View
239
Download
6
Category
Preview:
Citation preview
INVESTMENTS6th Edition
Sharpe, Alexander, and Bailey
POWER POINT PRESENTATIONS
CHAPTER ONE
INTRODUCTION
INTRODUCTION
• The investment environment– encompasses the kinds of marketable securities that
exist and where and how they are bought and sold.
• The investment process– Is concerned with how an investor should proceed in
making decisions about what marketable securities to invest in,how extensive the investment should be ,and when the investments should be made.
THE INVESTMENT ENVIRONMENT
• Securities
• Security markets
• Financial intermediaries
THE INVESTMENT ENVIRONMENT
• What are securities?–Definition: a legal representation of the right
to received prospective future benefits under stated conditions.
THE INVESTMENT ENVIRONMENT
–Calculating the RATE OF RETURN :
r = (p1 - p0)/ p0
where
r = the rate of return
p0 = the beginning price
p1 = the ending price
THE INVESTMENT ENVIRONMENT
• Types of Securities:–Treasury bills
–Long term bonds
–Common stocks
THE INVESTMENT ENVIRONMENT
• Risk, Return, and Diversification–The Fundamental Principle
• combining securities in a portfolio
• results in a lower level of risk
• than a simple average of the risks of each.
THE INVESTMENT ENVIRONMENT
• Security Markets:–Function: meeting place for buyers and
sellers
–Types of Markets based on Issuer:• Primary Secondary
– Seasoned new issue
– Unseasoned new issue
Money market capital market
THE INVESTMENT ENVIRONMENT
• Financial Intermediaries– Functions:
issue financial claims against themselves
– Types:• commercial banks
• savings and loans
• savings banks
• credit unions
• Use the proceeds from this issuance to purchase primarily the financial assets of others
• life insurance companies
• mutual funds
• pension funds
THE INVESTMENT PROCESS
• FIVE STEPS:– Set investment policy
– Perform security analysis
– Construct a portfolio
– Revise the portfolio
– Evaluate performance
STEP 1: Investment Policy
–Identify investor’s unique objective
–Determine amount of investable wealth
–State objectives in terms of risk and return
–Identify potential investment categories
Step 2: Security Analysis
–Using potential investment categories,
find mispriced securities
–Using fundamental analysis• intrinsic value should equal discounted present val
ue
• Compare current market price to true market value
• Identify undervalued\overvalued securities
–Using technical analysis
Step 3: Construct a Portfolio
• IDENTIFY SPECIFIC ASSETS AND PROPORTION OF WEALTH IN WHICH TO INVEST
• ADDRESS ISSUES OF–SELECTIVITY
–TIMING
–DIVERSIFICATION
Step 4: Portfolio Revision
• Periodically repeat Step 3
• Revise if necessary– increase/decrease existing securities
–delete some securities
–add new securities
Step 5: Portfolio Performance Evaluation
• Involves periodic determination of portfolio performance with respect to risk and return
• Requires appropriate measures of risk and return
END OF CHAPTER 1
Assignment :P17 , 1 、 3 、 4 、 5 、 18 、 22
Recommended