Bus 315 - Week1

Bus 315 - Week1 - Week 1 Introduction I The Investment...

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Week 1 Introduction I: The Investment Environment - Bodie et al., Ch. 1 Financial Markets and Instruments - Bodie et al., Ch. 2 1 Jorge Cruz Lopez - Bus 315: Investments
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The Investment Environment Objective: To provide a general overview of the financial markets. 2 Jorge Cruz Lopez - Bus 315: Investments
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The Investment Environment 1. A Short History of Investment 2. The Economic System and Investment 3. The Participants: Individuals and Financial Intermediaries 4. Recent Trends 5. The Agency Problem 6. Lessons to Learn 3 Jorge Cruz Lopez - Bus 315: Investments
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1. A Short History of Investment 4 Jorge Cruz Lopez - Bus 315: Investments
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A Short History of Investment • The Crash of 1929 and the Great Depression • One-day panic in 1987 • The ‘technology bubble’ in the nineties • The ‘bear market’ of the new millennium 5 Jorge Cruz Lopez - Bus 315: Investments
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2. The Economic System and Investment 6 Jorge Cruz Lopez - Bus 315: Investments
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The Economy and Investment 7 Jorge Cruz Lopez - Bus 315: Investments • The transfer of capital • Net users vs. net savers • Current vs. later consumption
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Real vs. Financial Investments Real Assets: – Assets used to produce goods and services Financial Assets: Claims on real assets 8 Jorge Cruz Lopez - Bus 315: Investments
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3. The Participants: Individuals and Financial Intermediaries 9 Jorge Cruz Lopez - Bus 315: Investments
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Individuals and Financial Objectives • Information Role • Consumption Timing • Allocation of Risk • Separation of Ownership and Management (agency issues) 10 Jorge Cruz Lopez - Bus 315: Investments
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The Investment Process Saving and investing – portfolios Asset Allocation – risk/return trade-off – Stocks, bonds, cash, other Security Selection – Which stocks/bonds in portfolio Security Analysis – Valuation of financial assets Active vs. . Passive Management 11 Jorge Cruz Lopez - Bus 315: Investments
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Financial Intermediaries • Banks, Mutual Funds, Insurance Cos. – Channeling funds from individuals to firms • Retail Stock Brokers – Executing investors’ decisions • Investment Dealers/Bankers – Raising new capital for firms 12 Jorge Cruz Lopez - Bus 315: Investments
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4. Recent Trends 13 Jorge Cruz Lopez - Bus 315: Investments
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Globalization • Managing foreign exchange. • Diversification to improve performance.
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Bus 315 - Week1 - Week 1 Introduction I The Investment...

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