--%>
Assignment Help - homework help

Explain non diversifiable risk and how is it measured

Explain non diversifiable risk? How is it measured?

Unless the returns of one-half the assets into a portfolio are entirely negatively correlated along with the other half-that is extremely unlikely-some risk will remain after assets are combined in a portfolio. The degree of risk which remains is non diversifiable risk, the part of portfolio's entire risk which can't be eliminated by diversifying.

Non diversifiable risk is measured by a term termed beta (β). The final group of diversified assets, the market, contain a beta of 1.0. The betas of portfolios, and individual assets, relate their returns to those of the total stock market. Portfolios along with betas higher than 1.0 are relatively more risky in compare of the market. Portfolios along with betas less than 1.0 are relatively less risky than the market. (Risk-free portfolios have a beta of zero.)

 

   Related Questions in Finance Basics

  • Q : Explain Conference Committee Conference

    Conference Committee: It is a committee of three members (that is two from the majority party and one from the minority party) from each house, appointed to gather and resolve differences among versions of a bill (example, when one house of the Legisl

    		•
  • Q : What is Finance Letter Finance Letter

    Finance Letter (FL): The proposals made, by the Director of Finance to the chairpersons of the budget committees in each and every house, to amend the Budget Bill and the Governor's Budget from that presented on January 10 to reflect a revised plan of

    		•
  • Q : Examples of high operating leverage

    Give two instances of types of companies likely to contain high operating leverage. Give examples. Long distance telephone companies & electricity generating companies are likely to contain operating leverage. These two kinds of companies

    		•
  • Q : What is Other Finance Refund to

    Refund to Reverted Appropriations: It is a receipt account to record the return of monies (example, abatements and reimbursements) to appropriations which have reverted.

    		•
  • Q : Question based on change in GDP Normal

    Normal 0 false false

  • Q : Decision rule using net present value

    Describe the decision rule for accepting or rejecting proposed projects while using net present value? While using the net present value decision rule any project along with a net present value greater than or equal to zero would be acceptable.

    		•
  • Q : How is finance associated to accounting

    How is finance associated to the disciplines of accounting and economics? Financial management is basically a combination of accounting and economics. Firstly, financial managers employ accounting information such

    		•
  • Q : What is Detail of Appropriations and

    Detail of Appropriations and Adjustments: A budget display, for each association, that replicates appropriations and adjustments by fund source for each of the character of expenditure, (that is, State Operations, Local Assistance, and Capital Outlay)

    		•
  • Q : Explain agents and their

    Normal 0 false false

    		•
  • Q : What is Availability Period

    Availability Period: The time period throughout which an appropriation might be encumbered (that is, committed for expenditure), generally specified by the law making the appropriation. When no particular time is given in financial legislation, the pe

    		•