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PORTFOLIO CONSTRUCTION, MANAGEMENT, & PROTECTION

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The traditional investments course covers two principal topics: security analysis and portfolio management. Security analysis involves estimating the merits of individual investments while portfolio management deals with the construction and maintenance of a collection of investments.

Investment professionals often describe security analysis as a three-step process.

First, the analyst considers prospects for the economy, given the stage of the business cycle. Second, the analyst determines which industries are likely to fare well in the forecasted economic conditions. Finally, the analyst chooses particular companies within the favored industries. Many people call this procedure EIC analysis for eco- nomy, industry, and company. In recent years the trend has been to move away from stock picking and toward portfolio management (Figure 1-1). Most of the academic literature from the last two decades generally supports the efficient markets paradigm. Market efficiency means that on a well-developed securities exchange, asset prices accurately reflect the trade- off between the relative risk and potential returns associated with the security. Markets are kept reasonably efficient because of the vast number of market participants who are quick to take advantage of security mispricing. This means that efforts to identify undervalued securities are generally fruitless. In other words, free lunches are difficult to find, and any quest for them is likely to wind up at a dead end.

The fact that markets are efficient does not mean that investment managers can just throw darts in making their investment decisions. Not all portfolios are created equal; some are clearly better than others. A properly constructed portfolio achieves a given level of expected return with the least possible risk. Portfolio managers have a duty to create the best possible collection of investments for each customer's unique needs and circumstances.

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Availability

10001341

332.6 STR p 4th

RLC MM (Rak Buku Umum)

Available

Detail Information

Series Title

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Statement of Responsibility

Robert A. Strong

Call Number

332.6 STR p 4th

Publisher

Mason : Thomson South-Western., 2004

Collation

xxiv, 664 p. : ill ; 25cm.

Language

English

ISBN/ISSN

0-324-23258-6

Classification

332.6

Content Type

-

Edition

4th. ed.

Subject(s)

Management
Buku Umum
Investment

Specific Detail Info

-

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