Tugas Manajemen Keuangan Makalah Risk And Return Dosen: Yuhasril www.mercubuana.ac.id
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Tugas Manajemen Keuangan Makalah Risk And Return Dosen: Yuhasril www.mercubuana.ac.id
Makalah Risk and ReturnFull description
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seminar finance fifth case study
Pengukuran risk & return sahamFull description
manajemen keuanganFull description
manajemen keuangan
2. Return and Risk Alok Kumar
09/04/08
2. Return and Risk
1
What we did in last class…
09/04/08
2. Return and Risk
2
We covered in last class • Why pe peo ople in inv vest? • Wh What at the they y wan wantt from from thei theirr inve invest stme ment? nt? • Whe Where re all all they they can can invest invest and what what par param amete eters rs they they adopt to invest?
09/04/08
2. Return and Risk
3
Investment Return
•
Risk
Historical
• Historical
HPR
(Holding Period Return)
HPY
Expected
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Coefficient Coefficient of Variance
• Expected
(Holding Period Yield)
•
Variance and Standard Deviation
2. Return and Risk
Variance and Standard Deviation Coefficient Coefficient of Variance 4
How do we measure return? •
HPR -
When we invest, we defer current current consumption in order to add our wealth so so
that we can consume more in future, hence return is change in wealth resulting from investment. If you commit commit Rs 1000 at the beginning beginning of the period and you get back Rs 1200 at the end of the period, return is Holding Period Return (HPR) calculated as follows
•
HPR = (Ending Value of Investment)/(beginning value of Investment) = 1200/1000 = 1.20
HPY –
conversion to percentage return, we calculate calculate this as follows,
Over a number of years, a single si ngle investments will likely to give high rates of return during some years and low rates of return, or possibly negative rates of return, during others. We can summarised the returns by computing the mean annual rate of return for this investment over some period of time. There are two measures of mean, Arithmetic Mean and Geometric Mean.
Arithmetic Mean = ∑HPY/n
Geometric Mean = [{(HPR 1) X (HPR 2) X (HPR 3)}1/n -1]
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How AM is different to GM Year
Beginning Value
Ending Value
HPR
HPY
1
1000
1150
1.15
0.15
2
1150
1380
1.2
0.2
3
1380
1104
0.8
-0.2
AM = [(0.15) + (0.20) + (-0.20)]/3 = 5% GM = [(1.15) X (1.20) X (0.80)] 1/3 – 1 = 3. 3.35 35% %
How do we Calculate Expected Return Expected Return = ∑R iPi, • where i varies from 0 to n • R denotes return from the security in i outcome • P denotes probability of occurrence of i outcome o utcome
09/04/08
Economy Growth
Probability of Occurrence
Deep Recession
5%
Mild Recession
20%
Average Economy
50%
Mild Boom
20%
Strong Boom
5% 2. Return and Risk
9
How do we Calculate Expected Return Economy Growth
Probability of Occurrence
T-Bills
Corporate Bonds
Equity A
Equity B
Deep Recession
5%
8%
12%
-3%
-2%
Mild Recession
20%
8%
10%
6%
9%
50%
8%
9%
11%
12%
Mild Boom
20%
8%
8.50%
14%
15%
Strong Boom
5%
8%
8%
19%
26%
8.00%
9.20%
10.30%
12.00%
Average Economy
100% Expected Rate of Return 09/04/08
2. Return and Risk
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Probability Distribution of Return Probability Distribution of Equity "A" 60% 50% y t i l i b a b o r P
40% 30%
Series1
20% 10% 0% Series1
-1 3.3 00%
-4 .30 0%
0 .70 0%
3.700 %
8.700%
5%
2 0%
5 0%
20%
5%
Dispersion from Expected Return
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2. Return and Risk
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Probability Distribution of Return
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2. Return and Risk
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So there is a risk of earning more than one return or uncertainty in return
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2. Return and Risk
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What is Risk
Webster define it as a hazard; as a peril ; as a exposure to loss or injury. Chinese definition –
Means its a threat but at the same time its an opportunity
So what is in practice risk means to us? 09/04/08
2. Return and Risk
14
What is Risk
Actual return can vary from our expected return, i.e. we can earn either more than our expected return or less than our expected return or no deviation from our expected return. Risk relates to the probability of earning a return less than the expected return, and probability distribution provide the foundation for risk measurement.
09/04/08
2. Return and Risk
15
Risk Measures for Historical Returns
Variance – is a measure of the dispersion of actual outcomes around the mean, larger the variance, the greater the dispersion. Variance = ∑(HPYi – AM)2 / (n) where i varies from 1 to n.
Variance is measured in the same units as the outcomes.
Standard Deviation – larger the S.D, the greater the dispersion and hence greater the risk. Coefficient of Variation – risk per unit of return, = S.D/Mean Return
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2. Return and Risk
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Risk Measurement for Expected Return
Variance – is a measure of the dispersion of possible outcomes around the expected value, larger the variance, the greater the dispersion. Variance = ∑(ki – k)2 (Pi) where i varies from 1 to n.
Variance is measured in the same units as the outcomes. 09/04/08
2. Return and Risk
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Return and Risk Measurement Expected Return or Risk Measure
T-Bills
Corporate Bonds
Equity A
Equity B
Expected return
8%
9.20%
10.30%
12.00%
Variance
0%
0.71%
19.31%
23.20%
Standard Deviation
0%
0.84%
4.39%
4.82%
Coefficient of Variation
0%
0.09%
0.43%
0.40%
Semi variance
0.00%
0.19%
12.54%
11.60%
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2. Return and Risk
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Things to look Measuring Risk • Varian Variance ce and and Standa Standard rd Deviati Deviation on The spread of the the actual returns returns around the expected expected return; The greater the deviation of the actual actual returns from from expected returns, the greater greater the variance
• Sk Skew ewn nes esss The biasness towards positive or negative returns;
• Kurto tossis The shape of the tails of the distribution ; fatter tails lead to higher kurtosis
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2. Return and Risk
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Skewness and Kurtosis
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So How Return and Risk should be related…..next class
