The_Investment_Setting(投资分析与投资组合管理).pptx

Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K. Reilly & Keith C. BrownChapter 1The Investment SettingQuestions to be answered: Why do individuals invest ? What is an investment ? How do we measure the rate of return on an investment ? How do investors measure risk related to alternative investments ?Chapter 1The Investment Setting What factors contribute to the rates of return that investors require on alternative investments ? What macroeconomic and microeconomic factors contribute to changes in the required rate of return for individual investments and investments in general ?Why Do Individuals Invest ?By saving money (instead of spending it), individuals tradeoff present consumption for a larger future consumption.04. 1$%400. 1$How Do We Measure The Rate Of Return On An Investment ?The pure rate of interest is the exchange rate between future consumption and present consumption. Market forces determine this rate. Peoples willingness to pay the difference for borrowing today and their desire to receive a surplus on their savings give rise to an interest rate referred to as the pure time value of money.How Do We Measure The Rate Of Return On An Investment ?If the future payment will be diminished in value because of inflation, then the investor will demand an interest rate higher than the pure time value of money to also cover the expected inflation expense. How Do We Measure The Rate Of Return On An Investment ?If the future payment from the investment is not certain, the investor will demand an interest rate that exceeds the pure time value of money plus the inflation rate to provide a risk premium to cover the investment risk. How Do We Measure The Rate Of Return On An Investment ?Defining an InvestmentA current commitment of $ for a period of time in order to derive future payments that will compensate for:the time the funds are committedthe expected rate of inflationuncertainty of future flow of funds.Measures of Historical Rates of ReturnHolding Period Return10. 1 $200$220 Investment of Value BeginningInvestment of Value EndingHPR1.1Measures of Historical Rates of ReturnHolding Period YieldHPY = HPR - 11.10 - 1 = 0.10 = 10%1.2Annual Holding Period ReturnAnnual HPR = HPR 1/nwhere n = number of years investment is heldAnnual Holding Period YieldAnnual HPY = Annual HPR - 1Measures of Historical Rates of ReturnMeasures of Historical Rates of ReturnArithmetic Mean1.4yields period holding annual of sum the HPY :whereHPY/AM nMeasures of Historical Rates of ReturnGeometric Mean1.5 nnHPRHPRHPR :follows as returns period holding annual theofproduct the :where1HPR GM 211A Portfolio of InvestmentsThe mean historical rate of return for a portfolio of investments is measured as the weighted average of the HPYs for the individual investments in the portfolio.Computation of HoldingPeriod Yield for a Portfolio#BeginBeginningEndingEndingMarketWtd.StockSharesPriceMkt. ValuePriceMkt. ValueHPR HPYWt.HPYA100,000 10$ 1,000,000$ 12$ 1,200,000$ 1.20 20%0.05 0.010 B200,000 20$ 4,000,000$ 21$ 4,200,000$ 1.055%0.20 0.010 C500,000 30$ 15,000,000$ 33$ 16,500,000$ 1.10 10%0.75 0.075 Total20,000,000$ 21,900,000$ 0.095 21,900,000$ 20,000,000$ HPY =1.095- 1 =0.095=9.5%HPR =1.095Exhibit 1.1Expected Rates of Return Risk is uncertainty that an investment will earn its expected rate of return Probability is the likelihood of an outcomeExpected Rates of Returnni 1iReturn) (Possible Return) ofy Probabilit( )E(R Return Expected)R(P.)(R(P)(R(Pnn2211)(RP(1iini1.6Risk AversionThe assumption that most investors will choose the least risky alternative, all else being equal and that they will not accept additional risk unless they are compensated in the form of higher return Probability DistributionsRisk-free Investment0.000.200.400.600.801.00-5%0%5%10% 15%Exhibit 1.2 Probability DistributionsRisky Investment with 3 Possible Returns0.000.200.400.600.801.00-30%-10%10%30%Exhibit 1.3 Probability DistributionsRisky investment with ten possible rates of return0.000.200.400.600.801.00-40% -20%0%20% 40%Exhibit 1.4Measuring the Risk of Expected Rates of Return2n1iReturn) Expected-Return (Possibley)Probabilit( )( Variance2iii1)E(R)RP(ni1.7Measuring the Risk of Expected Rates of ReturnStandard Deviation is the square root of the varianceni 12iii)E(R-RP1.8Measuring the Risk of Expected Rates of ReturnCoefficient of variation (CV) a measure of relative variability that indicates risk per unit of return Standard Deviation of ReturnsExpected Rate of ReturnsE(R)i1.9Measuring the Risk of Historical Rates of Returnvariance of the seriesholding period yield during period Iexpected value of the HPY that is equal to the arithmetic mean of the seriesthe number of observations2/nn1ii2HPY)(EHPYn E(HPY) HPY i21.10Determinants of Required Rates of Return Time value of money Expected rate of inflation Risk involvedThe Real Risk Free Rate (RRFR)Assumes no inflation.Assumes no uncertainty about future cash flows.Influenced by time preference for consumption of income and investment opportunities in the economyAdjusting For InflationReal RFR = 1Inflation) of Rate(1RFR) Nominal1 (1.12Nominal Risk-Free RateDependent uponConditions in the Capital MarketsExpected Rate of InflationAdjusting For InflationNominal RFR = (1+Real RFR) x (1+Expected Rate of Inflation) - 11.11Facets of Fundamental Risk Business risk Financial risk Liquidity risk Exchange rate risk Country riskBusiness Risk Uncertainty of income flows caused by the nature of a firms business Sales volatility and operating leverage determine the level of business risk.Financial Risk Uncertainty caused by the use of debt financing. Borrowing requires fixed payments which must be paid ahead of payments to stockholders. The use of debt increases uncertainty of stockholder income and causes an increase in the stocks risk premium.Liquidity Risk Uncertainty is introduced by the secondary market for an investment. How long will it take to convert an investment into cash? How certain is the price that will be received?Exchange Rate Risk Uncertainty of return is introduced by acquiring securities denominated in a currency different from that of the investor. Changes in exchange rates affect the investors return when converting an investment back into the “home currency.Country Risk Political risk is the uncertainty of returns caused by the possibility of a major change in the political or economic environment in a country. Individuals who invest in countries that have unstable political-economic systems must include a country risk-premium when determining their required rate of returnRisk Premiumf (Business Risk, Financial Risk, Liquidity Risk, Exchange Rate Risk, Country Risk)orf (Systematic Market Risk)Risk Premium and Portfolio Theory The relevant risk measure for an individual asset is its co-movement with the market portfolio Systematic risk relates the variance of the investment to the variance of the market Beta measures this systematic risk of an assetFundamental Risk versus Systematic Risk Fundamental risk comprises business risk, financial risk, liquidity risk, exchange rate risk, and country risk Systematic risk refers to the portion of an individual assets total variance attributable to the variability of the total market portfolio Relationship BetweenRisk and ReturnExhibit 1.7(Expected)Changes in the Required Rate of Return Due to Movements Along the SMLExhibit 1.8Changes in the Slope of the SMLRPi = E(Ri) - NRFRwhere:RPi = risk premium for asset iE(Ri) = the expected return for asset iNRFR = the nominal return on a risk-free asset1.13Market Portfolio RiskThe market risk premium for the market portfolio (contains all the risky assets in the market) can be computed:RPm = E(Rm)- NRFR where:RPm = risk premium on the market portfolioE(Rm) = expected return on the market portfolioNRFR = expected return on a risk-free asset1.14 Change in Market Risk PremiumExhibit 1.10NRFRExpected ReturnRmRmCapital Market Conditions, Expected Inflation, and the SMLExhibit 1.11NRFRNRFRExpected ReturnThe InternetInvestments OnlineFuture TopicsChapter 2 The asset allocation decision The individual investor life cycle Risk tolerance Portfolio management