INVESTMENTS Measuring expected return and risk z Moments of return distributions state ean Asset probability 1/3 Asset RO() 5 Asset R1 10 20 556 555 Asset 2 R2 Asset R3 55 4.55 Between asset 0 and 1, which one would you choose Between asset 1 and 2 Between asset 2 and 3
INVESTMENTS Fourth Edition Measuring expected return and risk Measuring expected return and risk-- example example Moments of return distributions 5 5 5 5 5 20 15 14.5 5 5 5 6 5 -10 -5 -5.5 R0(%) R1 R2 R3 Asset 0 Asset 1 Asset 2 Asset 3 Asset probability 1/3 1/3 1/3 state 1 2 3 Mean Between asset 0 and 1,which one would you choose? Between asset 1 and 2…… Between asset 2 and 3……
INVESTMENTS These returns have the following ean St d Skewness R0(%) 0.00 RI R2 5555 12.25 8.16 R3 8.16 0.57 Skewness =E[x-Ex u/St Dof x
INVESTMENTS Fourth Edition These returns have the following These returns have the following moments moments R3 5 8.16 -0.57 R2 5 8.16 0 R1 5 12.25 0 R0(%) 5 0.00 0 Mean St D Skewness Skewness {E[( x Ex ] } / St .D of x 1/ 3 3 = −