I calculated the Microsoft betas for MSCI World (0.898) and S&P 500 (1.032), so I know what is the "better" choice of market portfolio but I have no idea how to calculate the percentages of risk... Thx in advance!
2006-12-31 03:54:18 · 3 answers · asked by Anonymous in Business & Finance ➔ Investing
Since you know how to calculate beta then required rate of return Ks=krf+beta(km-krf) where,
Ks=equity return
km=market return
krf=discount rate
In this you see two risk factors the systematic risk which is compensated by krf and the non-systematic risk or company specific risk which is compensated by beta(km-krf).
So once you figure out Ks using the above formula, sutract krf from it to get the percentage of non systematic or company specific risk compensation. Usually this company specific risk can be diversified away using a portfolio of cyclical and non cyclical stocks.
2006-12-31 07:22:11 · answer #1 · answered by Mathew C 5 · 0⤊ 0⤋
Systematic Risk Calculation
2016-11-04 12:14:20 · answer #2 · answered by ? 4 · 0⤊ 0⤋
never ask such f---ing questions in interesting things like this.
2006-12-31 04:32:53 · answer #3 · answered by royalkinganish 1 · 0⤊ 1⤋