Summarised Summary Essay

Submitted By JessiLyon
Words: 1698
Pages: 7
Open Document
Week 1 – Assets & Investments

Major Asset Classes
Equity
Highest risk, highest return
Eg. Australian company stocks, managed funds, foreign stocks & specialty stocks
Cash
Low risk, low return
Short term debt instruments
Eg. 90-day treasury notes & bank accepted bills
Fixed Interest
Relatively low risk, relatively low return (higher than cash)
Long term debts
Eg. Government bonds & corporate debentures
Property
High risk, high return
Real estate
Eg. Property trusts & residential property investment

Asset Allocation
The choice of asset class within a portfolio is asset allocation – division of investment capital between the different asset classes
It determines the overall risk & expected return of a portfolio

Three Types of Revenue
Equal-Weighted Return

Value-Weighted Return

Price-Weighted Return

Normal Distribution
Zero skewness & zero excess kurtosis
Can be completely specified by mean & variance
Useful Assumption:
Allows mean to be used to estimate expected returns & variances
Useful for making statistical inferences
A lot of investment analysis’s require the assumption of a normal distribution

Week 2 – Portfolio Theory

Indifference Curves/Utility Curves

Utility Curve: combination of expected profit (return) & risk (measured by ) that yield the same level of expected utility (satisfaction) to the decision maker
Importance: they are important as they identify the portfolio of risky assets an investor prefers

Portfolio Variance – Large Number of Assets

Not that & number of covariance terms = [n – n]
As there are a large number of asset, w = 1/n
Variance of each asset can be approximated by average variance

* When n becomes larger & larger

Variance & covariance terms: n x n = n
Variance terms: n (diagonal cells)
Covariance terms: n – n (off-diagonal cells)

Unique covariance terms: (matrix is symmetric)
Week 3 – Asset Pricing Models

Efficient Frontier

CAPM Assumptions
Investors are risk averse & maximise their utility
Investors have unlimited access to borrowing/lending at risk-free rate
Investors face a one-period investment horizon
Investors are infinitely divisible
No transaction costs or taxes
No inflation or changes in interest rate
Capital markets are in equilibrium

Problem Testing CAPM
Requiring that an ex-ante model be tested using ex-post information
Estimating expected return for the market portfolio, individual risky assets or portfolio of risky assets, & the risk-free asset
Observed breaches of CAPM assumptions
Inclusion of surviving companies & the exclusion of failing ones

CAPM vs. APT
CAPM: shows that equilibrium rates of expected return on risky assets are a function of their covariance with the market (systematic risk in relation to broad-based market portfolio)
APT: shoes that expected return on any risky asset is a linear combination of various factors (diversification & arbitrage)
Multi-factor model  doesn’t define factors

Weeks 4 & 5 – Behavioural Finance & Market Anomalies

Efficient Market Hypothesis (EMH)
Security prices immediately & fully reflect all available & relevant information
Reaction to new information is instantaneous & unbiased

EMH & Technical Analysis
Information dissemination process is slow
This view contradict the EMH
EMH suggests rapid dissemination process & therefore, prices reflect all information
Thus, there would be no value to technical analysis

EMH & Fundamental Analysis
At one point in time, there is a basic intrinsic value for individual securities & if this intrinsic value is substantially different from the prevailing market value, the investor should make the appropriate investment decision
EMH – prices already fully reflect all available information
FA will be of little value
Even with an excellent valuation model, if you solely rely on past data, you cannot expect to do better than a buy-&-hold policy

Market Efficiency
A large number of competing profit-maximising participants analyse & value securities, each
Show More

Related Documents: Summarised Summary Essay

Essay about Marketing Summary

This report was commissioned to examine why the sales volume of Choice Chocolate has dropped over the past two years since its peak in 1998 and to recommend ways of increasing the volume. The research draws attention to the fact that in 1998, the market share of Choice Chocolate was 37%. The shares of their key competitors such as Venus and Bradbury were 22% and 18% respectively. The size of the chocolate market then was $36 million. Over the next two years, although Choice Chocolate retained…

Words 326 - Pages 2

Essay on Mr Jan

audit you need to understand for each of these areas how and if any changes will impact on your business or your competition. If they do, then you need to look at them in more detail. - Economic environment - The economic environment is often summarised with one acronym: PESTEL. This stands for political (e.g. tax changes, government actions), economic (employment levels, rate of economic growth), social / cultural (changing demographics, lifestyle and family values), technological (IT development…

Words 839 - Pages 4

Interest and Repayments Essay example

the question involves separating the principal and interest components of your loan repayments. The first thing we need to calculate is the monthly repayment over the course of the loan. The information required for this computation is summarised below: Summary Information: Original Loan Original Loan Amount (PV) 150,000 – 15,000 = 135,000 Monthly Repayment (a) ? Monthly Interest Rate (i) 0.07% (the annual rate divided by 12) Number of Repayments (n) 300 (25 years of monthly repayments) To compute…

Words 557 - Pages 3

Leadership in Organizations Essay

leadership research study, with a concluding summary and questions for…

Words 2020 - Pages 9

Troposphere and Smog Cycle no 2 Essay

ENVI 1011 Global Atmosphere A summary of the key topics 1. Atmospheric modelling (a) Atmospheric Composition Non-terrestrial atmospheres (b) Temperature profile of the atmosphere Key equations: (Thermosphere) O2 + hv => O + O + KE O3 + M + KE Troposphere – significance of Black Body radiation. What temperature should the Earth be? See ‘atmospheric modelling.doc’ (c) Atmospheric Stability Significance of…

Words 406 - Pages 2

Research Task

forget to record sources accurately. Your student diary has a clear guide to how different sources are referenced and recorded. 4. IF PHOTOCOPIES ARE INCLUDED, THEY MUST SHOW SUITABLE HIGHLIGHTING AND ANNOTATIONS THAT REFLECT UNDERSTANDING. 5. SUMMARIES SHOULD BE EVIDENT THROUGHOUT YOUR RESEARCH THAT CLARIFY YOUR STANCE AND/OR UNDERSTANDING OF SPECIFIC ISSUES. These show clearly how your research is developing and should be done weekly or whenever your research may have changed direction. These…

Words 2474 - Pages 10

Qwerty: Corporation and Sole Trader Essay

consists of two principal statements, usually amplified by detailed notes. These statements are: (a) the statement of financial position: a statement of the financial position of a business at a given date; (b) the income statement: a summary of the results of a business’s transactions for a period ending on the date of the statement of financial position. The amount of detail in a set of accounts will vary according to the type of accounts and the people who will be using them.…

Words 679 - Pages 3

topic 1 Essay

outflow of economic benefit. owner’s equity- the residual interest in the assets of the entity after liabilities are deducted The income statement a report prepared at the end of each reporting period. Uses the same information as is summarised in the P+L summary except it is set up In a more informative manner to convey meaningful information to the users of the report (relevance) it also emphasises the presentation of understandability. Purpose of the income statement- to report on the performance…

Words 633 - Pages 3

Essay on "The Strangers that came to Town"

6. HST on sale of goods or services is a credit to HST PAYABLE. 7. Types of Contra Accounts: Sales Return, Sales Account, Purchase Returns, Purchase Discounts, and Allowance for doubtful accounts receivable. 8. Definition of an Income Summary Account: is a temporary account used to store income statement account if balances revenue + expense accounts during closing entry step accounting cycle. 9. Definition of Dollar Sign: Dollar sign is usually only used in the trial balance + financial…

Words 1176 - Pages 5

Essay about Report Journal Technical Analysis

TABLE OF CONTENT EXECUTIVE SUMMARY This review critically reviews the article ‘A Momentum Trading Effect In Real Estate Funds: An Analysis with TIAA-CREF’ by Greg kuhlemeyer and Robert kunkel which appeared in the Journal Of Technical Analysis. The review will first summarise the article. Secondly, it will briefly analyse the effectiveness of the article’s structure, investigating how the information is set out and whether the reader can access it efficiently. Thirdly, the review will critique…

Words 2022 - Pages 9