3
Risk I: Total risk
- What is risk?
- The standard deviation of returns
- Interpretation of the standard deviation
- Mean returns and the standard deviation
- The big picture
- Excel section
In the previous chapter we discussed three ways to summarize return performance, but so much for the ‘good’ stuff; here comes the ‘bad’ stuff. In this chapter we’ll focus on one way to summarize risk. Keep this in mind, though: Risk can be defined in more than one way and we’ll explore other definitions later in the book.
What is risk?
Silly question, huh? Well, not really. The fact is that, simple as it may sound, academics and practitioners in finance have been wrestling with this definition for a very long time. And it gets worse. Nobody seems to have provided ...
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