There are two main sources of equity securities' total return:
Investors who purchase non-domestic equities may incur foreign exchange gains or losses.
Reinvestment income of dividends is also a source of return.
The risk of an equity security is the uncertainty of its expected total return. The measurement of the risk is typically the standard deviation of its expected total return over a number of periods.
Analysts use different methods to estimate an equity's expected return and risk.
Different types of shares have different risk characteristics. Common shares are more risky than preferred shares. Some shares (e.g., callable) are more risky than other shares (e.g., putable).
|janglejuic: Pretty straightforward|
|CFAToad: I was wondering if callable have more risk or just a ceiling on gains. But if you consider tge liquiduty risk once the ceiling is breached, it makes sense. No one would buy a callable share when it trades above the threshold. So if the corporation does mot call the share, the shareholder might be stuck with the share, or at least have fewer buyers.|
|johare30: please ask me these questions on the exam|