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Practical Investment Management

by: Strong, Robert A.

Practical Investment Management

by: Strong, Robert A.

ISBN 13:
9780324359367
ISBN 10:
0324359365
Edition: 4th
Format: Hardcover
Copyright: 03/09/2006
Publisher: Cengage Learning

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Summary

PRACTICAL INVESTMENT MANAGEMENT is intended for learners studying investments for the first time. Very practical and applied, it is comprehensive enough for those who plan to become Certified Financial Analysts, but remains user-friendly due to its clarity of explanation and its pedagogy. The book contains all standard topics found in the typical modern investments text, but in addition, several chapters of Practical Investment Management are unique. In addition to being an increasingly important asset class, mortgage-backed securities provide some thought-provoking questions on fixed income valuation. Bob Strong has an engaging writing style along with practical experience making this a very solid, yet very friendly, book for readers.

Foreword

xiii

Preface

The Concept of Investing

(8)

Introduction

(1)

Investing Defined

(1)

Investment Alternatives

(1)

Assets

(1)

Securities

(1)

Security Groupings

(1)

Three Reasons for Investing

(2)

Income

(1)

Appreciation

(1)

Excitement

(1)

The Academic Study of Investments

(2)

Theoretical Research

(1)

Empirical Research

(1)

Professors vs. Practitioners

(1)

Summary

(2)

Understanding Risk and Return

(26)

Introduction

(1)

Return

(7)

Holding Period Return

(1)

Yield and Appreciation

(1)

The Time Value of Money

(2)

Financial Calculators

(1)

Compounding

(1)

Compound Annual Return

(1)

Risk

(11)

Risk vs. Uncertainty

(1)

Dispersion and the Chance of Loss

(2)

The Problem with Losses

(4)

Risk Aversion

(1)

Partitioning Risk

(4)

More on the Relationship between Risk and Return

(3)

The Direct Relationship

(1)

Risk, Return, and Dominance

(2)

Summary

(4)

The Marketplace

(28)

Introduction

(1)

The Role of the Capital Markets

(3)

Economic Function

(1)

Continuous Pricing Function

(1)

Fair Pricing Function

(1)

The Exchanges

(6)

National Exchanges

(1)

Regional Exchanges

(1)

Trading Systems

(2)

Circuit Breakers and Trading Curbs

(1)

The Nasdaq Stock Market

(1)

The Small Order Execution System (SOES)

(1)

The Nasdaq National Market

(1)

The Nasdaq Small-Cap Market

(1)

The Over-the-Counter Market

(2)

Over-the-Counter Bulletin Board (OTCBB)

(1)

Pink Sheet Stocks

(1)

Third and Fourth Markets

(1)

Regulation

(3)

The Exchanges

(1)

The SEC

(1)

The NASD

(1)

SIPC

(1)

Ethics

(5)

Illegal vs. Unethical

(1)

The Chartered Financial Analyst Program

(1)

The CFA Program Exams

(1)

Standards of Professional Conduct

(2)

Summary

(3)

Appendix to Chapter 3: Code of Ethics and Standards of Professional Conduct

(4)

Bond Fundamentals

(31)

Introduction

(1)

Bond Principles

(6)

Identification of Bonds

(1)

Classification of Bonds

(2)

Terms of Repayment

(1)

Bond Cash Flows

(2)

Convertible and Exchangeable Bonds

(1)

Registration

(1)

The Financial Page Listing

(4)

Basic Information

(1)

Footnotes

(1)

Government Bonds

(1)

Bond Pricing and Returns

(9)

Valuation Equations

(2)

Yield to Maturity

(2)

Spot Rates

(2)

Realized Compound Yield

(1)

Current Yield

(1)

Accrued Interest

(1)

Bond Risks

(7)

Price Risks

(4)

Convenience Risks

(3)

Summary

(4)

Common Stock

(28)

Introduction

(1)

Corporations, Shares, and Shareholder Rights

(6)

Corporations

(1)

Shareholder Rights

(4)

The Mystique of Dividends

100

(9)

Types of Dividends

101

(2)

Special Distributions

103

(1)

The Dividend Payment Procedure

104

(3)

Why Dividends Do Not Matter

107

(2)

Stock Splits

109

(3)

Forward and Reverse Splits

109

(1)

Why Stock Splits Do Not Matter

109

(1)

Why Firms Split Their Stock

110

(2)

Stock Splits vs. Stock Dividends

112

(1)

The Financial Page Listing

112

(2)

The Basic Information

113

(1)

Footnotes and Symbols

113

(1)

Categories of Stock

114

(5)

Blue Chip Stocks

115

(1)

Income Stocks

116

(1)

Cyclical Stocks

116

(1)

Defensive Stocks

116

(1)

Growth Stocks

117

(1)

Speculative Stocks

118

(1)

Penny Stocks

118

(1)

Category Overlap

118

(1)

A Note on Stock Symbols

118

(1)

Summary

119

(3)

Market Mechanics

122

(28)

Introduction

122

(1)

Placing Orders

122

(6)

Order Information Flow

123

(1)

Types of Orders

123

(4)

Settlement Procedures

127

(1)

The Specialist and the Book

128

(4)

The Specialist and the Spread

128

(3)

Adjusting Limit and Stop Prices for Dividends

131

(1)

The Ticker Tape

132

(1)

Format

132

(1)

Accuracy

133

(1)

Other Ticker Tape Information

133

(1)

Types of Accounts

133

(7)

Cash Account

133

(1)

Margin Account

134

(6)

Other Types of Accounts

140

(1)

Selling Short

140

(2)

Rationale

140

(1)

Criticisms

140

(1)

Mechanics of a Short Sale

141

(1)

Selling Short Against the Box

142

(1)

Trading Fees

142

(5)

The Costs of Trading

143

(1)

The Commission Structure

144

(1)

Full-Service Brokers

144

(1)

Discount Brokers

145

(1)

Electronic Brokers

145

(1)

Current Events

146

(1)

Summary

147

(3)

Fundamental Stock Analysis

150

(43)

Introduction

150

(1)

Valuation Philosophies

151

(4)

Investors' Understanding of Risk Premiums

151

(1)

The Time Value of Money

152

(1)

The Importance of Cash Flows

152

(1)

EIC Analysis

153

(2)

Value vs. Growth Investing

155

(4)

The Value Approach to Investing

156

(1)

The Growth Approach to Investing

156

(2)

How Price Is Related to Value

158

(1)

Value Stocks and Growth Stocks: How to Tell by Looking

158

(1)

The Price-to-Book Ratio

159

(4)

Some Analytical Factors

163

(17)

Growth Rates

163

(4)

The Dividend Discount Model

167

(2)

The Importance of Hitting the Earnings Estimate

169

(1)

The Multistage DDM

169

(1)

Caveats about the DDM

170

(1)

False Growth

170

(1)

A Firm's Cash Flow

171

(2)

Small-Cap, Mid-Cap, and Large-Cap Stocks

173

(1)

Ratio Analysis

174

(2)

DuPont Analysis

176

(4)

Cooking the Books

180

(1)

Summary

180

(5)

Appendix to Chapter 7: Equity Research on E*Trade Financial Corporation

185

(8)

Valuation Tools

193

(29)

Introduction

193

(1)

Market Analysis

193

(5)

The Major Indexes

194

(1)

The Greenspan Model

195

(1)

The Equity Risk Premium

196

(2)

Company Analysis

198

(8)

The Greenspan Model

198

(1)

GARP

199

(1)

Pro Forma Earnings

200

(2)

The Growing Role of Cash Flow

202

(1)

Present Value of Growth Opportunities

203

(1)

Regulation Fair Disclosure

204

(2)

Summary

206

(4)

Appendix to Chapter 8: Reversion in a Mean Way

210

(12)

Technical Analysis

222

(25)

Introduction

222

(1)

Charting

222

(6)

The Underlying Logic

223

(1)

Types of Charts

223

(4)

Other Chart Annotations

227

(1)

Technical Indicators

228

(11)

Indicators with Economic Justification

228

(8)

Indicators of the Witchcraft Variety

236

(3)

Old Puzzles and New Developments

239

(4)

Fibonacci Numbers

239

(1)

Dow Theory

240

(1)

Kondratev Wave Theory

241

(1)

Chaos Theory

241

(1)

Neural Networks

242

(1)

The Future of Technical Analysis

243

(1)

Summary

243

(4)

Market Efficiency

247

(22)

Introduction

247

(1)

The Efficient Market Hypothesis (EMH)

248

(13)

Types of Efficiency

248

(1)

Degrees of Informational Efficiency

249

(11)

The Semi-Efficient Market Hypothesis

260

(1)

Security Prices and Random Walks

260

(1)

Anomalies

261

(5)

The Low-PE Effect

261

(1)

Low-Priced Stocks

262

(1)

The Small Firm and Neglected Firm Effects

262

(1)

Market Overreaction

263

(1)

The January Effect

263

(1)

The Weekend Effect

264

(1)

The Persistence of Technical Analysis

265

(1)

Final Thoughts

265

(1)

Summary

266

(3)

Behavioral Finance

269

(18)

Introduction

269

(1)

Established Behaviors

270

(10)

Representativeness Heuristic

270

(2)

Loss Aversion

272

(1)

Fear of Regret

272

(1)

Myopic Loss Aversion

272

(1)

Herding

273

(1)

Anchoring

273

(1)

Illusion of Control

273

(1)

Prospect Theory

274

(1)

Mental Accounting

275

(1)

Asset Segregation

276

(1)

Hindsight Bias

277

(1)

Overconfidence

278

(1)

Framing

278

(1)

Availability Heuristic

278

(1)

Illusion of Truth

279

(1)

Biased Expectations

279

(1)

Reference Dependence

279

(1)

Confirmation Bias

280

(1)

Outcome Bias

280

(1)

Self-Affirmation Bias

280

(1)

Mistaken Statistics

280

(4)

The Special Nature of Round Numbers

281

(1)

Extrapolation

281

(1)

Percentages vs. Numbers

281

(1)

Sample Size

282

(1)

Apparent Order

283

(1)

Regression to the Mean

283

(1)

Numerical Appearance

283

(1)

Summary

284

(3)

Gathering Investment Information

287

(31)

Introduction

287

(1)

Research Philosophy

287

(2)

Know Thyself

288

(1)

Screening

288

(1)

Resources at the Library

289

(13)

Standard & Poor's Publications

289

(11)

Mergent/Moody's Publications

300

(2)

Amazon no longer offers textbook rentals. We do!

Practical Investment Management

Practical Investment Management

9780324359367

0324359365

Summary

Table of Contents

Supplemental Materials

Write a Review

Amazon no longer offers textbook rentals. We do!

Practical Investment Management

Practical Investment Management

9780324359367

0324359365

Summary

Table of Contents

Supplemental Materials

Write a Review

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