Time HorizonsPlanning Horizon-Total length of time for which one plans usually lifetime based on income for retirementDecision Horizon-The length of time between decisions for portfolio revisionTrading horizon-The minimum time interval over which an investor can revise a portfolioSpeculators and HedgersSpeculators are investors who take positions that increasetheir exposure to certain risks in the hope of increasing their wealth. Hedgers take positions to reducetheir exposures. A person can be a speculator on some exposures and a hedger on others.Types of ProbabilityObjective probability:Probability is determined by past measures or history (of frequency)Example Batting Average in August is .312the probability the player gets a hit is .312Subjective probabilityProbability is based on individual judgment-Different people assign different probabilitiesEfficient PortfoliosAn efficient portfolio is the best return for a set level of riskOr the lowest risk for a set level of return
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This note was uploaded on 04/17/2009 for the course FINA 3000 taught by Professor Laplante during the Spring '08 term at UGA.