Review Fundamental analysis is about determining the value of an asset. The value of an asset is a function of its future dividends or cash flows. Dividends, earnings, and cash flows of a firm are all tied to the status of the whole economy especially for some firms and industries So it’s good to start with analyzing the economy, then the industry, then the position of the firm in the industry. We call this top-down approach

Chapter 1: A Brief History of Risk and Return We Calculate Returns Using Several Methods The Historical Record (Average Returns, Variance and Standard Deviation) Average Returns: The First Lesson (The Risk-Return Trade-Off)---Risk Premiums Return Variability: The Second Lesson Frequency Distributions and Variability & Normal Distribution Arithmetic Returns versus Geometric Returns Dollar Weighted Average Returns

Chapter 2 The Investment Process What is Margin? Short Sale? Short Sale Vs. long position?

Ch19: Global Economic Activity & Industry Analysis Top-Down Analysis Global Macroeconomic Activity Real GDP, Business Cycles, Economic Indicators The Global Economy and Stock Return Correlations The Effects of Exchange Rates on Global Investments Monitoring Jobs and the Price Level (Labor Market Indicators & Consumer Price Index) Monetary and Fiscal Policy Industry Analysis: Identifying Sectors & Porter’s Five Forces

Ch4: Mutual Funds & Other Investment Companies Investment Companies and Fund Types (Open-End versus Closed-End Funds& NAVs) Mutual Fund Operations Mutual Fund Organization and Creation & The Fund Prospectus and Annual Report Mutual Fund Costs and Fees (Types of Expenses and Fees & Expense Reporting) Short-Term Funds (Money Market Mutual Funds & Money Market Deposit Accounts) Long-Term Funds Stock Funds, Bond Funds & Stock and Bond Funds Mutual Fund Performance Information Closed-End Funds, Exchange Traded Funds, and Hedge Funds Closed-End Funds Performance Information (Discount Mystery) Exchange Traded Funds (ETFs), Leveraged Funds & Hedge Funds

Chapter 5 Review Private and Public Equity Private Equity Funds The Primary and Secondary Stock Markets The Primary Market for Common Stock The Secondary Market for Common Stock Dealers and Brokers The New York Stock Exchange Designated Market Makers, DDMs Types of Members NYSE-Listed Stocks Operation of the New York Stock Exchange Special Order Types NYSE and NASDAQ Competitors Stock Market Information The Dow Jones Industrial Average Stock Market Indexes More on Price-Weighted Indexes Value-Weighted Indexes

Ch 6 Common Stock Valuation (Security Analysis) The Dividend Discount Model Constant Dividend Growth Rate Model The Sustainable Growth Rate The Two-Stage Dividend Growth Model Discount Rates for Dividend Discount Models Observations on Dividend Discount Models Residual Income Model (RIM), Free Cash Flow Model, Price Ratio Analysis

Ch 7: Stock Price Behavior and Market Efficiency Foundations and Forms of Market Efficiency Some Implications of Market Efficiency Does Old Information Help Predict Future Stock Prices? Random Walks and Stock Prices How Does New Information Get into Stock Prices? Informed Traders and Inside Trading How Efficient are Markets? (Are Financial Markets Efficient?) Some Implications: The Performance of Professional Money Managers Anomalies & Bubbles and Crashes

Ch 8: Behavioral Finance & the Psychology of Investing Behavioral Finance: Introduction and Definition 3 Conditions that Lead to Efficient Markets Investor rationality, Independent deviations from rationality & Arbitrage Prospect Theory (Frame Dependence, Mental Accounting, Loss Aversion, House Money) Overconfidence (The Illusion of Knowledge & The Snakebite Effect) Sentiment-Based Risk and Limits to Arbitrage Technical Analysis: Why does it Thrive? Market Sentiment Index, Support and Resistance Levels & Moving Averages

Ch 11: Diversification and Risky Asset Allocation Expected Returns and Variances (Expected returns & Calculating the variance) Portfolios: Portfolio weights, Portfolio expected returns &Portfolio variance Diversification and Portfolio Risk: The principle of diversification Correlation and Diversification: Why diversification works Calculating portfolio risk The Markowitz Efficient Frontier: Risk and return with multiple assets

Ch 12: Return, Risk & the Security Market Line Announcements, Surprises, and Expected Returns Expected and unexpected returns (Announcements and news) Risk: Systematic and Unsystematic Diversification, Systematic Risk, and Unsystematic Risk Systematic Risk and Beta: Measuring systematic risk: Portfolio Betas The Security Market Line: Beta and the risk premium The reward-to-risk ratio More on Beta: Where do Betas come from? Ways to calculate Beta Why do Betas differ?

Ch 13: Performance Evaluation & Risk Management Performance Evaluation Well-Known Performance Evaluation Measures The Sharpe Ratio, Treynor Ratio & Jensen’s Alpha Other Performance Evaluation Measures: Information Ratio & R-Squared Comparing Performance Measures (Strengths and weaknesses) Sharpe-Optimal Portfolios Investment Risk Management and Value-at-Risk (VaR)