100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Investment Management, Portfolio management, bond and stock valuation $13.77   Add to cart
Quickly navigate to
Preview
  2.  
  3. University Of Leicester (LE)
  4.  
  5. Investment Management - EC3077 (EC3077)

Class notes

Investment Management, Portfolio management, bond and stock valuation
 24 views  1 purchase
  • Course
  • Investment Management - EC3077 (EC3077)
  • Institution
  • University Of Leicester (LE)

Complete notes for the EC3077 Investment Management module. I achieved the highest overall mark, and highest exam mark for my class of ~120 students using these notes. There is no guarantee of your final mark included with the purchase of these notes however.

Preview 4 out of 75  pages

Document information

  • April 11, 2022
  • 75
  • 2020/2021
  • Class notes
  • Unknown
  • All classes

Subjects

  • bonds
  • valuation
  • portfolio management
  • security market indexes
  • stock valuation
  • arbitrage pricing theory
  • technical analysis
  • active investing
  • passive investing
  • ethics of tradin
  • efficient market hypothesis

Written for

  • University of Leicester (LE)
  • Unknown
  • Investment Management - EC3077 (EC3077)
All documents for this subject (1)

Seller

avatar-seller
stuvia48392e

Content preview

Investment Management CONTENTS


Contents

1 Valuation 2

1.1 Introduction to security valuation . . . . . . . . . . . . . . . . . . 2

1.2 Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4


2 Bonds 4

2.1 Basic Features . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.2 Bond Characteristics . . . . . . . . . . . . . . . . . . . . . . . . 5

2.3 Rates of return on bonds . . . . . . . . . . . . . . . . . . . . . . 6

2.4 Global Bond Market Structure . . . . . . . . . . . . . . . . . . . 7

2.5 Who buys bonds? . . . . . . . . . . . . . . . . . . . . . . . . . 8

2.6 Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2.7 Alternative Bond Issues . . . . . . . . . . . . . . . . . . . . . . 10


3 The Fundamentals of Bond Valuation 13

3.1 Bond Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3.2 The Yield Model . . . . . . . . . . . . . . . . . . . . . . . . . . 16

3.3 Comparing Bond Yields . . . . . . . . . . . . . . . . . . . . . . 16

3.4 What determines an interest rate? . . . . . . . . . . . . . . . . . 18

3.5 Expectations Hypothesis . . . . . . . . . . . . . . . . . . . . . . 20


Page 1

,Investment Management CONTENTS


3.6 Liquidity Preference (Term Premium) Hypothesis . . . . . . . . . . 21

3.7 Segmented Market Hypothesis . . . . . . . . . . . . . . . . . . . 22

3.8 Yield Spreads . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

3.9 What Determines the Price Volatility for Bonds? . . . . . . . . . . 23

3.10 Trading Strategies . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.11 Duration Measures and price changes . . . . . . . . . . . . . . . . 24


4 Efficient Market Hypothesis 28

4.1 Weak form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

4.2 Semi-strong form . . . . . . . . . . . . . . . . . . . . . . . . . . 30

4.3 Strong form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30


5 Portfolio Management 30

5.1 Passive Management . . . . . . . . . . . . . . . . . . . . . . . . 33

5.2 Indexing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . 33

5.3 Active Management Strategies . . . . . . . . . . . . . . . . . . . 34

5.3.1 Interest Rate Anticipation . . . . . . . . . . . . . . . . . . 34

5.4 Core-Plus Management Strategies . . . . . . . . . . . . . . . . . 36

5.5 Matched-Funding Management Strategies . . . . . . . . . . . . . . 38

5.6 Dedicated Portfolios . . . . . . . . . . . . . . . . . . . . . . . . 38




Page 2

,Investment Management CONTENTS


5.7 Immunisation Strategies . . . . . . . . . . . . . . . . . . . . . . 39


6 Security Market Indexes 41

6.1 Uses of Security-Market Indexes . . . . . . . . . . . . . . . . . . 41

6.2 Factors in Constructing Market Indexes . . . . . . . . . . . . . . . 41

6.3 Stock Market Indexes . . . . . . . . . . . . . . . . . . . . . . . 42

6.4 Value-Weighted Index . . . . . . . . . . . . . . . . . . . . . . . 43

6.5 Unweighted Index . . . . . . . . . . . . . . . . . . . . . . . . . 43

6.6 Fundamental Weighted Index . . . . . . . . . . . . . . . . . . . . 44


7 Stock Valuation 44

7.1 Why and when to use DCF . . . . . . . . . . . . . . . . . . . . . 45

7.2 Why and when to use the relative valuation techniques . . . . . . . 45

7.3 Valuation with Temporary Supernormal Growth . . . . . . . . . . 46

7.4 Relative Valuation Techniques . . . . . . . . . . . . . . . . . . . 46

7.5 Estimating the Inputs . . . . . . . . . . . . . . . . . . . . . . . 49

7.6 Estimating RR for Foreign Securities . . . . . . . . . . . . . . . . 49

7.7 Expected Growth Rates . . . . . . . . . . . . . . . . . . . . . . 50

7.8 Breakdown of ROE . . . . . . . . . . . . . . . . . . . . . . . . . 51

7.9 Estimating dividend growth for foreign stocks . . . . . . . . . . . . 52




Page 3

, Investment Management CONTENTS


7.10 Mathematical concepts . . . . . . . . . . . . . . . . . . . . . . . 52

7.11 Altman Z Score . . . . . . . . . . . . . . . . . . . . . . . . . . 53

7.12 Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 55

7.13 Dividend Valuation Model . . . . . . . . . . . . . . . . . . . . . 56


8 Arbitrage Pricing Theory 58

8.1 Microeconomics based risk factor APT model . . . . . . . . . . . . 59


9 Technical Analysis 60

9.1 Stock Market Anomalies . . . . . . . . . . . . . . . . . . . . . . 61


10 Evaluating Portfolio Performance 62

10.1 Treynor Performance Measure . . . . . . . . . . . . . . . . . . . 63

10.2 Sharpe Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

10.3 Jensen Portfolio Measure . . . . . . . . . . . . . . . . . . . . . . 64


11 Portfolio Performance 65


12 Active vs Passive 65

12.1 Active Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . 67

12.2 Fundamental Strategies . . . . . . . . . . . . . . . . . . . . . . . 67

12.3 Technical Strategies . . . . . . . . . . . . . . . . . . . . . . . . 68



Page 4

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller stuvia48392e. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $13.77. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

57727 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$13.77  1x  sold
  • (0)
  Add to cart