2. Calculation of Variance 3. Calculation of Standard Deviation 4. Calculation of Correlation 5. Calculation of Beta using Correlation and Volatility In this article, I want to show you how to calculate …
In this article, I want to show you how to calculate the beta of a stock by using its covariance with the market index. There are several different ways that you can calculate beta but I want to focus on the formula that calculates beta using covari…
Sometimes people get confused between beta and volatility because both are measures of risk. So you might see a firm like McDonald's having a beta of 0.7 and a volatility of 1.05 and then see another firm like Amazon having a higher beta a…
How to calculate the beta of an entire portfolio? Let's say that you invested $2,000 in Walmart stock $8,000 in Intel stock , and $10,000 in Amazon and you know that the beta for each of these firms. You can go to Yahoo Financ e and look u…
I went to Yahoo Finance and I obtained the betas for 10 different us-based firms. I've got the betas in the right column, so you see Alcoa, for example, an aluminum company the beta is 0.28 whereas for Walmart the beta is 0.38 . Just a quick…
Here we're going to talk about the difference between systemic risk and unsystematic risk. When we think of risk, in general, it's basically the chance that a firm stock return is going to deviate and be different from what you were expect…
Let's say you were thinking of investing in eBay and you want to know the total risk associated with eBay stock. So you could go and you could calculate the standard deviation in eBay's returns, that's its volatility and that's g…
Let's say that you moved to a small town on the Mississippi River you're right up against the river you got a nice little home in the town of Sulphur Springs and let us say in Sulphur Springs there are a total of 100 homes altogether and wh…
