Beta: related pages

Alpha (Jensen's alpha, portfolio alpha)

The alpha of a security or fund is its out-performance over the risk adjusted return, with risk measured by beta.

Adjusted present value

An alternative to NPV. Cash flows are discounted using the cost of equity (instead of the WACC) and a separate adjustment is made for financing (i.e, the tax savings.

CAPM

A method of valuing securities or an investment using a discounted cash flow (DCF) using a risk adjusted discount rate.

DCF valuation

The calculation of the present value of a stream of future cash flows taking into account both risk and the time expected to elapse before the cash is received.

Risk premium

The difference between the rate of return on a security (or a market or an investment) and the risk free rate of return.

Volatility

A statistical measure of the risk of holding a security; the standard deviation of expected returns on a security.

WACC

The weighted average of the rates of return required by all of a company’s sources of capital.