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• Front Matter
  • Half Title
  • The McGraw Hill Series in Finance, Insurance, and Real Estate
    • Financial Management
    • Investments
    • Financial Institutions and Markets
    • International Finance
    • Real Estate
    • Financial Planning and Insurance
  • Titlepage
  • Copyright
  • About the Authors
    • ZVI BODIE
    • ALEX KANE
    • ALAN J. MARCUS
  • Brief Contents
  • Contents
  • Preface
    • UNDERLYING PHILOSOPHY
    • NEW IN THE THIRTEENTH EDITION
    • ORGANIZATION AND CONTENT
  • Distinctive Features
  • Connect
    • Instructors Student Success Starts with You
    • Students Get Learning That Fits You
  • Supplements
    • INSTRUCTOR LIBRARY
    • STUDENT STUDY CENTER
    • STUDENT PROGRESS TRACKING
    • MCGRAW HILL CUSTOMER CARE CONTACT INFORMATION
  • Acknowledgments
• Chapter 1: The Investment Environment
  • Introduction
  • 1.1: Real Assets versus Financial Assets
  • 1.2: Financial Assets
  • 1.3: Financial Markets and the Economy
    • The Informational Role of Financial Markets
    • Consumption Timing
    • Allocation of Risk
    • Separation of Ownership and Management
    • Corporate Governance and Corporate Ethics
  • 1.4: The Investment Process
  • 1.5: Markets Are Competitive
    • The Risk–Return Trade-Off
    • Efficient Markets
  • 1.6: The Players
    • Financial Intermediaries
    • Investment Bankers
    • Venture Capital and Private Equity
    • Fintech, Financial Innovation and Decentralized Finance
  • 1.7: The Financial Crisis of 2008–2009
    • Antecedents of the Crisis
    • Changes in Housing Finance
    • Mortgage Derivatives
    • Credit Default Swaps
    • The Rise of Systemic Risk
    • The Shoe Drops
    • The Dodd–Frank Reform Act
  • 1.8: Outline of the Text
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 2: Asset Classes and Financial Instruments
  • Introduction
  • 2.1: The Money Market
    • Treasury Bills
    • Certificates of Deposit
    • Commercial Paper
    • Bankers’ Acceptances
    • Eurodollars
    • Repos and Reverses
    • Federal Funds
    • Brokers’ Calls
    • LIBOR, SOFR, and SONIA
    • Yields on Money Market Instruments
    • Money Market Funds
  • 2.2: The Bond Market
    • Treasury Notes and Bonds
    • Inflation-Protected Treasury Bonds
    • Federal Agency Debt
    • International Bonds
    • Municipal Bonds
    • Corporate Bonds
    • Mortgage and Asset-Backed Securities
  • 2.3: Equity Securities
    • Common Stock as Ownership Shares
    • Characteristics of Common Stock
    • Stock Market Listings
    • Preferred Stock
    • Depositary Receipts
  • 2.4: Stock and Bond Market Indexes
    • Stock Market Indexes
    • Dow Jones Industrial Average
    • The Standard & Poor’s 500 Index
    • Russell Indexes
    • Other U.S. Market-Value Indexes
    • Equally Weighted Indexes
    • Foreign and International Stock Market Indexes
    • Bond Market Indicators
  • 2.5: Derivative Markets
    • Options
    • Futures Contracts
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 3: How Securities Are Traded
  • Introduction
  • 3.1: How Firms Issue Securities
    • Privately Held Firms
    • Publicly Traded Companies
    • Shelf Registration
    • Initial Public Offerings
    • SPACs versus Traditional IPOs
  • 3.2: How Securities Are Traded
    • Types of Markets
    • Types of Orders
    • Trading Mechanisms
  • 3.3: The Rise of Electronic Trading
  • 3.4: U.S. Markets
    • NASDAQ
    • The New York Stock Exchange
    • ECNs
  • 3.5: New Trading Strategies
    • Algorithmic Trading
    • High-Frequency Trading
    • Dark Pools
    • Internalization
    • Bond Trading
  • 3.6: Globalization of Stock Markets
  • 3.7: Trading Costs
  • 3.8: Buying on Margin
  • 3.9: Short Sales
  • 3.10: Regulation of Securities Markets
    • Self-Regulation
    • The Sarbanes-Oxley Act
    • Insider Trading
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 4: Mutual Funds and Other Investment Companies
  • Introduction
  • 4.1: Investment Companies
  • 4.2: Types of Investment Companies
    • Unit Investment Trusts
    • Managed Investment Companies
    • Exchange-Traded Funds
    • Other Investment Organizations
  • 4.3: Mutual Funds
    • Investment Policies
    • How Funds Are Sold
  • 4.4: Costs of Investing in Mutual Funds
    • Fee Structure
    • Fees and Mutual Fund Returns
  • 4.5 Taxation of Mutual Fund Income
  • 4.6 Exchange-Traded Funds
  • 4.7 Mutual Fund Investment Performance: A First Look
  • 4.8 Information on Mutual Funds
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 5: Risk, Return, and the Historical Record
  • Introduction
  • 5.1: Measuring Returns over Different Holding Periods
    • Annual Percentage Rates
    • Continuous Compounding
  • 5.2 Interest Rates and Inflation Rates
    • Real and Nominal Rates of Interest
    • The Equilibrium Real Rate of Interest
    • Interest Rates and Inflation
    • Taxes and the Real Rate of Interest
    • Treasury Bills and Inflation, 1926–2021
  • 5.3 Risk and Risk Premiums
    • Holding-Period Returns
    • Expected Return and Standard Deviation
    • Excess Returns and Risk Premiums
    • The Reward-to-Volatility (Sharpe) Ratio
  • 5.4 The Normal Distribution
  • 5.5 Deviations from Normality and Tail Risk
    • Value at Risk
    • Expected Shortfall
    • Lower Partial Standard Deviation and the Sortino Ratio
    • Relative Frequency of Large, Negative 3-Sigma Returns
  • 5.6 Learning from Historical Returns
    • Time Series versus Scenario Analysis
    • Expected Returns and the Arithmetic Average
    • The Geometric (Time-Weighted) Average Return
    • Estimating Variance and Standard Deviation
    • Mean and Standard Deviation Estimates from Higher-Frequency Observations
  • 5.7 Historic Returns on Risky Portfolios
    • A Global View of the Historical Record
  • 5.8 Normality and Long-Term Investments
    • Short-Run versus Long-Run Risk
    • Forecasts for the Long Haul
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 6: Capital Allocation to Risky Assets
  • Introduction
  • 6.1: Risk and Risk Aversion
    • Risk, Speculation, and Gambling
    • Risk Aversion and Utility Values
    • Estimating Risk Aversion
  • 6.2: Capital Allocation across Risky and Risk-Free Portfolios
  • 6.3: The Risk-Free Asset
  • 6.4: Portfolios of One Risky Asset and a Risk-Free Asset
  • 6.5: Risk Tolerance and Asset Allocation
    • Non-normal Returns
  • 6.6: Passive Strategies: The Capital Market Line
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
  • Appendix A: Risk Aversion, Expected Utility, and the St. Petersburg Paradox
  • Problems: Appendix A
  • Solutions To Concept Checks
• Chapter 7: Efficient Diversification
  • Introduction
  • 7.1: Diversification and Portfolio Risk
  • 7.2: Portfolios of Two Risky Assets
  • 7.3: Asset Allocation with Stocks, Bonds, and Bills
    • Asset Allocation with Two Risky Asset Classes
  • 7.4: The Markowitz Portfolio Optimization Model
    • Security Selection
    • Capital Allocation and the Separation Property
    • The Power of Diversification
    • Asset Allocation and Security Selection
  • 7.5: Risk Pooling, Risk Sharing, and Time Diversification
    • Risk Sharing versus Risk Pooling
    • Time Diversification
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
  • Appendix A: A Spreadsheet Model for Efficient Diversification
    • The Input List
    • Using Excel's Solver
    • Finding the Optimal Risky Portfolio on the Efficient Frontier
    • The Optimal CAL
    • The Optimal Risky Portfolio and the Short-Sales Constraint
  • Appendix B: Review of Portfolio Statistics
    • Expected Returns
    • Variance and Standard Deviation
    • Covariance
    • Correlation Coefficient
    • Portfolio Variance
• Chapter 8: Index Models
  • Introduction
  • 8.1 A Single-Factor Security Market
    • The Input List of the Markowitz Model
    • Systematic versus Firm-Specific Risk
  • 8.2 The Single-Index Model
    • The Regression Equation of the Single-Index Model
    • The Expected Return–Beta Relationship
    • Risk and Covariance in the Single-Index Model
    • The Set of Estimates Needed for the Single-Index Model
    • The Index Model and Diversification
  • 8.3 Estimating the Single-Index Model
    • The Security Characteristic Line for U.S. Steel
    • The Explanatory Power of U.S. Steel’s SCL
    • The Estimate of Alpha
    • The Estimate of Beta
    • Firm-Specific Risk
  • 8.4 The Industry Version of the Index Model
    • Predicting Betas
  • 8.5 Portfolio Construction Using the Single-Index Model
    • Alpha and Security Analysis
    • The Index Portfolio as an Investment Asset
    • The Single-Index Model Input List
    • The Optimal Risky Portfolio in the Single-Index Model
    • The Information Ratio
    • Summary of Optimization Procedure
    • An Example
    • Correlation and Covariance Matrix
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 9: The Capital Asset Pricing Model
  • Introduction
  • 9.1 The Capital Asset Pricing Model
    • The Market Portfolio
    • The Passive Strategy Is Efficient
    • The Risk Premium of the Market Portfolio
    • Expected Returns on Individual Securities
    • The Security Market Line
    • The CAPM and the Single-Index Market
  • 9.2 Assumptions and Extensions of the CAPM
    • Identical Input Lists
    • Risk-Free Borrowing and the Zero-Beta Model
    • Labor Income and Other Nontraded Assets
    • A Multiperiod Model and Hedge Portfolios
    • A Consumption-Based CAPM
    • Liquidity and the CAPM
  • 9.3 Issues in Testing the CAPM
  • 9.4 The CAPM and the Investment Industry
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 10: Arbitrage Pricing Theory and Multifactor Models of Risk and Return
  • Introduction
  • 10.1 Multifactor Models: A Preview
    • Factor Models of Security Returns
  • 10.2 Arbitrage Pricing Theory
    • Arbitrage, Risk Arbitrage, and Equilibrium
    • The Security Market Line of the APT
    • Well-Diversified Portfolios in Practice
  • 10.3 The APT and the CAPM
  • 10.4 A Multifactor APT
  • 10.5 The Fama-French (FF) Three-Factor Model
    • Estimating and Implementing a Three-Factor SML
    • Extensions of the Three-Factor Model: A First Look
    • Smart Betas and Multifactor Models
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 11: The Efficient Market Hypothesis
  • Introduction
  • 11.1: Random Walks and Efficient Markets
    • Competition as the Source of Efficiency
    • Versions of the Efficient Market Hypothesis
  • 11.2: Implications of the EMH
    • Technical Analysis
    • Fundamental Analysis
    • Active versus Passive Portfolio Management
    • The Role of Portfolio Management in an Efficient Market
    • Resource Allocation
  • 11.3: Event Studies
  • 11.4: Are Markets Efficient?
    • The Issues
    • Weak-Form Tests: Patterns in Stock Returns
    • Predictors of Broad Market Returns
    • Semistrong Tests: Market Anomalies
    • Strong-Form Tests: Inside Information
    • Interpreting the Anomalies
  • 11.5: Mutual Fund and Analyst Performance
    • Stock Market Analysts
    • Mutual Fund Managers
    • So, Are Markets Efficient?
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 12: Behavioral Finance and Technical Analysis
  • Introduction
  • 12.1: The Behavioral Critique
    • Information Processing
    • Behavioral Biases
    • Limits to Arbitrage
    • Limits to Arbitrage and the Law of One Price
    • Bubbles and Behavioral Economics
    • Evaluating the Behavioral Critique
  • 12.2: Technical Analysis and Behavioral Finance
    • Trends and Corrections
    • Machine Learning and Technical Analysis
    • Sentiment Indicators
    • A Warning
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 13: Empirical Evidence on Security Returns
  • Introduction
  • 13.1 The Index Model and the Single-Factor SML
    • Testing the Single-Factor SML
    • The Market Index
    • Measurement Error in Beta
  • 13.2 Tests of the Multifactor Models
    • Labor Income
    • Private (Nontraded) Business
    • Macroeconomic Risk Factors
  • 13.3 Fama-French-Type Factor Models
    • Size and B/M as Risk Factors
    • Behavioral Explanations
    • Momentum: A Fourth Factor
    • The Factor Zoo
  • 13.4 Liquidity and Asset Pricing
  • 13.5 Consumption-Based Asset Pricing and the Equity Premium Puzzle
    • Expected versus Realized Returns
    • Survivorship Bias
    • Extensions to the CAPM May Mitigate the Equity Premium Puzzle
    • Liquidity and the Equity Premium Puzzle
    • Behavioral Explanations of the Equity Premium Puzzle
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 14: Bond Prices and Yields
  • Introduction
  • 14.1 Bond Characteristics
    • Treasury Bonds and Notes
    • Corporate Bonds
    • Preferred Stock
    • Other Domestic Issuers
    • International Bonds
    • Innovation in the Bond Market
  • 14.2 Bond Pricing
    • Bond Pricing between Coupon Dates
  • 14.3 Bond Yields
    • Yield to Maturity
    • Yield to Call
    • Realized Compound Return versus Yield to Maturity
  • 14.4 Bond Prices over Time
    • Yield to Maturity versus Holding-Period Return
    • Zero-Coupon Bonds and Treasury Strips
    • After-Tax Returns
  • 14.5 Default Risk and Bond Pricing
    • Junk Bonds
    • Determinants of Bond Safety
    • Bond Indentures
    • Yield to Maturity and Default Risk
    • Credit Default Swaps
    • Credit Risk and Collateralized Debt Obligations
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 15: The Term Structure of Interest Rates
  • Introduction
  • 15.1 The Yield Curve
    • Bond Pricing
  • 15.2 The Yield Curve and Future Interest Rates
    • The Yield Curve under Certainty
    • Holding-Period Returns
    • Forward Rates
  • 15.3 Interest Rate Uncertainty and Forward Rates
  • 15.4 Theories of the Term Structure
    • The Expectations Hypothesis
    • Liquidity Preference Theory
    • Market Segmentation
  • 15.5 Interpreting the Term Structure
  • 15.6 Forward Rates as Forward Contracts
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 16: Managing Bond Portfolios
  • Introduction
  • 16.1 Interest Rate Risk
    • Interest Rate Sensitivity
    • Duration
    • What Determines Duration?
  • 16.2 Convexity
    • Why Do Investors Like Convexity?
    • Duration and Convexity of Callable Bonds
    • Duration and Convexity of Mortgage-Backed Securities
  • 16.3 Passive Bond Management
    • Bond-Index Funds
    • Immunization
    • Cash Flow Matching and Dedication
    • Other Problems with Conventional Immunization
  • 16.4 Active Bond Management
    • Sources of Potential Profit
    • Horizon Analysis
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 17: Macroeconomic and Industry Analysis
  • Introduction
  • 17.1 The Global Economy
  • 17.2 The Domestic Macroeconomy
    • Key Economic Indicators
  • 17.3 Demand and Supply Shocks
  • 17.4 Federal Government Policy
    • Fiscal Policy
    • Monetary Policy
    • Supply-Side Policies
  • 17.5 Business Cycles
    • The Business Cycle
    • Economic Indicators
  • 17.6 Industry Analysis
    • Defining an Industry
    • Sensitivity to the Business Cycle
    • Sector Rotation
    • Industry Life Cycles
    • Industry Structure and Performance
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 18: Equity Valuation Models
  • Introduction
  • 18.1 Valuation by Comparables
    • Limitations of Book Value
  • 18.2 Intrinsic Value versus Market Price
  • 18.3 Dividend Discount Models
    • The Constant-Growth DDM
    • Convergence of Price to Intrinsic Value
    • Stock Prices and Investment Opportunities
    • Life Cycles and Multistage Growth Models
    • Multistage Growth Models
  • 18.4 The Price–Earnings Ratio
    • The Price–Earnings Ratio and Growth Opportunities
    • P/E Ratios and Stock Risk
    • Pitfalls in P/E Analysis
    • The Cyclically Adjusted P/E Ratio
    • Combining P/E Analysis and the DDM
    • Other Comparative Valuation Ratios
  • 18.5 Free Cash Flow Valuation Approaches
    • Comparing the Valuation Models
    • The Problem with DCF Models
  • 18.6 The Aggregate Stock Market
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 19: Financial Statement Analysis
  • Introduction
  • 19.1 The Major Financial Statements
    • The Income Statement
    • The Balance Sheet
    • The Statement of Cash Flows
  • 19.2 Measuring Firm Performance
  • 19.3 Profitability Measures
    • Return on Assets, ROA
    • Return on Capital, ROC
    • Return on Equity, ROE
    • Financial Leverage and ROE
    • Economic Value Added
  • 19.4 Ratio Analysis
    • Decomposition of ROE
    • Turnover and Other Asset Utilization Ratios
    • Liquidity Ratios
    • Market Price Ratios: Growth versus Value
    • Choosing a Benchmark
  • 19.5 An Illustration of Financial Statement Analysis
  • 19.6 Comparability Problems
    • Inventory Valuation
    • Depreciation
    • Inflation and Interest Expense
    • Fair Value Accounting
    • Quality of Earnings and Accounting Practices
    • International Accounting Conventions
  • 19.7 Value Investing: The Graham Technique
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 20: Options Markets: Introduction
  • Introduction
  • 20.1 The Option Contract
    • Options Trading
    • American versus European Options
    • Adjustments in Option Contract Terms
    • The Options Clearing Corporation
    • Other Listed Options
  • 20.2 Values of Options at Expiration
    • Call Options
    • Put Options
    • Option versus Stock Investments
  • 20.3 Option Strategies
    • Protective Put
    • Covered Calls
    • Straddle
    • Spreads
    • Collars
  • 20.4 The Put-Call Parity Relationship
  • 20.5 Option-like Securities
    • Callable Bonds
    • Convertible Securities
    • Warrants
    • Collateralized Loans
    • Levered Equity and Risky Debt
  • 20.6 Financial Engineering
  • 20.7 Exotic Options
    • Asian Options
    • Barrier Options
    • Lookback Options
    • Currency-Translated Options
    • Digital Options
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 21: Option Valuation
  • Introduction
  • 21.1 Option Valuation: Introduction
    • Intrinsic and Time Values
    • Determinants of Option Values
  • 21.2 Restrictions on Option Values
    • Restrictions on the Value of a Call Option
    • Early Exercise and Dividends
    • Early Exercise of American Puts
  • 21.3 Binomial Option Pricing
    • Two-State Option Pricing
    • Generalizing the Two-State Approach
    • Making the Valuation Model Practical
  • 21.4 Black-Scholes Option Valuation
    • The Black-Scholes Formula
    • Implied Volatility
    • Dividends and Call Option Valuation
    • Put Option Valuation
    • Dividends and Put Option Valuation
  • 21.5 Using the Black-Scholes Formula
    • Hedge Ratios and the Black-Scholes Formula
    • Portfolio Insurance
    • Option Pricing and the Financial Crisis
    • Option Pricing and Portfolio Theory
    • Hedging Bets on Mispriced Options
  • 21.6 Empirical Evidence on Option Pricing
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 22: Futures Markets
  • Introduction
  • 22.1 The Futures Contract
    • The Basics of Futures Contracts
    • Existing Contracts
  • 22.2 Trading Mechanics
    • The Clearinghouse and Open Interest
    • The Margin Account and Marking to Market
    • The Convergence Property
    • Cash versus Actual Delivery
    • Regulations
    • Taxation
  • 22.3 Futures Markets Strategies
    • Hedging and Speculation
    • Basis Risk and Hedging
  • 22.4 Futures Prices
    • The Spot-Futures Parity Theorem
    • Spreads
    • Forward versus Futures Pricing
  • 22.5 Futures Prices versus Expected Spot Prices
    • Expectations Hypothesis
    • Normal Backwardation
    • Contango
    • Modern Portfolio Theory
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 23: Futures, Swaps, and Risk Management
  • Introduction
  • 23.1 Foreign Exchange Futures
    • The Markets
    • Interest Rate Parity
    • Direct versus Indirect Quotes
    • Using Futures to Manage Exchange Rate Risk
  • 23.2 Stock-Index Futures
    • The Contracts
    • Creating Synthetic Stock Positions: An Asset Allocation Tool
    • Index Arbitrage
    • Using Index Futures to Hedge Market Risk
  • 23.3 Interest Rate Futures
    • Hedging Interest Rate Risk
  • 23.4 Swaps
    • Swaps and Balance Sheet Restructuring
    • The Swap Dealer
    • Other Interest Rate Contracts
    • Swap Pricing
    • Credit Risk in the Swap Market
    • Credit Default Swaps
  • 23.5 Commodity Futures Pricing
    • Pricing with Storage Costs
    • Discounted Cash Flow Analysis for Commodity Futures
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 24: Portfolio Performance Evaluation
  • Introduction
  • 24.1 The Conventional Theory of Performance Evaluation
    • Average Rates of Return
    • Time-Weighted Returns versus Dollar-Weighted Returns
    • Adjusting Returns for Risk
    • Risk-Adjusted Performance Measures
    • The Sharpe Ratio for Overall Portfolios
    • The Treynor Ratio
    • The Information Ratio
    • The Role of Alpha in Performance Measures
    • Implementing Performance Measurement: An Example
    • Realized Returns versus Expected Returns
    • Selection Bias and Portfolio Evaluation
  • 24.2 Style Analysis
  • 24.3 Performance Measurement with Changing Portfolio Composition
    • Performance Manipulation and the Morningstar Risk-Adjusted Rating
  • 24.4 Market Timing
    • The Potential Value of Market Timing
    • Valuing Market Timing as a Call Option
    • The Value of Imperfect Forecasting
  • 24.5 Performance Attribution Procedures
    • Asset Allocation Decisions
    • Sector and Security Selection Decisions
    • Summing Up Component Contributions
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 25: International Diversification
  • Introduction
  • 25.1 Global Markets for Equities
    • Developed Countries
    • Emerging Markets
    • Market Capitalization and GDP
    • Home-Country Bias
  • 25.2 Exchange Rate Risk and International Diversification
    • Exchange Rate Risk
    • Investment Risk in International Markets
    • International Diversification
    • Are Benefits from International Diversification Preserved in Bear Markets?
  • 25.3 Political Risk
  • 25.4 International Investing and Performance Attribution
    • Constructing a Benchmark Portfolio of Foreign Assets
    • Performance Attribution
  • Summary
  • Key Terms
  • Key Equations
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 26: Alternative Assets
  • Introduction
  • 26.1 Hedge Funds versus Mutual Funds
    • The Alternative Asset Universe
  • 26.2 Hedge Fund Strategies
    • Statistical Arbitrage
    • High-Frequency Strategies
  • 26.3 Venture Capital and Angel Investors
    • Venture Syndication
    • Venture Capital and Innovation
  • 26.4 Leveraged Buyout Funds
    • Exits
    • Leveraged Buyouts and Innovation
  • 26.5 Performance Measurement for Hedge Funds
    • Liquidity and Performance
    • Liquidity and Hedge Fund Performance
    • Liquidity and Private Equity
    • Survivorship Bias and Backfill Bias
    • Tail Events
    • Historical Hedge Fund Performance
    • Style Analysis
    • Historical Performance of Private Equity
  • 26.6 Fee Structure in Hedge Funds
    • Incentive Fees
    • Private Equity Chasing Waterfalls
    • Funds of Funds
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• Chapter 27: The Theory of Active Portfolio Management
  • Introduction
  • 27.1 Optimal Portfolios and Alpha Values
    • Forecasts of Alpha Values and Extreme Portfolio Weights
    • Restriction of Tracking Risk
  • 27.2 The Treynor-Black Model and Forecast Precision
    • Adjusting Forecasts for the Precision of Alpha
    • Distribution of Alpha Values
    • Organizational Structure and Performance
  • 27.3 The Black-Litterman Model
    • Black-Litterman Asset Allocation Decision
    • Step 1: The Covariance Matrix from Historical Data
    • Step 2: Determination of a Baseline Forecast
    • Step 3: Integrating the Manager’s Private Views
    • Step 4: Revised (Posterior) Expectations
    • Step 5: Portfolio Optimization
  • 27.4 Treynor-Black versus Black-Litterman: Complements, Not Substitutes
    • The BL Model as Icing on the TB Cake
    • Why Not Replace the Entire TB Cake with the BL Icing?
  • 27.5 The Value of Active Management
    • A Model for the Estimation of Potential Fees
    • Results from the Distribution of Actual Information Ratios
    • Results from Distribution of Actual Forecasts
  • 27.6 Concluding Remarks on Active Management
  • Summary
  • Key Terms
  • Problem Sets
  • APPENDIX A: Forecasts and Realizations of Alpha
  • APPENDIX B: The General Black-Litterman Model
    • Steps 1 and 2: The Covariance Matrix and Baseline Forecasts
    • Step 3: The Manager’s Private Views
    • Step 4: Revised (Posterior) Expectations
    • Step 5: Portfolio Optimization
• Chapter 28: Investment Policy and the Framework of the CFA Institute
  • Introduction
  • 28.1 The Investment Management Process
  • 28.2 Major Investor Types
    • Individual Investors
    • Personal Trusts
    • Mutual Funds
    • Pension Funds
    • Endowment Funds
    • Life Insurance Companies
    • Non–Life Insurance Companies
    • Banks
  • 28.3 Constraints
    • Liquidity
    • Investment Horizon
    • Regulations
    • Tax Considerations
    • Unique Needs
  • 28.4 Policy Statements
    • Sample Policy Statements for Individual Investors
  • 28.5 Asset Allocation
    • Top-Down Asset Allocation for Institutional Investors
    • Monitoring and Revising the Portfolio
  • 28.6 Managing Portfolios of Individual Investors
    • Investment in Residence
    • Saving for Retirement and the Assumption of Risk
    • Retirement Planning Models
    • Target Date Funds
    • Tax Sheltering and Asset Allocation
  • 28.7 Pension Funds
    • Defined Contribution Plans
    • Defined Benefit Plans
    • Pension Investment Strategies
  • Summary
  • Key Terms
  • Problem Sets
  • Solutions To Concept Checks
• References to CFA Problems
  • References to CFA Problems
• Glossary
  • Glossary
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• Notation, Formulas
  • Commonly Used Notation
  • Useful Formulas
    • Measures of Risk
    • Portfolio Theory
    • Market Equilibrium
    • Fixed-Income Analysis
    • Equity Analysis
    • Derivative Assets
    • Performance Evaluation
• Name Index
  • Name Index
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• Subject Index
  • Subject Index
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• Additional Student Resources
  • Additional Student Resources
• Accessibility Content: Text Alternatives for Images
  • Figure 1.1 Text Alternative (Chapter 1)
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  • APPLICATIONS: Buying on Margin 3.1 Text Alternative (Chapter 3)
  • APPLICATIONS: Short Sale 3.1 Text Alternative (Chapter 3)
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  • Two-State Option Pricing (Chapter 21)
  • Two-State Option Pricing Figure 1 (Chapter 21)
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  • Generalizing the Two-State Approach (Chapter 21)
  • Generalizing the Two-State Approach Figure 1 (Chapter 21)
  • Making the Valuation Model Practical (Chapter 21)
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  • SOLUTIONS TO CONCEPT CHECKS (Chapter 22)
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  UM RAFBÆKUR Á HEIMKAUP.IS

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