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320Slides1[1][1] - Investment Management Issues in...

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Investment Management
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Issues in Investments How to measure risk? What return to expect for taking a given amount of risk? Is passive portfolio management preferable to active management? Is it possible to time the market? How to allocate dollars among various asset classes? How to select from within an asset class? How to measure portfolio performance?
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The Investment Management Process Asset allocation Decide on key asset classes Decide on investment proportions Security selection Securities to be selected within each class Amount to be invested in each Ex-post performance evaluation Did investments deliver the returns expected? Was the level of risk consistent with expectations? Which had more impact: Asset allocation or security selection?
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Financial Markets
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Financial Assets Real assets are things such as land, buildings, machinery, and knowledge. Financial assets represent claims on real assets or income generated by them. Examples of financial assets are bonds, stocks, futures, and options.
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Why are Financial Assets Useful? Consumption Timing Capital Allocation Allocation of Risk Separation of Ownership and Management
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Goals of Financial Market Participants Firms issue stocks and bonds to raise funds. Individuals, agents, mutual funds, etc. buy to invest funds. Some individuals may wish to speculate on future price movements, interest rates, etc. Still other individuals wish to hedge positions to eliminate risk, e.g., corn, currency risk, etc. Traders or intermediaries profit from making the markets function.
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What is a Securities Market? A securities market is a place where you buy or sell financial assets such as bonds, stocks, options, or futures. Examples of securities exchanges: New York Stock Exchange (NYSE) American Stock Exchange (AMEX) Arizona Stock Exchange (AZX) Chicago Board of Trade (CBT) Over the Counter (OTC) market National Association of Securities Dealers (NASDAQ)
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Market Structure The primary market for securities refers to the initial sale of securities to the public by a firm. The secondary market is where previously issued securities are then traded among individuals and institutions. The NYSE, for example, is a continuous, secondary market with a centralized exchange Trading can occur any time when the market opens Trading is in shares issued previously. All trading occurs on the NYSE floor.
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New York Stock Exchange Founded May 17, 1792 1,366 membership seats (allows you to buy and sell) Approximate cost of a seat: $2 million Over 3,000 companies are listed on the NYSE Automation of trading: SuperDOT order-routing system Stringent listing requirements, especially for foreign firms
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NYSE Listing Requirements U.S. Companies Non U.S. Companies
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This note was uploaded on 12/10/2009 for the course FIN 320 taught by Professor Dark during the Spring '09 term at Iowa State.

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320Slides1[1][1] - Investment Management Issues in...

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