ECN 204 Chapter Notes - Chapter 15b: Idiosyncrasy, Open Market Operation, Bernard Madoff
12 Oct 2017
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Document Summary
This chapter provides an introduction to financial economics. It begins by distinguishing between economic investment and financial investment. Next the calculation and use of present value in decision- making is presented. An overview of stocks, bonds, and mutual funds is provided, followed by an explanation of the why investors choose different assets and why those assets produce different returns. Portfolio diversification and the relationship between risk and return are explained. Finally, a discussion of arbitrage demonstrates why rates of return change and why it is hard even for professional investors to. There are major revisions to the learning objectives. There are five more quick reviews to help the students retain the appropriate information. All relevant tables and graphs have been updated with current data. Comments and teaching suggestions: the globe and mail and similar publications present articles daily that are devoted to the investment decision-making issues addressed in this chapter.
