A measure of the expected return on a particular share compared to the expected return on shares with a similar beta coefficient, identifying the specific risk associated with a share as opposed to the systematic risk associated with securities of the same class.
Arbitrage Pricing Theory (APT) is a model proposed by Stephen Ross in 1976 for calculating returns on securities. It assumes multiple factors affecting security returns, differing from the Capital Asset Pricing Model (CAPM), which relies on a single systematic risk factor.
A measure of the volatility of a share in relation to the overall market. A share with a high beta coefficient is likely to respond to stock market movements by rising or falling in value by more than the market average.
A theoretical approach to investment choices based on the assumption that for any given expected return, rational investors will seek to minimize their risk, and for any given level of risk, they will seek to maximize their return.
Systemic risk, also known as market risk or systematic risk, refers to the part of a security’s risk that is common to all securities within the same general class and cannot be eliminated by diversification. The measure of systemic risk for individual stocks is the Beta Coefficient.
