The Investment Objective
Summary of chapter 1: General overview of the investment environment
A. Short History of Investing B. The Investment Objective C. Financial System: Clients and their
Needs D. Agency Theory
A. Short history of investing
Zero. If not, one could use returns from one period to predict returns in later
periods and make abnormal profits.
c. This is a predictable pattern in returns which should not occur if the weak-form
efficient market hypot
BEHAVIOURAL FINANCE AND TECHNICAL ANALYSIS
1. Technical analysis can generally be viewed as a search for trends or patterns in
market prices. Technical analysts tend to view these trends as momentum, or
gradual adjustments to correct prices, or
THE INVESTMENT ENVIRONMENT
1. a. No. The increase in price did not add to the productive capacity of the
b. Yes, the value of the equity held in these assets has doubled.
c. Future homeowners as a whole are worse off, since mortgage lia
INDEX MODELS AND THE ARBITRAGE PRICING THEORY
l. a. To optimize this portfolio one would need:
estimates of means
estimates of variances
estimates of covariances
n2 + 3n
b. In a single-ind
TRADING ON SECURITIES MARKETS
Individual solutionanswers to this problem will vary.
In principle, potential losses are unbounded, growing directly with increases in
the price of Alcan.
If the stop-buy order can be filled at $78, the
EMPIRICAL EVIDENCE ON SECURITY RETURNS
1. Even if the single-factor CCAPM (with a consumption-tracking portfolio used as
the index) performs better than the CAPM, it is still quite possible that the
consumption portfolio does not capture the si
OPTIMAL RISKY PORTFOLIOS
1. (a) for sure.
(b) and (d) are firm-specific.
(c) and (e) can be either firm-specific or due to marketwide factors.
2. (a) and (c) enter into the portfolio variance and thus affect portfolio risk.
3. (a) is true by def
Markets and Instruments
Summary of chapter 2: introduce the key features of different security types A. Money Market shorter term
Money market instruments and how yields
B. Capital Market longer term Fixed Income Equity Derivative Securit