This is not a simple course. In this document, I have summarized the entire course material as well as provided small additional information to help you further your understanding and score higher on tests and exams. I highly recommend printing and binding these notes, then taking them to lectures ...
→ Asset allocation decision: Choosing between broad asset classes
→ Security selection decision: Choosing which securities to hold within the classes
,LECTURE NOTES - WEEK 1
TOP-DOWN APPROACH
→ The top-down approach to investing focuses on the big picture, or how the overall economy
and macroeconomic factors drive the markets and stock prices
→ Also looks at the performance of sectors or industries
→ The top-down approach is easier for investors who are less experienced and for those who
don't have the time to analyse a company's financials
BOTTOM-UP APPROACH
→ Focuses on how an individual company in a sector performs compared to specific companies
within the sector.
→ Utilizes financial ratios and examines cash flows
→ Bottom-up investing can help investors pick quality stocks that outperform the market even
during periods of decline
MARKETS
→ Risk-return trade-off: As the level of risk increases, so should the rate of return on an
investment
→ Efficient markets: Security prices adjust in response to new information in order to reflect the
market consensus estimate of the security's value
→ Passive management: Attempts to replicate the performance of a specific benchmark or index
→ Active management: Requires frequent buying and selling in order to outperform a specific
benchmark or index (higher risk and larger fees)
THE PLAYERS
→ Firms: Net demanders of capital (raise capital to pay for investments)
→ Households: Net suppliers of capital (purchase securities)
→ Governments: Borrowers or lenders depending on the relationship between tax revenue and
government expenditure
→ Financial intermediaries: Bring suppliers and demanders of capital together
→ Investment companies: Invest the pooled capital of investors in financial securities
→ Hedge funds: Only open to institutional investors
→ Investment bankers: Advise corporations on the prices it can charge for securities issued &
appropriate interest rates, deals in primary market (IPOs)
→ Venture capital: investments in start-up companies
, LECTURE NOTES - WEEK 1
→ Private equity: Investments in firms that do not trade publicly
→ Cryptocurrency: A digital currency designed to work as a medium of exchange through a
computer network that is not reliant on any central authority to uphold it
→ Blockchain: A system in which a record of transactions made in cryptocurrency are maintained
across several computer that are linked in a peer-to-peer network
2008/2009 FINANCIAL CRISIS
→ Begun with the housing market bubble, which was caused by an overabundance of mortgage-
backed securities that bundled high-risk loans
→ Reckless lending resulted in an unprecedented number of loans defaulting, resulting in losses
that caused financial institutions to fail
→ Demonstrated the importance of systemic risk
The benefits of buying summaries with Stuvia:
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
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
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 jasonalperstein. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.75. You're not tied to anything after your purchase.
