投资学论述题

1.Discuss the industry life cycle, how this concept can be used by security analysts. The industry life cycle transitions through start-up, consolidation, maturity and relative decline phases.

1. In start-up period, stock prices growth is rapid and increasing, and is suitable for ordinary investors but not for speculators.

2. In consolidation period, stock prices growth is stable, and is suitable for persistent investor but not for value investors.

3. In maturity period, stock prices growth is slowing, and is suitable for Income or value investors but not for persistent investor.

4. In relative decline period, stock prices growth is minimal or negative, and is suitable for speculators but not for ordinary investors .

2.With regard to semi-strong-form efficient market, what is meant by the term”anomaly”? Give three examples of market anomalies and explain why each is considered to be an anomaly?

4.Briefly describe what are the market anomalies regarding the empirical tests of semi-strong form efficient market?

Anomalies are patterns that should not exist if the market is truly efficient. Investors might be able to make abnormal profits by exploiting the anomalies, which doesn’t make sense in an efficient market.

1. The small-firm effect, average annual returns are consistently higher for small-firm portfolios, even when adjusted for risk by using the CAPM.

2. The liquidity effect, investors demand a return premium to invest in less-liquid stocks. This is related to the small-firm effect and the neglected-firm effect. These stocks tend to earn high risk-adjusted rates of return.

3. The neglected-firm effect, small firms tend to be ignored by large institutional traders and stock analysts. This lack of monitoring makes them riskier and they earn higher risk-adjusted returns.

3.Discuss what is the protective put option strategy.

The protective put, or put hedge, is a hedging strategy where the holder of a security buys a put to guard against a drop in the stock price of that security. A protective put strategy is usually employed when the options trader is still bullish on a stock he already owns but wary of uncertainties in the near term. It is used as a means to protect unrealized gains on shares from a previous purchase.

5: discuss what fundamental analysis is and what information it needs.

That is the analysis of the determinants of value such as earning prospects. Ultimately, the business success of the firm determines the dividends it can pay to shareholders and the price it will command in the stock market.

In doing fundamental analysis we need information. Such as

1. The global economy (exchange rate)

2.The domestic macroeconomy (gross domestic product, employment, unemployment rate, inflation, interest rates, budget deficit, sentiment.)

3. Enterprise quality, Political factors, Industry factors, Market factors,Investment psychological factors.

6: discuss the various forms of market efficiency. Also discuss the implications for the various forms of market efficiency for the various types of securities` analysts.

1. The weak from the efficient market hypothesis states that stock prices immediately reflect market data. Market data refers to stock prices and trading volume. Technicians attempt to predict future stock prices based on historic stock price movements. Thus, if the weak from of the EMH holds, the work of the technician is of no value.

2. The semi-strong from of the EMH states that stock prices include all public information. This public information includes market data and all other publicly available information, and all information reported in the press relevant to the firm. Thus, market information is a subset of all public information. As a result, if the semi-strong form holds, then the fundamentalist, who attempts to identify undervalued securities by analyzing public information, is unlikely to do so consistently over time. In fact, the work of the fundamentalist may make the markets even more efficient.

3. The strong form of the EMH states that all information is immediately reflected in stock prices. Public information is a subset of all information, thus if the strong form of the EMH holds, the semi-strong form must hold also. The strong form of the EMH states that even with inside information, one cannot expect to outperform the market consistently over time.