View
216
Download
1
Category
Tags:
Preview:
Citation preview
2
What is an investment ?
Is hiding money in a
mattress or keeping it in a
piggy bank an investment ?
No! The “safe-keeping” of
money does not involve
any expected compensation.
3
What is an investment ?
How about baseball
Possibly, but compensation ishighly uncertain, and some of the value of ownership may be “sentimental” rather than financial in nature.
cards or Beanie Babies? Are they an investment?
4
pure time value of money→
expected rate of inflation→
investment risk (risk premium) →
What is an investment ?
6
Measuring Returns
Dollar Returns VT=Income+ΔP
(1)HPR =VV T
0
(2)HPY = HPR – 1
Alternatives (i) V0=$250 VT=$350 in 2 yrs
(ii) V0=$100 VT=$112 in 6 mos
(3)Annual HPR =HPR1/N
(4)Annual HPY =HPR1/N – 1
7
Measuring Historic Returns─AM vs. GM
RA = n
HPY
RG = (πHPR)1/N -1
3 138.0 110.4
Year Beginning Value Ending Value HPR HPY
1 100.0 115.0
2 115.0 138.0
10
Measuring Portfolio Returns
0.095$21,900,000 $20,000,000 Total
0.0750.75101.1016,500,000 3315,000,000 30500,000 C
0.010.2051.054,200,000 214,000,000 20200,000 B
0.01 0.05 20% 1.20 $1,200,000 $12 $1,000,000 $10 100,000 A
Weighted HPY
Market Weight
HPY HPR Ending Market Value
Ending Price
Beginning Market Value
Beginning Price
Number of Shares
Investment
COMPUTATION OF HOLDING PERIOD YEILD FOR A PORTFOLIO
11
Economic Conditions Probability Rate of Return
Strong economy, no inflation 0.15 0.20
Weak economy, above - average inflation 0.15 -0.20
No major change in economy 0.70 0.10
Measuring Returns ─ Uncertainty
13
Measuring Risk (Π)
變異係數 (Coefficient of Variation)
CV = )(Ri
i
E
2B
2ABA
2B
2ABA
,RR
,RR
BA or
Markowitz 平均數-變異數法則
14
Measuring Risk (III)
Range
Rmax – Rmin
Semivariance
)(
2)]([
jj RERjjj RERP 2
β 係數 (Cov of returns w/ the mkt portfolio) β= 2
),(
m
mj RRCov
15
投資組合之期望報酬與風險投資組合期望報酬
iip RWR
1 iW
投資組合之變異數 當 n = 2
BAABBABBAAp
ABAABBAAp
WWW
CovWWW
2
222222
2222222
if 0AB 22222BBAAp WW
16
Sources of Risk Business risk
Financial risk
Liquidity risk
Exchange rate risk
Country risk
Systematic Risk vs. Unsystematic Risk
Risk premium
19
Issues That Investors Should Always Consider
There is a trade-off between risk and expected return
Developed financial markets are nearly efficient.
Focus on after-tax returns, net of expenses.
Diversify across asset types, industries, and even
countries.
20
What types of investments can one make?
Real assets vs. Financial assets
Tangible assets vs. Claims on assets
Direct vs. Indirect financial investments
Individual securities vs. “pools” of assets
Derivatives
Futures, options
22
What is asset allocation?The process of deciding how to distribute
wealth among asset classes, sectors,
and countries for investment purposes.
Not an isolated choice, but
rather a component of the
portfolio management process.
23
Managing Risk
Since risk drives
expected return,
investing involves
managing risk rather
than managing return.
26
The Portfolio Management Process (I)
A four step process:
1. Construct a policy statement
2. Study current financial conditions and forecast future trends
3. Construct a portfolio
4. Monitor needs and conditions
30
Basic Investment PhilosophiesIn forming an investment portfolio, several questions are paramount:
In what types of securities should I invest?
Within each security type, how do I select which assets to purchase?
Finally, how active should I manage my portfolio?
31
Asset Allocation Security Selection
Active Market timing Stock picking
Passive Maintain pre-determined allocation(s)
Try to track a well-known market index
Summarizing the Basic Strategies
32
Globalization
Securitization
Financial Engineering
• bundling - hybrid security • unbundling - IOs & POs
Computerizes trading
Recent Trends
33
Ethics in Investments
Financial markets are vitally important to a well-functioning economy.
Trust in information and faith in fairness are essential.
Codes of ethics for financial professionals and strict regulations attempt to create such an environment where financial markets can efficiently fulfill their economic function.
34
Jobs in Investments
Sales Registered representative of a brokerage firm Financial planners
Investment Analysis and Portfolio Management Brokerage firms, banks, money managers, mutual fund
managers, insurance companies
Professional Designations Chartered Financial Analyst (CFA) Certified Financial Planner (CFP)
Recommended