What is non - diversifiable risk, Financial Management

Assignment Help:

What is nondiversifiable risk? How is it measured?

If not the returns of one-half the assets in a portfolio are perfectly negatively correlated along with the other half-which is very unlikely- some risk will remain after assets are combined into a portfolio. The degree of risk which remains is non-diversifiable risk, the part of a portfolio's total risk that cannot be eliminated by diversifying.

Nondiversifiable risk is calculated by a term known as beta (β). The ultimate group of diversified assets, the market, has a beta of 1.0.  The betas of individual assets and portfolios, relate their returns to those of the whole stock market.  Portfolios along with betas higher than 1.0 are comparatively more risky than the market.  Portfolios with betas less than 1.0 are comparatively less risky than the market.  (Risk-free portfolios have a beta of zero.)


Related Discussions:- What is non - diversifiable risk

Assignment ., Gretz Tool Company is a large U.S based Multinational Corpora...

Gretz Tool Company is a large U.S based Multinational Corporation with subsidiaries in eight different countries. The parent of Gretz provided initial cash infusion to establish ea

Rectification of errors, What is rectification of errors? List and explain ...

What is rectification of errors? List and explain the stages where the errors are deducted for rectification.

Apv capital budgeting is use for foreign capital expenditure, What creates ...

What creates the APV capital budgeting framework useful for analyzing foreign capital expenditures? The APV framework is a value - additivity method. Since international projects

Incremental policy model to the policy making process, Question 1: Poli...

Question 1: Policy implementation is the most critical stage of the policy process. Critically analyse some of the main constraints that hinder the implementation of public pol

Explain the principles of taxation and double taxation, Question 1 ) A Glob...

Question 1 ) A Globalization is a procedure of international integration that arises due to increasing human connectivity as well as the interchange of products, ideas and other ph

How do financial managers calculate the average tax rate, How do financial ...

How do financial managers calculate the average tax rate? Financial managers calculate the average tax rate by dividing tax dollars paid by earnings before taxes (EBT).

When are the financial crises occurred, When are the financial crises occur...

When are the financial crises occurred? Financial crises arise where there is a large raise in asymmetric information into financial markets. Asymmetric information arises whil

Bonds with warrants, Bonds with Warrants: Warrants are usually attached...

Bonds with Warrants: Warrants are usually attached with the bonds or preference shares to attract the investor. The objective is to induce the potential investors to subscribe

What is the ratio uses, What is the Ratio uses To compare results over ...

What is the Ratio uses To compare results over a period of time To measure performance against other organisations To compare results with a target To compare against

Common size and index analysis, sk company had the following balance sheets...

sk company had the following balance sheets and income statements over the last 3 years

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd