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15.1 Risk and Return to an Individual Asset

Learning Outcomes

Measuring Historical Returns

Individual Investment Realized Return

Think It Through: Calculating Return

Average Annual Returns

Think It Through: Calculating Arithmetic and Geometric Average Return

Measuring Risk

Volatility of Returns

Think It Through: Calculating the Standard Deviation of Returns

Firm-Specific Risk

Link to Learning: Peloton and Risk

15.2 Risk and Return to Multiple Assets

Diversification

Link to Learning: Diversification

Link to Learning: How to Build a Diversified Portfolio

Portfolio Size and Risk

15.3 The Capital Asset Pricing Model (CAPM)

Risk-Free Rate

Link to Learning: US Treasury Securities

Risk Premium

Beta

Interpreting Beta

Calculating Betas

CAPM Equation

Link to Learning: Calculating Beta

Link to Learning: CAPM

15.4 Applications in Performance Measurement

Sharpe Ratio

Link to Learning: Sharpe Ratio

Treynor Measurement of Performance

Jensen's Alpha

Think It Through: Comparing the Returns and Risks of Portfolios

15.5 Using Excel to Make Investment Decisions

Average Return and Standard Deviation for a Single Stock

Average Return and Standard Deviation for a Portfolio

Calculating Beta

Link to Learning: State Street Global Advisors

Welcome to "Fundamentals of Investing: Risk, Return, and Performance Measurement," a comprehensive online course designed to demystify the core principles of financial markets and investment strategies. Whether you are an aspiring financial analyst, a business student, or an individual investor looking to optimize your personal portfolio, understanding the delicate balance between risk and return is crucial for long-term success.

Welcome to "Fundamentals of Investing: Risk, Return, and Performance Measurement," a comprehensive online course designed to demystify the core principles of financial markets and investment strategies. Whether you are an aspiring financial analyst, a business student, or an individual investor looking to optimize your personal portfolio, understanding the delicate balance between risk and return is crucial for long-term success. In this course, you will dive deep into the mechanics of individual and multiple assets, learning how to calculate historical returns, measure volatility, and mitigate firm-specific risks through effective diversification.

Moving beyond the basics, this course provides an in-depth exploration of the Capital Asset Pricing Model (CAPM), teaching you how to interpret Beta, assess risk premiums, and utilize the risk-free rate to make informed pricing decisions. You will also master industry-standard performance measurement tools, including the Sharpe Ratio, Treynor Measurement, and Jensen's Alpha, enabling you to evaluate and compare portfolio performances accurately. Finally, you will bridge the gap between theory and practice by applying these concepts using Microsoft Excel, equipping you with the practical skills needed to calculate average returns, standard deviations, and Beta in real-world scenarios. Enroll today to build a robust foundation in investment analysis and take control of your financial future.

Fundamentals of Investing: Risk, Return, and Performance Measurement

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            <p>Understanding the mechanics of financial markets begins with the fundamental trade-off between risk and return. This course explores how to quantify the performance of individual assets by measuring historical and realized returns, providing a clear distinction between arithmetic and geometric averages. Beyond simple gains, we delve into the mathematical measurement of risk, examining how volatility and standard deviation define the uncertainty of an investment. By analyzing firm-specific risks and real-world case studies, learners will develop a robust framework for evaluating the potential and pitfalls of any single security before it is added to a broader strategy.</p>

<p>Building upon individual asset analysis, the curriculum transitions into the strategic management of multiple assets through the lens of diversification and portfolio theory. We will examine the Capital Asset Pricing Model (CAPM) to understand how the risk-free rate, risk premiums, and Beta interact to determine expected returns in a systematic market context. To ensure these theoretical concepts are actionable, the course covers essential performance measurement tools—including the Sharpe Ratio, Treynor Measurement, and Jensen’s Alpha—which allow investors to compare portfolios on a risk-adjusted basis. Finally, practical modules on using Excel will equip you with the technical skills necessary to calculate standard deviations, betas, and average returns, transforming raw data into informed investment decisions.</p>
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