Investment Risk and Return Quiz

Beta measures the sensitivity of an asset's returns to changes in the overall market returns.

Diversification aims to decrease the risk of an investment portfolio by spreading investments across different assets.

Dividend Yield is a measure of investment return and represents the annual dividend income as a percentage of the investment's current market price.

CAPM measures the expected return on an investment based on its risk.

The Sharpe Ratio is calculated as the difference between the mean return and the risk-free rate, divided by the standard deviation.

Systematic risk is the risk associated with the entire market and cannot be eliminated through diversification.

Alpha represents the excess return of an investment compared to its benchmark, indicating skill or strategy effectiveness.

The liquidity of an investment is influenced by market demand, impacting the ease of buying or selling the asset.

Penny stocks typically offer high potential returns but come with a high level of risk due to their volatile nature.

Portfolio management aims to maintain a balance between risk and return, optimizing the performance of the overall investment portfolio.

A stop-loss order is placed to sell a stock automatically when its price reaches a predetermined level, limiting potential losses.

A Black Swan event is a rare and unpredictable occurrence with a low probability but significant impact on the market.

The Fama-French three-factor model includes factors like size, value, and market risk, but not the momentum premium.