New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Chapter 10 : Some Lessons from Capital Market History

by: Leosinh

Chapter 10 : Some Lessons from Capital Market History FIN 323

Marketplace > Marshall University > Business > FIN 323 > Chapter 10 Some Lessons from Capital Market History
GPA 3.34

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

First part of Exam 3
Principles of Finance
Dr. Shaorong Zhang
Class Notes
Math, financial
25 ?




Popular in Principles of Finance

Popular in Business

This 3 page Class Notes was uploaded by Leosinh on Saturday March 19, 2016. The Class Notes belongs to FIN 323 at Marshall University taught by Dr. Shaorong Zhang in Spring 2016. Since its upload, it has received 16 views. For similar materials see Principles of Finance in Business at Marshall University.

Similar to FIN 323 at Marshall


Reviews for Chapter 10 : Some Lessons from Capital Market History


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 03/19/16
Chapter 10 : Some Lessons from Capital Market History Important More Important Most important Dollar Returns : If you buy an asset of any sort, your gain (or loss ) from that investment is called your return on investment. There are two components : 1) You may receive some cash directly while you own the investment. This is called the income component of your return. 2) The value of the asset you purchase will often change. In this case, you have a capital gain or capital loss on your investment. The total dollar return on your investment is the sum of the dividend and the capital gain : Total dollar return = Dividend income + Capital gain ( or loss). Total cash if stock is sold = Initial Investment + Total Return The Historical record : 1) Large-company stocks. The large-company stock portfolio is based on the Standard & Poor’s 500 index , which contains 500 of the largest companies ( in terms of total market value of outstanding stock) in the United States. 2) Small-company stocks. This is a portfolio composed of stock of smaller companies, where “small” corresponds to the smallest 20 percent of the companies listed on the New York Stock Exchange, again as measured by market value of outstanding stock. 3) Long-term corporate bonds. This is a portfolio of high-quality bonds within 20 years to maturity. 4) Long-term U.S government bonds. This is a portfolio of U.S government bonds with 20 years to maturity. 5) U.S Treasury bills. This is based on Treasury bills ( T-bills for short ) with a one-month maturity. Average Returns : The first lesson. Calculating Average Returns : the obvious way to calculate the average returns on the different investments in Table 10.1 is simply to add up the yearly return and divide by 86. Risk Premiums : The difference between these two returns can be interpreted as a measure of the excess return on the average risky asset ( assuming the stock of a large U.S corporation has about average risk compared to all risky assets. The variability of returns : The second lesson. Frequency Distributions and Variability. Variance : the average squared difference between the actual return and the average return. Standard deviation : the positive square root of the variance. Normal distribution (or bell-curve) : a symmetric, bell-shaped frequency distribution that is completely defined by its average and standard deviation. More on average returns: Arithmetic versus Geometric Averages: The 0 percent is called the geometric average return. The 25 percent is called the arithmetic average return. The geometric average return answers: “ What was your average compound return per year over a particular period ?”. Calculating Geometric Average Returns: Capital market efficiency: Efficient capital market : market in which security prices reflect available information. Efficient markets hypothesis (EMH) : the hypothesis that actual capital markets, such as the NYSE , are efficient.


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.