26099203 Practical Investment Management by Robert a Strong Ch01 Slides

7/28/2019 26099203 Practical Investment Management by Robert a Strong Ch01 Slides

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South-Western / Thomson Learning 2004

by

Robert A. StrongUniversity of Maine

PowerPoint Presentation

byYee-Tien Fu

National Cheng-Chi University

Taipei, Taiwan

Practical Investment Management


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CHAPTER ONE

Practical Investment Management

Robert A. Strong

THE CONCEPT OF INVESTING


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Thomson Learning/ South-Western 2004 1 - 3

Investing Defined

Investment Alternatives Assets

Securities Security Groupings

Three Reasons for Investing Income Appreciation Excitement

Outline


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The Academic Study of Investments

Theoretical Research Empirical Research Professors vs. Practitioners

Outline


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To consume, to save, or to invest

a dollar that is earned ?

Both saving and investing amount to

consumption shifting through time.

Investing Defined

However, saving involves little, if any,

risk, while investing is a riskyendeavor.


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Assets

Financial Assets Real Assetse.g. bond, stock e.g. land

Assets are things that people own.

Investment Alternatives

Financial assets have a

corresponding liability, while real

assets do not.


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Securitization is the process of converting an

asset or collection of assets into a moremarketable form.

A securityis a legal document thatshows an ownership interest.

Although securities are historically

associated with financial assets, they arealso applicable to real assets.




There are three broad categories of securities.

Securities

Equity

Securities

e.g. common

stock

Derivative

Assets

e.g. futures,

options

Fixed Income

Securities

e.g. bonds,

preferred stock




Why invest ???

Three Reasons for Investing

People invest to

supplement their income

earn capital gains Appreciation refers to an increase in the value of

an investment.

experience the excitement of the investment

process



Theoretical research involves

building mathematical models and

proposing pricing relationships

rather than studying actual market

data.E.g. arbitrage relationships, impact of stock

splits and cash dividends on investors

Theoretical models are frequently tested byconducting empirical research.




Empirical research uses actual market datarather than mathematical models.

An anomalyis an observed result that defies

explanation within the known theoreticalframework.




The investment community can learn much

from both rigorous academic research and

from the life experiences of people on the

front lines of the marketplace.


vs.

Professors Practitioners



Investing Defined

Investment Alternatives Assets

Securities Security Groupings

Three Reasons for Investing Income Appreciation Excitement

Review


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26099203 Practical Investment Management by Robert a Strong Ch01 Slides