ACCA P4 Well-diversified portfolios
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Dear John, I absolutely love your voice and the way you present the lectures. Thank you so much!
Thank you 馃檪
Brilliant Lecture.Thank you.
Thank you very much for your comment 馃檪
Sir, would you say that the systematic risk can be completely be removed when we diversify our portfolio in different economies?
It is likely that it can be reduced, but doubtful that it could be removed because more and more economies are inter-related in that stock exchanges tend to move up and down together more and more.
Hey John, could you answer my question that I had asked in Ask the tutor section regarding ‘Burung Co’ a June 2014 question?
Thank you! 馃檪
Sorry – I must have missed it for some reason 馃檨
Sir
l have been able to download the P4 notes but unable to watch the lecture videos
Any help to enable me benefit from the lectures online ?
Please ask in the technical support forum, and admin will try and help you.
The link is immediately below the lecture.
These lectures are too good!! Clear and precise!! I cant believe I used to waste money on school!!! Thank you Sir!!!
Thank you very much for your comment 馃檪
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this lessons are very good. It is better than the high chargeable courses in China.
Thank you very much for the comment (and please do tell your colleagues) 馃檪
Brilliant explanation! Thank you so much!
Thank you 馃檪
So means the other term for systematic risk is market risk/ business risk?
And this systematic risk can actually be quantified as asset beta?
When we say equity beta means we take into account systematic risk(business risk) and finance risk? But why finance risk is not unsystematic risk and therefore shall be excluded from CAPM, since every co that the investor invests should has their own capital structure ?
Your first two statements are correct.
Financial risk due to gearing is not really separate risk – what gearing does is increase the existing risk (you need to watch the F9 lecture on gearing to see an example illustrating what I mean).
So more gearing will increase the business risk for the shareholders. That is why the equity beta will be higher than the asset beta.
your lectures give a lot of confidence during preparations let alone the exams…i am ever grateful.
I am pleased that you find them helpful 馃檪
Sir, what if the 3 industries you gave as an example are belonging to 3 different sectors? Then is it possible to diversify the risk? Or is diversification possible only among industries in the same business sector?
Could you please correct me- Total risk= Systematic + Unsystematic.
Systematic risk cannot be eliminated nor reduced. Unsystematic risk can be removed or reduced by diversification. Did I understand it right?
And is it because of the presence of systematic risk that risk cannot be equal to 0?
In practice you would diversify between shares in different sectors. The unsystematic risk would be reduced and the systematic risk would be the average of the systematic risk of the shares chosen.
Yes – the total risk is systematic and unsystematic.
Yes – unsystematic can be reduced/removed by diversification.
In theory there can be systematic risk of zero – an investment with zero risk (such as government securities). In practice even government securities carry some risk and so there will always be some risk.
Thank you Sir. I like all your lectures. They are so understandable. Thanks ever so much for this. 馃檪 馃檪
You are welcome 馃檪
Hello Sir,
I just started watching the videos and I wanted to know in advance if Mergers and Acquisitions are well covered in the video lectures – I struggled in question 1 in the Dec 2014 exam and this time I want to be ready for it…
Thank You.
Sir you said that risk cannot be removed but can only be reduced,so how come in the Icecream and umbrella eg the risk was 0 when half of the money was invested in each?
Thanks
I did not say that at all!
I said that in real life, investments are positively correlated and so risk cannot be removed (the systematic risk will remain) but that it can potentially be reduced.
Ice cream and umbrella was an extreme example where they were perfectly negatively correlated that does not occur in real life.
Hello, I am a bit confused – in example 3 are you saying that the standard deviation=market risk?
From the previous lectures, Tutor has clearly explained that when the standard deviation increases the risk also increases. Standard deviation is the measure of risk itself. Am I right admin? Correct me if I am wrong 馃檪 ?
well explained. lot of thanks and Gods blessings to you.
it makes me clear to prepare for my june exam,thanks
very good.