TheInvestmentSetting讲义
Investment-PPT文档资料
• Now let see Buffett. • He was born in the United States, Nebraska, Omaha and was most investment consciousness from childhood. • He is very interested in the stock and digital. what he thinks is just making money. • He set up a stall selling gum(口香 糖) only in his five years old. Slightly more grown up, he led his friends to pick up and sell used golf balls and has a booming business.
• In 1941, just entered 11 years old, he purchased his first stock(股票). • In 1947, Warren Buffett entered the University of Pennsylvania for finance and business management. Two years later, he transferred to Blass Lincoln University and achieve his bachelor's degree in economics within one year. • In 1957, Buffett is in charge of $300000, but it rose to $500000 in the end of the year. In 1964, his personal wealth is $4000000, and this time he was in charge of 22000000 dollars.
投资学(Investment 8th)讲义1
Investment InstitutionsWhat are Investment institutions? Contractual savings institutions -Insurance companies -Pension fundsInvestment intermediaries -Mutual funds / unit trusts -Investment trusts -Hedge funds-Private equity company❝Investment institution is a financial intermediary (company) engaged in investing in, and managing, a portfolio of securities on behalf of their shareholders. ❝Indirect investment in capital/money marketinstruments via an investment institution is the most popular way for individuals to invest surplus funds ❝In the UK, 50 –60% of equities and bonds are held and managed by investment institutions ❝Benefits: diversified portfolio, professional managements❝All investment companies charge a fee (annual expense ratio) to shareholders to pay for theoperating costs and the management fee.❝Depositary institutions◦Intermediaries with a significant proportion of their funds derived from customer deposits, e.g. Building societies. Short-term liabilities.❝Contractual savings institutions◦Typically acquire funds at periodic intervals on a contractual basis❝Investment intermediaries◦Collective investment funds, Finance companies,Investment banks, Securities firms❝Two major groups: Insurance companies and Pension funds ❝Long-term liabilities❝Liquidity of their assets is less important than for depositary institutions –they can predict with greater accuracy their future payments due to customers❝Hence, they can invest a greater proportion of funds in long-term securities (bonds,equities)❝Primary objective is to protect policyholders (firms and individuals) from adverse events ❝Receive premiums from policyholders and promise compensation if specified events occur❝Two main segments: general insurance and life insurance❝Protection against personal injury and liabilities such as accidents, theft and fire❝Usually over a fixed time period e.g. 1 year ❝Claims usually made soon after the event so liabilities are mostly short term❝Hence they hold a greater proportion of liquid assets than life insurers. Holding financial assets might be viewed as a byproduct of the business.❝Some authors (e.g. B&T) do not view this category as an investment intermediary❝Protects the policyholder in the event of death, illness or retirement; hence long-term liabilities❝Term assurance, Whole-of-life policy, Endowment policy, Annuities❝Term assurance: provides insurance cover, for specifiedperiod, against the risk of death. If the insured survivesthe specified period then no payment is made.❝Whole-of-life policy pays a capital sum on the death ofthe person assured, whenever that event occurs.❝Endowment policy pays a capital sum at the end ofsome specified term or earlier if the assured dies withinthe term.-The premium for Whole-of-life and endowment policieswill be higher than for term assurance.❝Annuities: A policyholder pay an initial lump sumwhich used by the insurance company to providean agreed income until death.-The insurance company immediately creates a fund❝Risk: certain sums are guaranteed to be paid in thefuture and these sums exceed the value of thepremiums over the life of the contract.❝Match the term structure of its assets and liabilities❝Invest in long-term assets e.g. bonds, equities andmortgages.❝Provide retirement income (in the form ofannuities) to employees covered by a pension plan❝Personal scheme and public (state) scheme❝Funded scheme and unfunded (pay-as-you-go)scheme❝Funded scheme: Receive contributions fromemployers and/or employees and invest thesefunds in assets, including equities and bonds.Returns from the investment are used to paybenefits to members of the scheme.❝Two main types of funded scheme: defined benefit(DB) and defined contribution (DC)❝DB: the sponsor agrees to pay members ofthe scheme a pension equal to apredetermined percentage of their finalsalary (average salary), subject to themember‟s years of service❝DC: the return on the investmentsdetermines pension benefits❝Occupational schemes where the sponsor isthe employer have historically been DB,while private pensions are DC❝Risk: benefits to be paid are not known with certainty;inflation complications as it increases the benefits to bepaid by fund.❝Benefit from tax deferral: in the UK, contributions arenot taxable, pensioner pays income tax❝Pension fund trustees will determine the overallinvestment strategy❝They will often decide what proportion of assets to beheld in different asset classes❝Asset mix will be influenced by the maturity of the fund❝Long-term liabilities hence long-term assets❝Index-linked bonds, Equities❝Investment companies are classified, depending on whether their own capitalisation (number of shares outstanding) is constantly changing or fixed:-Open-end : capitalisation constantly changing; new investors buy additional shares from the company and some existing shareholders sell their shares back to the company.-Closed-end : fixed capitalization; share traded onexchange.open-ended❝Mutual funds / unit trusts❝Open-ended investment companies OEICsClosed ended❝Investment trusts ❝Hedge funds❝Private equity company❝Pool resources from many individuals andcompanies and invest these in a range of assets ❝Provide opportunities for small investors to investin a diversified fund at low cost❝Take advantage of lower transaction costs in trading larger blocks of securities❝Trusts in the legal sense; controlled and monitored by trustees; who act as guardian of the assets on behalf of the beneficial owners ❝Investment decisions❝When an investor buys a stake in a unit trust, he/she purchases a new unit in the fund (unless matched with a seller by the fund manager)❝Open-ended fund where the size of the fund can varyaccording to the number of contributors to the fund ❝Price of each unit reflects current value of the fund divided by the number of outstanding units❝All sales and purchases of units are made with the trust manager.❝Do not trade on stock exchange.❝Dual pricing structure: offer price (investors buy units)and bid price (investors sell units back to the trust)❝Annual management fee (usually 0.5 -1% of the funds under management), plus the bid-offer spread on buying and selling units❝Limited in the amount that can be invested in any single security❝Total return for a mutual fund includes reinvestment dividends and capital gain.❝A cumulative total return measures the actual performance over 3, 5 or 10 years.❝In Jan 2009, 8,000 domestic mutual funds withassets of $9.4 trillion in the US.❝Short-term funds:-Money market mutual funds ❝Long-term funds: -Capital market funds;-Equity (stock) funds, Bond funds or Hybrid(balanced) funds (hold combination of stocks and bonds)-Index funds: mutual funds holding an managed portfolio of bonds or stocks designed to match particular market index, such as S&P 500. Has low expenses ratio.❝OEICs operate similarly to a unit trust in the sense that they are open-ended❝But an OEIC has a company structure and can be listed on the stock exchange ❝Shares will reflect the value of the fund ❝Shares will have a single price (rather than the separate buying and selling prices indicated for unit trusts)❝Companies whose business is the investment of funds in financial assets.❝A closed-end fund, only able to raise more funds through rights issue shares or borrowing (bonds) ❝Not a trust in the legal sense; limited liability company with listed shares (traded in stock market).❝Investors can purchase ordinary shares of the ITC ❝A portfolio, managed by ITC‟s board of directors who determine the investment strategy❝Not faced with outflow of funds, so investment strategy does not depend on maintaining cash flows to meet future liabilities❝The existence of borrowed funds in the capitalstructure implies a …gearing effect‟ on the value of the ITC shares❝Net asset value (NAV) per share is the value of assetsless debt divided by number of issued shares-E.g. ITC capital structure: £8m in equities (4m shares) + £2m debt. Thus the NAV per share = £2-If the value of ITC asset portfolio were to doubled to £20m, then the NAV per would increase to £4.5 (£18m/4m shares)-A 100% in the value of assets held has led to an increase in the NAV per share of 125%❝The gearing effect is of benefit to shareholders in a rising stock market.❝The hedge funds are largely unregulated❝Reputation is as risky funds, shrouded by mystery and only accessible to the wealthy.❝According to IFSL, the number of hedge funds increased from 4,000 with $324bn of assets in 1999 to peak of 11,000 with $2,150bn in 2007, and then declined to 10,000 hedge funds and $1,500bn by the start of 2009. ❝There is no unique definition of hedge fund since it is an industry term rather than a legal term❝“Includes a multitude of skill -based investment strategies with a broad range of risk and returnobjectives. A common element is the use of investment and risk management skills to seek positive returns regardless of market direction.”❝A hedge fund is an actively managed investment fund ❝Seeks an attractive …absolute return‟, a return whether the market go up or down.❝Do not follow any benchmark, but rather just try to generate high returns (larger than ordinary available return) while managing risks, by exploiting various market opportunities❝Typical strategies include -Short selling,-Borrowing, Leverage -Use of derivatives❝Fees include a fixed fee and management fee e.g. 1-2% of assets plus 20-25% of upside performance.Hedge fundsMutual funds and pension fundsInvestment trusts FreedomLimitation on borrowing, short selling, and the use of derivatives May borrow Limitations on short selling, and the use of derivatives❝Typical investors◦Wealthy individuals ◦Pension funds◦Other hedge funds, creating …funds of hedge funds‟ –diversity in strategy and risk❝Returns and risk can vary a great deal among the different hedge fund strategies❝Market neutral (or relative value arbitrage) funds ◦Attempt to produce returns that have no or low correlation with e.g. equity markets◦Highly quantitative portfolio construction◦Concentrate on the relative value of individual shares, bonds, currencies ...◦Commonly apply arbitrage strategies-e.g. exploit mispricing between an underlying asset and a derivative instrument-Concentrate on the difference in performance of two given securities in homogenous universe. E.g. belief that BP will do better than X in oil firm; go long on BP and short on X.-Take position with convertible bonds❝Long/short funds-Generally invest in equity and bonds, taking directional bets on individual security or sector-Analyse individual companies and individual shares-Micro investors (look at individual/specific stocks)-Some may specialize in geographical sectors -Others may specialize in either small or large companies -E.g. 130/30-Timing is crucial-Stock-picking skill (short selling overpriced stocks and buying underpriced stocks)-Not automatically market neutral e.g. could havestrong positive correlation with equityGlobal (macro) asset funds-Look at stocks, bonds, currencies, and commodities from a global point of view -Macro-investors (look at broad themes) -Have positive exposure to the market-A fund might go long in sectors they believe will provide good returns, and short on countries they believe will have negative returns❝Event driven funds-Looks to exploit special situations -Take over bids-Merger, Corporate restructuring❝A group of individuals set up a limited liabilitypartnership, might have a limited life of around 10 years.❝Make good returns by buying public companies or neglected subsidiaries at good price and turning them into more attractive business❝They will gear up with debt that a public company would not want to risk.❝Normally be turned into non-quoted company❝They get involved in the business, bringing their own expertise and give managers big incentives to improve the business❝They seek cut costs, squeeze suppliers and sell unwanted assets, sell and lease back property ❝Large amount of leverage involved❝They take their profit in a variety of ways:-Refloat the company-Sell the company to someone else in the same business -Refinancing❝The private equity market was boosted in the early 2000s.❝IFSL shows that the global private equity investment amounted to $176.6bn in 2000, this increased to $317.6bn in 2007, then hit by the credit crisis andfell to $189bn.❝In the UK, well-known firms that are or have been owned by private equity groups: Boots, Iceland, Debenhams, New Look, Kwik-Fit❝E.g. In Dec. 2003, a group of private equity firms-Texas Pacific, CVC and Merrill Lynch Global Private Equity-bough Debenhams for £1.7bn, of which £600m was their own capital.❝In two refinancing in 2004 and 2005, they reconstructed the balance sheet with new borrowings and paid themselves back £1.3bn(twice of their original capital) in about 18 months. ❝They refloated Debenhams in May 2006.Explain the different types of investment institution. Identify and analyse the factors that will influence the investment strategy applied by each type of institution.。
Chapter 01-The Investment Setting
Chapter 1 The Investment Setting
13
3. Determining Required Rates of Return
The real risk-free rate Factors influencing the nominal risk-free rate Risk premium Risk premium and portfolio theory Fundamental risk versus systematic risk Summary of required rate of return
Chapter 1 The Investment Setting
9
For example
Barber, B. and J. Lyon, 1997, Detecting long-run abnormal stock returns: the empirical power and specification of test statistics, Journal of Financial Economics 43, 341-372.
– Pure time value of money – expected rate of inflation – risk premium
Chapter 1 The Investment Setting
5
2. Measuring Return and Risk
Measuring historical rates of return Computing mean historical returns Computing expected rates of return Measuring the risk of expected rates of return Risk measures for historical returns
INVESTMENTS 投资学 (博迪BODIE, KANE, MARCUS)Chap021 Option Valuation-42页PPT资料
Borrow $81.82 (10% Rate) 18.18
Net outlay $18.18
Payoff
Value of Stock 90 120
Repay loan - 90 - 90
Net Payoff
0 30
30
0 Payoff Structure is exactly 3 times the Call
– The value of the stock cannot fall below zero. – Once the firm is bankrupt, it is optimal to
exercise the American put immediately because of the time value of money.
120
10
100
C
90
0
Stock Price
Call Option Value X = 110
INVESTMENTS | BODIE, KANE, MARCUS
Binomial Option Pricing: Text Example
Alternative Portfolio
Buy 1 share of stock at $100
• Intrinsic value - profit that could be made if the option was immediately exercised – Call: stock price - exercise price – Put: exercise price - stock price
INVESTMENTS | BODIE, KANE, MARCUS
JUFE Investments Lectures 1 to 5 (Markets and Instruments)
Financial and real investment Investment in real assets generates wealth Goods for consumption Durable and non-durable Infrastructure of the economy Transportation, housing, schools, hospitals, etc. Financial assets are claims to wealth generated by real assets. Future cash flows Financial assets represent the allocation of wealth to individuals in the economy They do not add to the wealth of the economy.
Flow of funds in the financial system Surplus units (savers) Deficit units (borrowers) Households (or individuals) buy financial assets Firms obtain money to invest in real production by selling financial assets The financial assets of households are the liabilities of the firms Assets and liabilities balance out when aggregated, leaving only real assets as wealth
ch01THE INVESTMENT SETTING(投资学,赖利)
So …
With the result that …
Implications of Market Efficiency
It’s what is unexpected that moves the market (the genuinely new information in news). We should be skeptical of investment strategies that claim to be able to beat the market on a consistent basis.
Don’t put all of your eggs in one basket! Diversification reduces risk without necessarily sacrificing expected return. It’s a no-brainer!
Real assets vs. Financial assets
Why is the real risk-free rate positive?
Borrowers are willing to pay to be able to spend more than their current resources allow. Savers need compensation in order to give up the right to consume today.
Compensation for expected inflation:
If the future payment will be diminished in value because of inflation, then investors will demand an interest rate higher than the real risk-free interest rate so that their expected purchasing power will actually increase.
chapter01The Investment Setting(国际投资,英文版)
7
The World’s Bond Market
The World Bond Market, By Regions of the Major Issuers
All other markets 6% U.K. Sterling 3% Euroland 26% U.S. Dollar 50%
Japanese Yen 15%
Global Stock Market Capitalization
Tokyo 13% Asia, Pacific ex. Tokyo 7%
Nasdaq 15%
Europe, Africa, M. East 29% South America 1%
NYSE 32% Rest of N. America 3%
2
Gambling vs. Speculating
Gambling occurs when
– Outcome is determined very quickly (a roll of the dice, for instance) – A source of entertainment – Outcome is not based on an economic endeavor, but, rather, random outcomes – Creates risk without expectation of economic benefit
Francis & Ibbotson Chapter 1: The Investment Setting
5
The World’s Equity Capital
World’s equity capital is concentrated in
The_Investment_Setting(投资分析与投资组合管理)
n
Pi[Ri -E(Ri )]2
i1
Measuring the Risk of Expected Rates of Return 1.9
Coefficient of variation (CV) a measure of relative variability that indicates risk per unit of return
1.00 0.80 0.60 0.40 0.20 0.00
-30%
-10%
10%
30%
Probability Distributions
Exhibit 1.4
Risky investment with ten possible rates of return
1.00 0.80 0.60 0.40 0.20 0.00
How Do We Measure The Rate Of Return On An Investment ?
People’s willingness to pay the difference for borrowing today and their desire to receive a surplus on their savings give rise to an interest rate referred to as the pure time value of money.
funds.
Measures of Historical Rates of Return
Holding Period Return 1.1
HPR EndinVg alueof Investment BeginninVgalueof Investmen
投资学英文课件-(10)【可修改文字】
(ri - rf) = i + i (rm - rf) + ei
Risk Premium Or Excess Return
Market Risk Premium or Index Risk Premium
i = the stock’s expected return ifs zero (rm - rf) = 0
GE's contribution to risk premium wGE E(rGE ) rf E(rGE ) rf
GE's contribution to variance
wGECov(rGE , rM ) Cov(rGE , rM )
9-10
Using GE Text Example Continued
9-15
Liquidity and the CAPM
• Liquidity • Illiquidity Premium • Research supports a premium for illiquidity.
– Amihud and Mendelson – Acharya and Pedersen
• CAPM holds for the overall portfolio because:
E(rP ) wk E(rk ) and
k
P wk k
k
• This also holds for the market portfolio:
E(rM ) rf M E(rM ) rf
9-12
• Market portfolio contains all securities and the proportion of each security is its market value as a percentage of total market value
The_Investment_Setting(投资分析与投资组合管理)-PPT文档资料
Computation of Holding Exhibit 1.1
Period Yield for a Portfolio
Stock A B C
Total
# Shares 100,000 200,000 500,000
Begin Price $ 10 $ 20 $ 30
Beginning Mkt. Value $ 1,000,000 $ 4,000,000 $ 15,000,000 $ 20,000,000
n
(Pi )(R i )
i 1
Risk Aversion
The assumption that most investors will choose the least risky alternative, all else being equal and that they will not accept additional risk unless they are compensated in the form of higher return
Determinants of Required Rates of Return
• Time value of money • Expected rate of inflation • Risk involved
Defining an Investment
A current commitment of $ for a period of time in order to derive future payments that will compensate for:
– the time the funds are committed – the expected rate of inflation – uncertainty of future flow of
INVESTMENTS 投资学 (博迪BODIE, KANE, MARCUS)Chap025 Diversification-PPT资料34页
is 54%.
INVESTMENTS | BODIE, KANE, MA2R5C-U2S
Background
• Clearly, U.S. stocks do not comprise a fully diversified equity portfolio.
• International investing provides greater diversification opportunities.
INVESTMENTS | BODIE, KANE, M2A5R-C1U4S
Table 25.7 Composite and Political Risk Forecasts
INVESTMENTS | BODIE, KANE, M2A5R-C1U5S
Table 25.7 Interpretation
Figure 25.4 Index Dollar Return Beta on U.S. Stocks, 2000–2009
INVESTMENTS | BODIE, KANE, M2A5R-C2U1S
Figure 25.5 Average Dollar-Denominated Excess Returns
INVESTMENTS | BODIE, KANE, M2A5R-C2U2S
Average Country-Index Returns and Capital Asset Pricing Theory
• Figure 25.5 shows a clear advantage to investing in emerging markets.
return either by investing in UK bills and
INVESTMENTS 投资学 (博迪BODIE, KANE, MARCUS)Chap020 Options Markets Introduction-PPT资料41页
Out of the Money - exercise of the option would not be profitable Call: market price < exercise price. Put: market price > exercise price.
INVESTMENTS | BODIE, KANE, M2A0R-C1U9S
Option versus Stock Investments
• Could a call option strategy be preferable to a direct stock purchase?
• Suppose you think a stock, currently selling for $100, will appreciate.
• Sellers (writers) of options receive premium income.
• If holder exercises the option, the option writer must make (call) or take (put) delivery of the underlying asset.
• Investor’s profit:
$7.00 - $4.79 = $2.21
• Holding period return = 46.1% over 44 days!
宏观经济学之投资理论Investment(精品PPT课件共30页)
This scatterplot shows that inventory investment is high in years when real GDP rises and low in years when real GDP falls.
N = ßY I = N = ßY
N是经济的存货量, I 是存货投资—是存货量的变动N
Second, there are various causes of shifts in the investment function. An improvement in the available technology raises the marginal product of capital and raises business fixed investment.
Inventory investment (存货投资) The change in the quantity of goods that firms hold in
storage, including materials and supplies, work in process (加工中的产品), and finished goods. Neoclassical model of investment
InvestmentsMBA536-25页PPT资料
Chapter 5: Introduction to Risk and Return
III. SUPPLY OF LOANABLE FUNDS A. Households are net suppliers of funds. B. The supply of funds is a function of risk and return. C. The supply of funds is also subject to investor preferences. D. Governments may also supply funds (credit or specie).
Chapter 5: Introduction to Risk and Return
V. KEY ISSUES REGARDING INTEREST RATES
A. Does US Gov’t borrowing affect rates? B. What impact do foreign rates have on domestic rates? C. What other exogenous events affect interest rates? D. Do shortages in the commodities markets affect rates?
Chapter 5: Introduction to Risk and Return
II. DEMAND FOR [LOANABLE] FUNDS A. Households
1. Consumption and saving a function of income 2. Consumption above current income levels financed with
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How Do We Measure The Rate Of
Return On An Investment ?
If the future payment from the investment is not certain, the investor will demand an interest rate that exceeds the pure time value of money plus the inflation rate to provide a risk premium to cover the investment risk.
an investment ? • How do investors measure risk related to
alternative investments ?
Chapter 1 The Investment Setting
• What factors contribute to the rates of return that investors require on alternative investments ?
1.2
Holding Period Yield
HPY = HPR - 1
1.10 - 1 = 0.10 = 10%
Measures of Historical Rates of Return
Annual Holding Period Return –Annual HPR = HPR 1/n
where n = number of years investment is held
How Do We Measure The Rate Of Return On An Investment ?
People’s willingness to pay the difference for borrowing today and their desire to receive a surplus on their savings give rise to an interest rate referred to as the pure time value of money.
Measures of Historical Rates of Return
1.5
Geometric Mean
GM HPR1n 1
where:
theproductof theannual
• What macroeconomic and microeconomic factors contribute to changes in the required rate of return for individual investments and investments in general ?
Chapter 1 The Investment Setting
Questions to be answered: • Why do individuals invest ? • What is an investment ? • How do we measure the rate of return on
Why Do Individuals Invest ?
By saving money (instead of spending it), individuals tradeoff present consumption for a larger future consumption.
How Do We Measure The Rate Of Return On An Investment ?
The pure rate of interest is the exchange rate between future consumption and present consumption. Market forces determine this rate.
$ 1 .0 0 4 % $ 1 .04
Annual Holding Period Yield –Annual HPY = Annual HPR - 1
Measures of Historical Rates of Return
1.4
Arithmetic MHPY thesumof annual holdingperiodyields
Defining an Investment
A current commitment of $ for a period of time in order to derive future payments that will compensate for:
– the time the funds are committed – the expected rate of inflation – uncertainty of future flow of
How Do We Measure The Rate Of Return On An Investment ?
If the future payment will be diminished in value because of inflation, then the investor will demand an interest rate higher than the pure time value of money to also cover the expected inflation expense.
funds.
Measures of Historical Rates of Return
Holding Period Return 1.1
HPR EndinVg aluoef Investment BeginninVgaluoef Investmen
$220 1.10 $200
Measures of Historical Rates of Return