Summary of the learning material Alternative Investments
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Summary Alternative Investments
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alternative investments HC1
Financial assets are claims to the income generated
by real assets.
What is productive capacity a function of?
Real assets (land, building, machines etc)
How do governments finance their activities?
What are characteristics of equity?
1) Ownership share in corporation
2) Income determined by dividends or by increase/decrease stock price
3) Tend to be riskier than debt securities
What is available on the primary market?
1) Newly issued securities
2) Stocks ; IPO, Seasoned/secondary equity offering
3) Investment bankers and underwriting
4) Underpricing
What does the Firm-Foundation theory mean? Name 4 characteristics
1) Intrinsic value (IV)
2) Present and past conditions, and future prospects
3) When market price < IV then buy, otherwise sell
4) Difficult to correctly assess IV
What does the Castle-In-The-Air Theory mean? Name 3 characteristics
1) Behaviour of investors
2) When E(future price) > current price then buy, otherwise sell
3) Difficult to assess the behaviour
How do you measure stock return?
Rt = 100 * ((Divt +Pt -P(t-1))/P(t-1))
Alternative Investment HC2
What is the weak form of EMH?
Security prices reflect all price history information
Name 4 ways to measure the performance of an investment?
Comparison against a static strategy
Using asset pricing model
strategy, benchmark, ratio
factor, return, portfolio
currency, interest, distribution
project, investment, market
companies, investment, investors
shares, funds, fund
fee, funds, incentive
return, portfolio, 2001