FI 414 Lecture Notes - Lecture 2: Arbitrage, John Maynard Keynes, Financial Times
Document Summary
To prepare: sample exam and look through lecture slides. Sample exam will be posted by this friday. Sample exam will be reviewed on monday before exam. Bull in nyc: thought the market would be bullish vs. the bearish force: we are trying to pick out investment to help us avoid these large swings. All news is factored into the stock market immediately. Two notions of efficient market: no free lunch in financial market - illegal, prices equal fundamental value - efficient and this is what is the center of controversy. Popular advice from emh: buy and hold, passive investing, diversify portfolio. In practical terms, buy and hold a well-diversified portfolio such as the s&p 500 index. Limit of diversification: even if we hold all the stocks available in the stock market, achieving the full diversification in equity, the stock market is still very, very risky. Why are you paid: answer: only two possibilities.
