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TRANSFER OF INNOVATION
Kristina Leviauskait
2010
Table of Contents
Introduction ...4
1. Investment environment and investment management process...7
1.1 Investing versus financing7
1.2. Direct versus indirect investment .9
1.3. Investment environment..11
1.3.1. Investment vehicles ..11
1.3.2. Financial markets...19
1.4. Investment management process.23
Summary..26
Key-terms28
Questions and problems...29
References and further readings..30
Relevant websites31
2. Quantitative methods of investment analysis...32
2.1. Investment income and risk.32
2.1.1. Return on investment and expected rate of return...32
2.1.2. Investment risk. Variance and standard deviation...35
2.2. Relationship between risk and return..36
2.2.1. Covariance36
2.2.2. Correlation and Coefficient of determination...40
2.3. Relationship between the returns on stock and market portfolio42
2.3.1. Characteristic line and Beta factor.43
2.3.2. Residual variance...44
Summary...45
Key-terms.48
Questions and problems...48
References and further readings...50
3. Theory for investment portfolio formation...51
3.1. Portfolio theory51
3.1.1. Markowitz portfolio theory...51
3.1.2. The expected rate of return and risk of portfolio..54
3.2. Capital Asset Pricing Model56
3.3. Arbitrage Price Theory59
3.4. Market Efficiency Theory62
Summary...64
Key-terms.66
Questions and problems67
References and further readings...70
4. Investment in stocks.....................................................................71
4.1. Stock as specific investment.....71
4.2. Stock analysis for investment decision making72
4.2.1. E-I-C analysis.73
4.2.2. Fundamental analysis..75
4.3. Decision making of investment in stocks. Stock valuation..77
4.4. Formation of stock portfolios...82
4.5. Strategies for investing in stocks..84
Summary..87
Key-terms90
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