FINA2207 Lecture Notes - Lecture 1: Fundamental Analysis, Momentum Investing, Capital Asset Pricing Model
Document Summary
Intuitive investing- relies on intuition and has no analysis: passive investing- accepts market price as value. Also known as the efficient market" approach: momentum investing- believes that stocks have momentum to continue moving either up or down even further, fundamental investing- uses fundamental analysis or valuation analysis. Examines information about firms for the purpose of reaching conclusion about the underlying value. Alpha and beta technology: passive investment needs beta technology. It involves using the capm model to hold a well diversified portfolio. The investor is protected against fundamental risk but not price risk: active investing needs both beta and alpha technology. Alpha technologies try to gain abnormal returns by exploiting arbitrate opportunities from mispricing. Bubbles: bubbles occur when people form unreasonable expectations of likely returns. Investors borrow to buy paper securities rather than real productive assets, creating an intolerable debt burden: this causes the banks to eventually run into trouble, and retirement savings to be lost.
