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| Background | |
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| Understanding Investments | |
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| The Purpose of this Textbook | |
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| The Nature of Investments | |
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| Some Definitions | |
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| Investing as a Part of Personal Financial Planning | |
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| Why Do We Invest? | |
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| The Importance of Studying Investments | |
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| Understanding the Investment Decision Process | |
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| The Basis of Investment Decisions | |
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| The Expected Risk-Return Trade-Off | |
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| Structuring the Decision Process | |
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| Important Considerations in the Investment Decision Process | |
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| The Great Unknown | |
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| The Global Investments Arena | |
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| The New Economy versus The Old Economy | |
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| The Rise of the Internet | |
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| Institutional Investors | |
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| The Issue of Market Efficiency | |
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| Corporate Governance | |
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| Professional Educational Alternatives | |
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| The Canadian Securities Course (CSC) | |
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| The Chartered Financial Analyst Program | |
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| Investment Alternatives | |
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| Organizing Financial Assets | |
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| An International Perspective | |
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| Non-Marketable Financial Assets | |
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| Money Market Securites | |
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| Capital Market Securites | |
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| Fixed-Income Securities | |
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| Asset-Backed Securities | |
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| Equity Securities | |
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| Derivative Securites | |
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| Options | |
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| Futures Contracts | |
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| Taxation of Investment Income in Canada | |
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| Investment Funds | |
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| Investing Indirectly | |
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| Investing Indirectly through Investment Funds | |
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| What Is an Investment Fund? | |
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| Types of Investment Funds Unit Investment Trust | |
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| Closed-End Investment Funds | |
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| Open-End Investment Funds (Mutual Funds) | |
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| Major Types of Mutual Funds | |
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| Money Market Funds | |
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| Equity and Bond & Income Funds | |
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| Indirect Investment Transactions | |
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| Closed-End Funds | |
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| Mutual Funds | |
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| Exchange-Traded Funds (ETFs) | |
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| Distinguishing among ETFs, Closed-End Funds, and Mutual Funds | |
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| Segregated Funds | |
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| Labour Sponsored Venture Capital Corporations (LSVCCs) | |
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| Investment Funds and Performance | |
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| Benchmarks | |
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| How Important Are Expenses? | |
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| Mutual Fund Ratings | |
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| Consistency of Performance | |
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| Investing Internationally through Investment Funds | |
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| New Developments in International Investing | |
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| The Future of Indirect Investing | |
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| Securities Markets | |
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| The Importance of Financial Markets | |
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| The Primary Markets | |
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| Investment Dealers | |
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| The Underwriting Process | |
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| The Prompt Offering Qualification (POP) System | |
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| The Listing Process | |
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| Global Security Issues | |
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| Private Placements | |
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| The Secondary Markets | |
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| Equity Securities - Auction Markets | |
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| Equity Securities - Negotiated Markets | |
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| The Third and Fourth Markets | |
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| After-Hours Trading | |
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| In-House Trading | |
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| Comparison of International Equity Markets | |
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| Stock Market Indicators | |
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| Bond Markets | |
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| Derivatives Markets | |
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| The Changing Securites | |
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| The Globalization of Securities Markets | |
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| Stock Market Indexes | |
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| How Securities are Traded | |
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| Brokerage Transactions | |
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| Brokerage Firms | |
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| Stockbrokers or Financial Consultants? | |
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| Types of Brokerage Accounts | |
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| Commissions | |
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| Electronic Trading and the Internet | |
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| Investing without a Broker | |
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| How Orders Work | |
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| Orders on the Organized Exchanges | |
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| Orders in the Over-the-Counter Market | |
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| Types of Orders | |
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| Clearing Procedures | |
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| Investor Protection in the Securities Markets | |
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| The Canadian Regulatory Environment | |
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| Margin | |
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| Short Sales | |
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| Trading on the NYSE | |
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| Securites Regulation in the United States | |
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| The Returns and Risks from Investing | |
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| Return | |
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| The Components of Return | |
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| Risk | |
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| Sources of Risk | |
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| Types of Risk | |
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| Measuring Returns | |
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| Total Return | |
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| Return Relative | |
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| Cumulative Wealth Index | |
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| International Returns | |
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| Summary Statistics for Returns | |
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| Measuring Risk | |
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| Standard Deviation | |
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| Risk Premiums | |
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| Realized Returns and Risks from Investing | |
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| Total Returns and Standard Deviations | |
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| Cumulative Wealth Indexes | |
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| Important Investment Concepts | |
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| Expected Return and Risk | |
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| Future Return and Risk | |
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| Estimating Security Return and Risk | |
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| Dealing with Uncertainty | |
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| Calculating Expected Return | |
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| Calculating Risk | |
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| Portfolio Return and Risk | |
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| Portfolio Expected Return | |
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| Portfolio Risk | |
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| Analyzing Portfolio Risk | |
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| Risk Reduction in Stock Portfolios | |
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| Diversification | |
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| Markowitz Diversification | |
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| Measuring Co-Movements in Security Returns | |
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| The Correlation Coefficient | |
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| Covariance | |
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| Calculating the Portfolio Risk | |
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| The Two-Security Case | |
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| The n-Security Case | |
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| Simplifying the Markowitz Calculations | |
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| The Single-Index Model | |
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| Portfolio Selection | |
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| Introducing Riskless Assets | |
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| Building a Portfolio | |
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| Step 1: Use the Markowitz Portfolio Selection Model | |
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| Efficient Portfolios | |
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| Selecting an Optimal Portfolio of Risky Assets | |
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| Alternative Methods of Obtaining the Efficient Frontier | |
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| Selecting Optimal Asset Classes | |
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| Step 2: Consider Borrowing and Lending Possibilities | |
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| Risk-Free Borrowing and Lending | |
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| The New Efficient Set | |
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| Step 3: Choose the Final Portfolio Based on Preferences | |
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| The Separation Theorem | |
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| The Implications of Portfolio Selection | |
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| Systematic and Non-Systematic Risk | |
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| Modern Portfolio Theory and the Portfolio Management Process | |
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| Capital Market Theory | |
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| Introduction to Capital Market Theory | |
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| The Assumptions of the CAPM | |
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| Equilibrium in the Capital Markets | |
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| The Market Portfolio | |
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| The Importance of the Market Portfolio | |
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| Composition of the Market Portfolio | |
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| The Equilibrium Risk - Return Trade-Off | |
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| The Capital Market Line | |
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| The Security Market Line | |
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| Estimating the SML | |
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| Estimating Beta | |
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| Tests of the CAPM | |
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| The Fama and French Studies | |
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| Difficulties in Testing the CAPM | |
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| Arbitrage Pricing Theory | |
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| Understanding the APT Model | |
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| Using APT in Investment Decisions | |
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| Some Conclusions about Asset Pricing | |
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| Market Efficiency | |
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| The Concept of an Efficient Market | |
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| What is an Efficient Market? | |
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| Why the Market Can Be Expected to Be Efficient | |
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| Forms of Market Efficiency | |
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| Evidence on Market Efficiency | |
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| Weak-Form Evidence | |
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| Semi-Strong-Form Evidence | |
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| Strong-Form Evidence | |
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| Implications of the Efficient Market Hypothesis | |
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| For Technical Analysis | |
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| For Fundamental Analysis | |
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| For Money Management | |
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| Evidence of Market Anomalies | |
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| Momentum in Stock Returns | |
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| Earnings Announcements | |
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| Value Stocks | |
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| The Size Effect | |
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| Seasonality in Stock Returns | |
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| The Value Line Ranking System | |
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| Other Anomalies | |
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| Some Conclusions about Market Efficiency | |
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| Fixed-Income Securities: Analysis, Valuation, and Management | |
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| Bond Yields and Prices | |
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| Bond Prices | |
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| The Valuation Principle | |
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| Bond Valuation | |
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| Bond Yields | |
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| The Basic Components of Interest Rates | |
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| Measuring Bond Yields | |
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| Bond Price Changes | |
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| Bond Price Changes Over Time | |
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| Bond Price Changes as a Result of Interest Rate Changes | |
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| Measuring Bond Price Volatility: Duration | |
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| Treasury Bill Yields and Prices | |
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| Effective Duration and Effective Convexity | |
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| Convertible Bonds | |
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| Bonds: Analysis and Strategy | |
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| Why Buy Bonds? | |
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| Buying Foreign Bonds | |
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| Important Considerations in Managing a Bond Portfolio | |
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| Understanding the Bond Market | |
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| The Term Structure of Interest Rates | |
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| The Risk Structure of Interest Rates - Yield Spread | |
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| Bond Strategies | |
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| Passive Management Strategies | |
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| Active Management Strategies | |
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| Immunization - A Hybrid Strategy | |
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| Building a Fixed-Income Portfolio | |
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| Conservative Investors | |
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| Aggressive Investors | |
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| The International Perspective | |
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| Common Stocks: Analysis, Valuation, and Management | |
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| Common Stock Valuation | |
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| The Present Value Approach | |
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| The Required Rate of Return | |
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| The Expected Cash Flows | |
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| The Dividend Discount Model | |
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| The Multiple-Growth Case | |
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| Dividends, Dividends - What about Capital Gains? | |
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| Intrinsic Value | |
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| The Dividend Discount Model in Practice | |
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| Relative Valuation Approaches | |
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| The P/E Ratio Approach | |
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| Market-to-Book Ratio (M/B) | |
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| Price/Sales Ratio (P/S) | |
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| Other Relative Valuation Approaches | |
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| Other Valuation Issues | |
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| Economic Value Added | |
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| Market Value Added | |
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| Which Valuation Method to Use? | |
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| Bursting the Bubble of New Economy Stocks - A Lesson in Valuation | |
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| Some Final Thoughts on Valuation | |
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| The Analysis and Valuation of Preferred Stock | |
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| The Free Cash Flow Valuation Approach | |
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| Common Stocks: Analysis and Strategy | |
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| Taking a Global Perspective | |
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| Some Important Issues Involving Common Stocks | |
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| The Impact of the Overall Market on Individual Stocks | |
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| The Required Rate of Return | |
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| Building Stock Portfolios | |
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| The Passive Strategy | |
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| Buy-and-Hold Strategy | |
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| Index Funds and Exchange-Traded Funds | |
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| The Active Strategy | |
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| Security Selection | |
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| Sector Rotation | |
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| Market Timing | |
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| Efficient Markets and Active Strategies | |
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| Ways of Analyzing and Selecting Stocks | |
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| Technical Analysis | |
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| Fundamental Analysis | |
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| Efficient Market and Behavioural Finance | |
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| A Framework for Fundamental Analysis | |
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| Bottom-Up Fundamental Analysis | |
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| Top-Down Fundamental Analysis | |
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| The Framework for Fundamental Analysis in Perspective | |
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| Security Analysis | |
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| Analysis of The Economy and The Stock Market | |
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| The Economy and the Stock Market | |
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| Taking a Global Perspective | |
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| Measures of Economic Activity | |
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| The Business Cycle | |
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| Other Factors Affecting the Aggregate Economy | |
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| The Relationship between the Bond Market and the Stock Market | |
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| Macroeconomic Forecasts of the Economy | |
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| Understanding the Stock Market | |
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| What Do We Mean by the Market? | |
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| The Determinants of Stock Prices | |
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| Valuing the Market | |
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| The Earnings Stream | |
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| The Multiplier | |
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| Putting the Two Together | |
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| Forecasting Changes in the Market | |
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| Using the Business Cycle to Make Market Forecasts | |
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| Using Key Variables to Make Market Forecasts | |
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| Using Valuation Models to Make Market Forecasts | |
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| Industry Analysis | |
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| The Importance of Industry Analysis | |
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| Performance of Industries Over Time | |
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| What Is an Industry? | |
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| Classifying Industries | |
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| Analyzing Industries | |
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| The Industry Life Cycle | |
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| Qualitative Aspects of Industry Analysis | |
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| Industry Rotation | |
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| Evaluating Future Industry Prospects | |
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| Assessing Longer-Term Prospects | |
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| Picking Industries for Next Year | |
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| Business Cycle Analysis | |
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| Company Analysis | |
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| Fundamental Analysis | |
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| The Accounting Aspects of Earnings | |
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| The Financial Statements | |
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| The Problem with Reported Earnings | |
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| The Global Arena - International Accounting | |
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| Analyzing a Company's Profitability | |
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| Analyzing Return on Equity (ROE) | |
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| Estimating the Internal (Sustainable) Growth Rate | |
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| Earnings Estimates | |
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| A Forecast of EPS | |
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| The Accuracy of Earnings Forecasts | |
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| Earnings Surprises | |
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| The Earnings Game | |
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| Useful Information for Investors about Earnings Estimates | |
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| Sales Growth - An Alternative to Earnings | |
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| The P/E Ratio | |
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| Determinants of the P/E Ratio | |
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| Why P/E Ratios Vary among Companies | |
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| Fundamental Security Analysis in Practice | |
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| Putting All the Pieces Together | |
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| Financial Ratio Analysis: An Overview | |
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| Technical Analysis | |
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| Introduction | |
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| What Is Technical Analysis? | |
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| A Framework for Technical Analysis | |
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| Stock Price and Volume Techniques | |
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| The Dow Theory | |
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| Charts of Price Patterns | |
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| Moving Averages | |
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| Relative Strength | |
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| Obtaining Charts to Use in Technical Analysis | |
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| Technical Indicators | |
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| Breadth Indicators | |
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| Sentiment Indicators | |
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| Testing Technical Analysis Strategies | |
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| Some Conclusions about Technical Analysis | |
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| Derivative Securities | |
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| Options | |
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| Introduction | |
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| Options | |
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| Why Options Markets? | |
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| Understanding Options | |
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| Options Terminology | |
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| How Options Work | |
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| The Mechanics of Trading | |
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| Some Basic Options Characteristics | |
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| In the Money, At the Money, and Out of the Money | |
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| Intrinsic Values | |
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| Payoffs and Profits from Basic Option Positions | |
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| Calls | |
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| Puts | |
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| Some Observations on Buying and Selling Options | |
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| Some Basic Options Strategies | |
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| Covered Calls | |
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| Protective Puts | |
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| Portfolio Insurance | |
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| Option Valuation | |
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| A General Framework | |
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| Time Values | |
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| Boundaries on Option Prices | |
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| The Black-Scholes Model | |
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| Put Option Valuation | |
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| Summarizing the Factors Affecting Options Prices | |
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| Hedge Ratios | |
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| Using the Black-Scholes Model | |
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| An Investor's Perspective on Puts and Calls | |
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| What Puts and Calls Mean to Investors | |
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| The Evolutionary Use of Options | |
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| Other Types of Options | |
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| The Basics of Stock-Index Options | |
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| Strategies with Stock-Index Options | |
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| The Popularity of Stock-Index Options | |
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| Spreads and Combinations | |
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| Rights and Warrants | |
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| Put-Call Parity: The No-Arbitrage Argument | |
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| Futures | |
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| Introduction | |
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| Understanding Futures Markets | |
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| Why Futures Markets? | |
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| Current Futures Markets | |
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| International Futures Markets | |
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| Futures Contracts | |
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| The Structure of Futures Markets | |
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| Futures Exchanges | |
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| The Clearing Corporation | |
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| The Mechanics of Trading | |
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| Basic Procedures | |
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| Margin | |
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| Using Futures Contracts | |
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| Hedgers | |
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| How to Hedge with Futures | |
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| Speculators | |
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| Financial Futures | |
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| Interest Rate Futures | |
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| Stock-Index Futures | |
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| Speculating with Stock-Index Futures | |
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| Conclusion | |
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| Futures Options | |
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| Other Derivative Securities | |
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| Investment Management | |
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| Portfolio Management | |
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| Portfolio Management as a Process | |
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| Individual Versus Institutional Investors | |
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| Formulate an Appropriate Investment Policy | |
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| Objectives | |
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| Constraints and Preferences | |
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| Determine and Quantify Capital Market Expectations | |
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| Forming Expectations | |
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| Rate of Return Assumptions | |
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| Constructing the Portfolio | |
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| Asset Allocation | |
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| Portfolio Optimization | |
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| Monitor Market Conditions and Investor Circumstances | |
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| Monitoring Market Conditions | |
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| Changes in Investor's Circumstances | |
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| Make Portfolio Adjustments as Necessary | |
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| Performance Measurement | |
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| Illustrative Examples | |
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| Evaluation of Investment Performance | |
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| The Bottom Line | |
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| Framework for Evaluating Portfolio Performance | |
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| Differential Risk Levels | |
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| Differential Time Periods | |
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| Appropriate Benchmarks | |
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| Constraints on Portfolio Managers | |
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| Other Considerations | |
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| CFA Institute's Global Investment Performance Standards (GIPS�) | |
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| Return and Risk Considerations | |
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| Measures of Return | |
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| Risk Measures | |
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| Risk-Adjusted Measures of Performance | |
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| The Sharpe Performance Measure | |
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| The Treynor Performance Measure | |
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| Jensen's Differential Return Measure | |
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| Problems with Portfolio Measurement | |
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| Other Issues in Performance Evaluation | |
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| Monitoring Performance | |
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| Performance Attribution | |
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| Can Performance Be Predicted? | |
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| Appendix: Tables | |