FIN401-Chapter 1 notes

Allocation decision is the primary asset determinant

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Unformatted text preview: ce of which securities to hold which Asset allocation decision is the primary Asset determinant of portfolio’s return. determinant Competitive Markets Competitive Risk-return tradeoff Risk-return Efficient markets theory → Should be neither overpriced nor underpriced neither → Should reflect all available information all Active vs. Passive Management Active Active management → Finding undervalued securities Finding → Timing the market Passive management Passive → No attempt to find undervalued securities find → No attempt to time time → Holding an efficient portfolio efficient Players in the Financial Markets Players Business firms → Net borrowers Net Households → Net savers Net Governments → Can be both borrowers and savers Can Financial intermediaries → Banks Banks → Investment companies, etc. Investment Investment Bankers Investment...
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