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    Risk Measurement and Its Applications

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    ishmeetkaur14
    This document discusses risk and measures used to quantify risk associated with investment returns. It defines risk as the chance that an investment's actual return will differ from the expected return. It categorizes risk into systematic risk, due to overall market factors, and unsystematic risk, specific to a particular firm. The purpose of quantifying risk is to gauge how much the expected and actual returns may differ. Common statistical measures used include range, standard deviation, coefficient of variation, and beta.

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    Risk Measurement and Its Applications

    Uploaded by

    ishmeetkaur14
    24 views12 pages
    This document discusses risk and measures used to quantify risk associated with investment returns. It defines risk as the chance that an investment's actual return will differ from the expected return. It categorizes risk into systematic risk, due to overall market factors, and unsystematic risk, specific to a particular firm. The purpose of quantifying risk is to gauge how much the expected and actual returns may differ. Common statistical measures used include range, standard deviation, coefficient of variation, and beta.

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    This document discusses risk and measures used to quantify risk associated with investment returns. It defines risk as the chance that an investment's actual return will differ from the expected return. It categorizes risk into systematic risk, due to overall market factors, and unsystematic risk, specific to a particular firm. The purpose of quantifying risk is to gauge how much the expected and actual returns may differ. Common statistical measures used include range, standard deviation, coefficient of variation, and beta.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    24 views12 pages

    Risk Measurement and Its Applications

    Uploaded by

    ishmeetkaur14
    This document discusses risk and measures used to quantify risk associated with investment returns. It defines risk as the chance that an investment's actual return will differ from the expected return. It categorizes risk into systematic risk, due to overall market factors, and unsystematic risk, specific to a particular firm. The purpose of quantifying risk is to gauge how much the expected and actual returns may differ. Common statistical measures used include range, standard deviation, coefficient of variation, and beta.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 12

    BY: ISHMEET KAUR

    MBA – 3rd SEM


    01611403909
     The chance that an investment's actual
    return will be different from the expected
    return
     Chance of variation in return
    return

    0
    risk
    return

    Risk Equity shares


    premium Preference shares
    Unsecured loans
    Bonds & debentures

    Govt. securities
    Risk-free
    rate of
    return

    0 risk
    RISK UNCERTAINTY

    Possibility or Possibility or
    probability of probability cannot be
    happening or non- measured as facts and
    happening of an event figures are not
    can be quantified and available
    measured
    1. Systematic Risk
     It refers to fluctuation in return due to
    changes in the market factors such as
    money supply, inflation, economic
    recessions, tax reforms etc.

     These factors all the firms or industries.

     No investor can avoid or eliminate this risk.


    2. Unsystematic risk
    It refers to the fluctuations in the returns
    due to factors which are specific to a
    particular firm.

    It is diversifiable.

    Example: a fluctuation in the price of


    crude oil will affect the fortune of
    petroleum companies but not the textile
    manufacturing companies.
     Though future returns from an investment
    are unpredictable, but an investors always
    tends to measure the degree of risk
    associated with the expected return from an
    investment.
     Statistical
    measures can be used to make
    more precise measurement of risk about the
    estimated returns.

     The purpose is to gauge the extent to which


    the expected return and actual return are
    likely to differ.
     These measures are:

    1. RANGE
    2. STANDARD DEVIATION
    3. COEFFECIANT OF VARIATION
    4. BETA
     Therange is the difference between the highest
    and the lowest expected return.

    20%
    (highest return)

    17%
    RANGE=10%
    EXPECTED 15%
    (20%-10%)
    RETURN FROM
    AN INVESTMENT 12%

    10%
    (lowest return)

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