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Equity Markets and Portfolio Analysis

Book Description

Understand today's investment challenges and the role of the Bloomberg system

In recent years, changes have swept through the investment industry like wildfire. Academia has followed along and provided new lenses for viewing this transformation, as well as new strategies for gaining a true understanding and knowledge of investment and financial markets. Now, Equity Markets and Portfolio Analysis has been created to further inform investment professionals and finance students on the basic concepts and strategies of investments, and to provide more detailed discussions on advanced strategies and models. The concepts covered in this book will help readers gain a better understanding of the markets and uses for an increasing number of securities, strategies, and methodologies.

Equity Markets and Portfolio Analysis is the only core investment book that covers the functionality of Bloomberg terminals, increasingly critical tools both in the classroom and on the trading floor. As Bloomberg terminals now play a key role in the research, teaching, and managing of student investment funds, understanding the system's information and analytical functions has become more important than ever.

  • In-depth coverage of fundamentals through more detailed concepts for students and professionals who want to better understand the evaluation, selection, and management of securities

  • One-of-a-kind training and instructional course, introduction to Bloomberg investment subjects, and reference for CFA preparation

  • Bloomberg material provided in an appendix accompanying each chapter, a useful option for professors

  • Ideal for finance practitioners, investment bankers, and academics

  • This unique resource will give readers both the foundational knowledge and the analytical tools necessary for investment success, both in the classroom and in the real world.

    Table of Contents

    1. Preface
      1. Content
    2. Acknowledgments
    3. CHAPTER 1 Overview of the Financial System
      1. Real and Financial Assets
      2. Types of Equity Claims
      3. Types of Debt Claims
      4. Financial Markets
      5. Types of Financial Markets
      6. Regulations
      7. Efficient Financial Markets
      8. Characteristics of Assets
      9. Conclusion
      10. Web Site Information
      11. Notes
      12. Selected References
    4. CHAPTER 2 Overview and Guide to the Bloomberg System
      1. Introduction
      2. Bloomberg System—Bloomberg Keyboard
      3. Accessing Some of the Information Discussed in Chapter 1
      4. Indexes
      5. Functionality
      6. Economic, Industry, Law, and Municipal Information Screens
      7. Monitor and Portal Screens
      8. Portfolios and Baskets
      9. Screening and Search Functions
      10. The Bloomberg Excel Add-In: Importing Bloomberg into Excel
      11. Launchpad
      12. Other Bloomberg Functions
      13. Conclusion
      14. Bloomberg Exercises
    5. CHAPTER 3 Stock and Bond Valuation and Return
      1. Introduction
      2. Rate of Return
      3. Future and Present Values
      4. Bond Valuation
      5. The Yield to Maturity and Other Rates of Return Measures for Bonds
      6. Total Return
      7. Spot Rates and Equilibrium Prices
      8. Geometric Mean
      9. Stock Valuation and Return
      10. Fundamental Stock Valuation
      11. Two-Stage and Three-Stage Growth Models
      12. The Bloomberg Three-Stage Growth Model—DDM
      13. Valuation of Preferred Stock
      14. Conclusion
      15. Web Site Information
      16. Notes
      17. Selected References
      18. Bloomberg Exercises
    6. CHAPTER 4 Equity Securities, Markets, and Trading
      1. Introduction
      2. Types of Equity Securities
      3. How Stocks and other Securities are Traded—Primary Market
      4. The Markets for Existing Securities
      5. Convergences of Organized Exchanges, the OTC Market, and the Electronic Communications Networks
      6. Trading Securities in the Market
      7. Types of Transactions
      8. Types of Orders
      9. Cost of Trading
      10. Conclusion
      11. Web Site Information
      12. Notes
      13. Selected References
      14. Bloomberg Exercises
    7. CHAPTER 5 Investment Funds, Intermediate Securities, and Global Equity Markets
      1. Introduction
      2. Investment Funds
      3. Exchange-Traded Funds
      4. Other Investment-Type Funds and Securities
      5. Insurance Companies, Pension Funds, and Investment Banks
      6. Financial Service Industry, the 2008 Financial Crisis, and Regulations
      7. Global Equity Markets and Exchanges
      8. Conclusion
      9. Web Site Information
      10. Notes
      11. Selected References
      12. Bloomberg Exercises
    8. CHAPTER 6 Expected Rate of Return and Risk—Stock
      1. Introduction
      2. Risk-Free Security, Nominal Rates, and Real Rates
      3. Stock Risk: Firm, Industry, and Market Risk
      4. Statistical Measurements of Expected Return and Risk
      5. Parameter Estimates: Historical Averages
      6. Parameter Estimates: Regression
      7. Relationship between Return and Risk
      8. Conclusion
      9. Web Site Information
      10. Notes
      11. Selected References
      12. Bloomberg Exercises
    9. CHAPTER 7 Portfolio Evaluation
      1. Introduction
      2. Portfolio Return and Risk
      3. Portfolio Risk and Size Relation
      4. Return and Risk of a Portfolio of Risky Stocks and a Risk-Free Security
      5. Portfolio Performance Evaluation Using Bloomberg
      6. Conclusion
      7. Web Site Information
      8. Selected References
      9. Bloomberg Exercises
    10. CHAPTER 8 Portfolio Selection— Markowitz Model
      1. Introduction
      2. Two-Security Portfolio Return-Risk Relation
      3. Markowitz Portfolio Selection
      4. Efficiency Frontier
      5. Single-Index Model
      6. Elton, Gruber, and Padberg
      7. Multi-Index Models
      8. Conclusion
      9. Notes
      10. Selected References
      11. Bloomberg Exercises
    11. CHAPTER 9 The Capital Asset Pricing Model
      1. Introduction
      2. Overview
      3. Derivation of the CAPM
      4. Empirical Tests of the CAPM
      5. Application of CAPM: Wells Fargo Stock Selection Approach
      6. Conclusion
      7. Notes
      8. Selected References
      9. Bloomberg Exercises
    12. CHAPTER 10 The Arbitrage Pricing Theory
      1. Introduction
      2. Derivation of the Model
      3. Empirical Tests of the APT
      4. Application of APT: Factor Models
      5. Conclusion
      6. Notes
      7. Selected References
      8. Bloomberg Exercises
    13. CHAPTER 11 The Financial Anatomy of a Company—Fundamental Analysis
      1. Introduction
      2. Stock Value
      3. Equity Valuation of a Firm
      4. Capital Structure
      5. Corporate Investments
      6. Mergers and Acquisitions
      7. Conclusion
      8. Notes
      9. Selected References
      10. Bloomberg Exercises
    14. CHAPTER 12 Applied Fundamental Analysis
      1. Introduction
      2. Valuation Using the Multiplier Approach
      3. Valuation Using the Discounted-Cash Flow Model and Bloomberg's DDM Model
      4. Growth Duration Model
      5. Economic Value Added
      6. Relative Analysis
      7. Qualitative Analysis
      8. When to Sell
      9. Conclusion
      10. Web Site Information
      11. Selected References
      12. Bloomberg Exercises
    15. CHAPTER 13 Market and Industrial Analysis: Top-Down Approach
      1. Introduction
      2. Macroeconomic Environment
      3. Business Fluctuations: Overshooting, Corrections, and Financial Crisis
      4. Economic Indicators
      5. Industry Analysis
      6. Aggregate Stock Market Analysis and Valuation
      7. Industry Analysis and Valuation
      8. Top-Down Portfolio Management
      9. Conclusion
      10. Web Site Information
      11. Notes
      12. Selected References
      13. Bloomberg Exercises
    16. CHAPTER 14 Technical Analysis
      1. Introduction
      2. Price Trends
      3. Price Trends Combined with Volume and Moving Averages
      4. Market and Stock Metrics
      5. Technical Analysis of Other Markets and Portfolios
      6. Behavioral Finance
      7. Conclusion
      8. Web Site Information
      9. Notes
      10. Selected References
      11. Bloomberg Exercises
    17. CHAPTER 15 Efficient Markets
      1. Introduction
      2. Efficient Market Theory
      3. Studies of the Weak-Form Hypothesis
      4. Studies of the Semi-Strong-Form Hypothesis
      5. Studies of the Strong-Form Hypothesis
      6. Conclusions on the Strong-Form Efficient Markets
      7. Portfolios Revisited: Equity Style Portfolios
      8. Conclusion
      9. Notes
      10. Selected References
      11. Bloomberg Exercises
    18. CHAPTER 16 Options Markets
      1. Introduction: Short History of the Derivative Market
      2. Option Strategies
      3. Fundamental Option Strategies
      4. Other Option Strategies
      5. Option Price Relations
      6. Option Exchanges
      7. Stock Index Options
      8. Black-Scholes Option Pricing Model
      9. Conclusion
      10. Web Site Information
      11. Notes
      12. Selected References
      13. Bloomberg Exercises
    19. CHAPTER 17 Futures Markets
      1. Introduction
      2. The Nature of Futures Trading and the Role of the Clearinghouse
      3. The Market and Characteristics of Futures Contracts
      4. Equity Index Futures
      5. Pricing Futures and Forward Contracts: Carrying-Cost Model
      6. Options on Futures Contracts
      7. Conclusion
      8. Web Site Information
      9. Notes
      10. Selected References
      11. Bloomberg Exercises
    20. Index
    21. End User License Agreement