1
Chapter 9 Capital Market Theory and Asset Pricing Models
Outline
Capital Market Theory
1. Capital market theory builds on Markowitz _ theory.
2. Capital market theory provides a model for _ risky as
FIN 352 Investments (Summer 2016)
Instructor: Dr. Chang
Chapter 5 How Securities Are Traded?
Lecture outline (Weeks 23)
Brokerage Operations
1. Revenues:
(a) Commissions on executed trades
(b) Sales l
FIN 352 Investments (Summer 2016)
Lecture outline
Instructor: Dr. Chang
Topic 1 Introduction to Investments
Investments?
1.
2.
Investors should buy low and sell high in order to build wealth over time
FIN 352 Investments
Instructor: Dr. Chang
Summer 2016
Chapter 2 Investment Alternatives
Lecture Outline Week 1
The Role of Financial Markets
1. Help firms and governments raise cash by selling claims
FIN 352 Investments (Summer 2016)
Instructor: Dr. Chang
Chapter 6 Returns and Risks from Investing
Lecture outline (Weeks 3)
The Basis of Investment Decisions
1. Return on investment
2. Risk involved
FIN 352 Investments (Summer 2016)
Instructor: Dr. Chang
Chapter 3 Indirect Investing
Lecture outline
Indirect Investing
Figure 3.1 (p. 53).
1.
2.
3.
4.
Alternative to direct investment in or ownership
FIN 352 Investments (Summer 2016)
Instructor: Dr. Chang
Chapter 4 Securities Markets and Market Indices
Lecture outline (Week 5)
The Role of Financial Markets
1. Help firms and governments raise cash
Chapter 1 - Investments: Background and Issues
Investment vs. investments
Real assets vs. financial assets
Financial markets and the economy
Investment process
Competitive markets
Players in investmen
Chapter 8 - Market Efficiency
Random walks and efficient market hypothesis (EMH)
Implications of EMH
The role of portfolio manager in an efficient market
Evidence of market efficiency and anomalies
In
Chapter 15 - Options Markets
Option contract
Option trading
Values of options at expiration
Options vs. stock investments
Option strategies
Option-like securities
Option contract
Options are rights to
Chapter 10 Stock Valuation
Outline
Fundamental Analysis
1. Capitalization of expected income
(a) Dividend discount model
(b) Free cash flow model
2. Multiple of earnings approach
e.g., price/earnings
1
Chapter 7 Portfolio Theory
Outline
Investment Decisions
1. Investment decisions involve _.
(a) Risk that an expected return will not be realized.
(b) Investors must think about return distributions,
1
Chapter 6 Returns and Risks from Investing
Oultine
The Basis of Investment Decisions
1. Return
(a) Represent growth in wealth and purchasing power.
(b) Two types of returns:
(1) Expected return (ER)
Chapter 11 Stock Analysis and Strategy
Outline
Impact of the Overall Market on Stocks
1. Aggregate market movements remain the largest single factor explaining fluctuations in both
individual stock pr
Chapter 17 Bond Yields and Prices
Oultine
Bond Basics 101
1.
Bonds are used by _ and _ to raise large sums of capital.
2.
Bonds are viewed as _ debt instruments (or IOUs) that represent the issuers
co
1
Chapter 19 Options
Outline
The last lecture has come.
Derivative Securities 101
1. The value of a derivative security is derived from its connected underlying security.
2. Futures and options contra
FIN 352
Assignment 2
10/15/17
In the fourth chapter, of the book A Random Walk Down Wall Street by Burton G Malkiel,
titled The Explosive Bubbles of the Early 2000s, Malkiel discusses the most recent
FIN 352 Exam #2 Review
Chapter 6 Questions
6.1 Distinguish between historical return and expected return.
Historical returns are the returns that have realized in the past and expected returns are yet
FIN352
Review questions for midterm exam 2
Note: The numbering of these review questions may be not consecutive.
The symbol * or > indicates the right answer.
1. Total return is equal to:
a.
b.
c.
d.
Market Anomalies
Data Mining
Weak form market efficiency
Semi-strong form market efficiency
Strong form market efficiency
Abnormal returns
Bubble
Momentum
Mean Revision
Random Walk
In-Sample vs. Out-o
What are the three steps in our basic retirement
planning calculation?
How do we incorporate inflation into our
calculation?
How does the asset allocation decision affect the
basic three steps in our
Professor Dow
Review of Percentages
Writing Percentages
Percentages can be written in a number of different ways. For example, twelve percent can be written
as a:
Percentage: 12%
Decimal: 0.12
Fractio
Creating a Personal
Financial Plan
Overview
Setting goals are important and often used to measure success. However, simply setting goals does not
ensure you will someday accomplish them. Achieving goa
FIN 352 Professor Dow
Worksheet: Calculating Returns
The Basics
Say that you started with $2,000 and a year later you have $2,500. You can calculate the return in two
ways:
1) 2,500/2,000 = 1.25 This
According to Modern Portfolio Theory, the risk of
a portfolio is
According to Modern Portfolio Theory, the risk of a
single asset is
Criticisms of Modern Portfolio Theory
Fat tails
Risk
Uncertainty
Bl
FIN 352
Assignment 4
11/13/17
In the tenth chapter of the book, A Random Walk Down Wall Street by Burton G. Malkiel,
titled Behavioral Finance, Malkiel discusses how human cognitive and emotional bias
FIN 352
Assignment 3
11/13/17
In the eighth chapter of the book, A Random Walk Down Wall Street by Burton G.
Malkiel, titled A New Walking Shoe: Modern Portfolio Theory, Malkiel discusses, much as the
FIN 352
Assignment 1
10/15/17
In the first chapter of the book, A Random Walk Down Wall Street by Burton G Malkiel,
titled Firm Foundations and Castles in the Air, Malkiel discusses the differences be
FIN 352 Investments (Fall 2017)
Instructor: Dr. Chang
Topic 1 Introduction to Investments
Lecture Outline (Week 1)
Investments?
1.
How can investors build wealth over time?
- Buy something Low and sel