Investments

The portion of the value of the investment that is not borrowed

• -to recieve a amount in the future
• -to recieve regular income
• -to preserve the buying power of money

• -potential higher gain
• -portfolio diversification

• -it measures the dispersion of a set of data from its mean
• -a measure of the volitility of an investement

• -enjoy your money now
• -current consumption
• -you dont need money in the future
• -investment risk

• -interest bearing
• -equities
• -derivatives

• -money market instruments
• -fixed income securities

• -common stock
• -preferred stock

• -short term obligations issued bu government and corporations
• -simplest form

• -longer term debt obligations that promise pixed payments
• -bonds

• -the rate of return of a riskless investment
• ex. t-bills becuase the government wont default

• The extra return on a risky asst over the risk free rate
• -a reward for bearing risk

• -real estate
• -hedge funds
• -private equity
• -commodities
• -collectables

A brokerage account where securities can be bought and sold on credit

• an investment company that stands ready to
• buy and sell shares in itself to investors, at any time

an investment company with a fixed number of shares that are bought and sold by investors

its a measure of how much trading a fund does

• objective
• -return req.
• -risk tolerance
• Constraints
• -liquidity
• -time horizon
• -taxes 
• -legal

Investors are much more distressed by prospective losses than they are happy about prospective gains.

• -mental accounting
• -frame dependence 
• -house money effect

• -people segament thier money into seperate buckets
• -will spend bonuses differently than regular income

• how a problem is frame matters to people
• -they will answer differently to the same question asked differently

people will take more risk with money they have won

• -GDP growth rate
• -Interest rates
• -inflation
• -home prices
• employment

• sucurities prices rapid change to new information and current prices reflect all availialbe information.
• -investors cant acheive higher return withour higher risk

• -weak form- past prices are no use in beating market
• -semistrong- publicly availiable information is of no use in beating the market
• -strongform- information of any kind is no use including inside information.

companies with low price to earnigs ratios actually have higher returns

small stocks in particular have historically generated high returns in the month of january

there is a pattern of higher trading volume and higher stock prices in the last week of dec and first 2 weeks of january

• investors need portfolio managers to provide diverification.
• - the market needs analyists to seek profit opportunities to ensure prices reflect all info.

net income minus common shareholders opportunity cost

• insider trading is acting on information gained in an illegal way
• informed trading in gaining all publically availiable information to form an investment strategy

risk that influences a large number of assets or called market risk (cant diversify away)

risk that influences a single company or called uniqued risk

• -rivalry among competitors
• -threat of entrients
• -threat of substitute products
• -bragaining power of customers
• -bargaining power of suppliers

• -low cost producer
• -product differentiation
• -focus/niche postitioning