Contents
Final PDF to printer

viii Contents
bod72160fmi-xxvi.indd viii 10/08/20 03:23 PM
4.8 Information on Mutual Funds 103
End-of-Chapter Material 105–110
Part TWO
PORTFOLIO THEORY 111
5 Risk, Return, and the Historical
Record 112
5.1 Rates of Return 113
Measuring Investment Returns over Multiple
Periods 113
Conventions for Annualizing Rates of Return 115
5.2 Inflation and the Real Rate of Interest 116
The Equilibrium Nominal Rate of Interest 117
5.3 Risk and Risk Premiums 118
Scenario Analysis and Probability
Distributions 119
The Normal Distribution 121
Normality and the Investment Horizon 123
Deviation from Normality and Tail Risk 123
Risk Premiums and Risk Aversion 124
The Sharpe Ratio 125
5.4 The Historical Record 126
Using Time Series of Returns 126
Risk and Return: A First Look 127
5.5 Asset Allocation Across Risky and Risk-Free
Portfolios 132
The Risk-Free Asset 133
Portfolio Expected Return and Risk 133
The Capital Allocation Line 135
Risk Aversion and Capital Allocation 136
5.6 Passive Strategies and the Capital Market Line 137
Historical Evidence on the Capital Market Line 137
Costs and Benefits of Passive Investing 138
End-of-Chapter Material 139–146
6 Efficient Diversification 147
6.1 Diversification and Portfolio Risk 148
6.2 Asset Allocation with Two Risky Assets 149
Covariance and Correlation 150
Using Historical Data 153
The Three Rules of Two-Risky-Assets
Portfolios 154
The Risk-Return Trade-Off with
Two-Risky-Assets Portfolios 155
The Mean-Variance Criterion 156
6.3 The Optimal Risky Portfolio with a
Risk-Free Asset 159
3 Securities Markets 55
3.1 How Firms Issue Securities 56
Privately Held Firms 56
Publicly Traded Companies 57
Shelf Registration 57
Initial Public Offerings 58
3.2 How Securities are Traded 59
Types of Markets 59
Types of Orders 60
Trading Mechanisms 62
3.3 The Rise of Electronic Trading 63
3.4 U.S. Markets 65
NASDAQ 66
The New York Stock Exchange 66
ECNs 66
3.5 New Trading Strategies 67
Algorithmic Trading 67
High-Frequency Trading 67
Dark Pools 68
Bond Trading 69
3.6 Globalization of Stock Markets 70
3.7 Trading Costs 71
3.8 Buying on Margin 71
3.9 Short Sales 74
3.10 Regulation of Securities Markets 77
Self-Regulation 78
The Sarbanes–Oxley Act 79
Insider Trading 80
End-of-Chapter Material 81–85
4 Mutual Funds and Other
Investment Companies 86
4.1 Investment Companies 87
4.2 Types Of Investment Companies 87
Unit Investment Trusts 88
Managed Investment Companies 88
Exchange-Traded Funds 89
Other Investment Organizations 89
4.3 Mutual Funds 90
Investment Policies 90
How Funds Are Sold 92
4.4 Costs of Investing in Mutual Funds 93
Fee Structure 93
Fees and Mutual Fund Returns 95
4.5 Taxation of Mutual Fund Income 97
4.6 Exchange-Traded Funds 98
4.7 Mutual Fund Investment Performance:
A First Look 100
Final PDF to printer

Contents ix
bod72160fmi-xxvi.indd ix 10/08/20 03:23 PM
8 The Efficient Market Hypothesis 226
8.1 Random Walks and Efficient Markets 227
Competition as the Source of Efficiency 228
Versions of the Efficient Market Hypothesis 230
8.2 Implications of the EMH 231
Technical Analysis 231
Fundamental Analysis 233
Active versus Passive Portfolio Management 233
The Role of Portfolio Management in
an Efficient Market 234
Resource Allocation 235
8.3 Are Markets Efficient? 235
The Issues 235
Weak-Form Tests: Patterns in Stock Returns 237
Predictors of Broad Market Returns 239
Semistrong Tests: Market Anomalies 239
Other Predictors of Stock Returns 242
Strong-Form Tests: Inside Information 243
Interpreting the Anomalies 243
Bubbles and Market Efficiency 245
8.4 Mutual Fund and Analyst Performance 246
Stock Market Analysts 246
Mutual Fund Managers 247
So, Are Markets Efficient? 251
End-of-Chapter Material 251–257
9 Behavioral Finance and Technical
Analysis 258
9.1 The Behavioral Critique 259
Information Processing 260
Behavioral Biases 261
Limits to Arbitrage 264
Limits to Arbitrage and the Law of One Price 265
Bubbles and Behavioral Economics 267
Evaluating the Behavioral Critique 268
9.2 Technical Analysis and Behavioral Finance 268
Trends and Corrections 269
Sentiment Indicators 273
A Warning 274
End-of-Chapter Material 276–282
Part THREE
DEBT SECURITIES 283
10 Bond Prices and Yields 284
10.1 Bond Characteristics 285
6.4 Efficient Diversification with
many Risky Assets 163
The Efficient Frontier of Risky Assets 163
Choosing the Optimal Risky Portfolio 165
The Preferred Complete Portfolio and a
Separation Property 166
Constructing the Optimal Risky Portfolio:
an Illustration 166
6.5 A Single-Index Stock Market 168
Statistical Interpretation of the
Single-Index Model 171
Learning from the Index Model 173
Using Security Analysis with the Index Model 176
6.6 Risk Pooling, Risk Sharing, and Time
Diversification 177
Time Diversification 180
End-of-Chapter Material 181–193
7 Capital Asset Pricing and Arbitrage
Pricing Theory 194
7.1 The Capital Asset Pricing Model 195
The Model: Assumptions and Implications 195
Why All Investors Would Hold the Market
Portfolio 196
The Passive Strategy Is Efficient 197
The Risk Premium of the Market Portfolio 198
Expected Returns on Individual Securities 199
The Security Market Line 200
Applications of the CAPM 201
7.2 The CAPM and Index Models 202
7.3 How Well Does the CAPM Predict Risk
Premiums? 203
7.4 Multifactor Models and the CAPM 204
The Fama-French Three-Factor Model 206
Estimating a Three-Factor SML 206
Multifactor Models and the Validity of the
CAPM 208
7.5 Arbitrage Pricing Theory 208
Diversification in a Single-Index Security
Market 209
Well-Diversified Portfolios 210
The Security Market Line of the APT 210
Individual Assets and the APT 211
Well-Diversified Portfolios in Practice 212
The APT and the CAPM 212
Multifactor Generalization of the APT 213
Smart Betas and Multifactor Models 214
End-of-Chapter Material 215–225
Final PDF to printer

x Contents
bod72160fmi-xxvi.indd x 10/08/20 03:23 PM
Part FOUR
SECURITY ANALYSIS 363
12 Macroeconomic and Industry
Analysis 364
12.1 The Global Economy 365
12.2 The Domestic Macroeconomy 367
Gross Domestic Product 367
Employment 368
Inflation 368
Interest Rates 368
Budget Deficit 368
Sentiment 368
12.3 Interest Rates 369
12.4 Demand and Supply Shocks 370
12.5 Federal Government Policy 371
Fiscal Policy 371
Monetary Policy 371
Supply-Side Policies 372
12.6 Business Cycles 373
The Business Cycle 373
Economic Indicators 374
Other Indicators 375
12.7 Industry Analysis 377
Defining an Industry 377
Sensitivity to the Business Cycle 380
Sector Rotation 381
Industry Life Cycles 382
Industry Structure and Performance 385
End-of-Chapter Material 386–394
13 Equity Valuation 395
13.1 Valuation by Comparables 396
Limitations of Book Value 397
13.2 Intrinsic Value Versus Market Price 397
13.3 Dividend Discount Models 399
The Constant-Growth DDM 400
Stock Prices and Investment
Opportunities 402
Life Cycles and Multistage Growth Models 405
Multistage Growth Models 409
13.4 Price–Earnings Ratios 410
The Price–Earnings Ratio and Growth
Opportunities 410
P/E Ratios and Stock Risk 414
Pitfalls in P/E Analysis 414
The Cyclically Adjusted P/E Ratio 416
Treasury Bonds and Notes 285
Corporate Bonds 287
Preferred Stock 288
Other Domestic Issuers 289
International Bonds 289
Innovation in the Bond Market 289
10.2 Bond Pricing 291
Bond Pricing between Coupon Dates 294
Bond Pricing in Excel 295
10.3 Bond Yields 296
Yield to Maturity 296
Yield to Call 298
Realized Compound Return versus
Yield to Maturity 300
10.4 Bond Prices Over Time 301
Yield to Maturity versus Holding-Period
Return 303
Zero-Coupon Bonds and Treasury STRIPS 304
After-Tax Returns 304
10.5 Default Risk and Bond Pricing 306
Junk Bonds 306
Determinants of Bond Safety 306
Bond Indentures 308
Yield to Maturity and Default Risk 309
Credit Default Swaps 311
10.6 The Yield Curve 312
The Expectations Theory 313
The Liquidity Preference Theory 316
A Synthesis 317
End-of-Chapter Material 318–327
Managing Bond Portfolios 328
11.1 Interest Rate Risk 329
Interest Rate Sensitivity 329
Duration 331
What Determines Duration? 335
11.2 Passive Bond Management 337
Immunization 337
Cash Flow Matching and Dedication 343
11.3 Convexity 344
Why Do Investors Like Convexity? 346
11.4 Active Bond Management 348
Sources of Potential Profit 348
Horizon Analysis 349
An Example of a Fixed-Income Investment
Strategy 349
End-of-Chapter Material 350–361
Final PDF to printer

Contents xi
bod72160fmi-xxvi.indd xi 10/08/20 03:23 PM
Other Listed Options 480
15.2 Values of Options at Expiration 481
Call Options 481
Put Options 482
Options versus Stock Investments 483
15.3 Option Strategies 485
15.4 Optionlike Securities 493
Callable Bonds 493
Convertible Securities 494
Warrants 496
Collateralized Loans 496
Leveraged Equity and Risky Debt 497
15.5 Exotic Options 498
Asian Options 498
Currency-Translated Options 498
Digital Options 498
End-of-Chapter Material 499–508
16 Option Valuation 509
16.1 Option Valuation: Introduction 510
Intrinsic and Time Values 510
Determinants of Option Values 510
16.2 Binomial Option Pricing 512
Two-State Option Pricing 512
Generalizing the Two-State Approach 515
Making the Valuation Model Practical 516
16.3 Black-Scholes Option Valuation 519
The Black-Scholes Formula 520
The Put-Call Parity Relationship 526
Put Option Valuation 529
16.4 Using the Black-Scholes Formula 529
Hedge Ratios and the Black-Scholes
Formula 529
Portfolio Insurance 531
Option Pricing and the Financial Crisis 534
16.5 Empirical Evidence 535
End-of-Chapter Material 536–546
17 Futures Markets and Risk
Management 547
17.1 The Futures Contract 548
The Basics of Futures Contracts 548
Existing Contracts 551
17.2 Trading Mechanics 551
The Clearinghouse and Open Interest 551
Marking to Market and the Margin Account 554
Combining P/E Analysis and the DDM 417
Other Comparative Valuation Ratios 417
13.5 Free Cash Flow Valuation Approaches 418
Comparing the Valuation Models 421
The Problem with DCF Models 422
13.6 The Aggregate Stock Market 423
End-of-Chapter Material 424–435
14 Financial Statement Analysis 436
14.1 The Major Financial Statements 437
The Income Statement 437
The Balance Sheet 438
The Statement of Cash Flows 439
14.2 Measuring Firm Performance 441
14.3 Profitability Measures 442
Return on Assets 442
Return on Capital 442
Return on Equity 442
Financial Leverage and ROE 442
Economic Value Added 444
14.4 Ratio Analysis 445
Decomposition of ROE 445
Turnover and Asset Utilization 448
Liquidity Ratios 450
Market Price Ratios 451
Choosing a Benchmark 452
14.5 An Illustration of Financial Statement
Analysis 453
14.6 Comparability Problems 456
Inventory Valuation 456
Depreciation 457
Inflation and Interest Expense 458
Fair Value Accounting 458
Quality of Earnings and Accounting Practices 459
International Accounting Conventions 461
14.7 Value Investing: The Graham Technique 462
End-of-Chapter Material 463–474
Part FIVE
DERIVATIVE MARKETS 475
15 Options Markets 476
15.1 The Option Contract 477
Options Trading 478
American versus European Options 479
The Option Clearing Corporation 479
Final PDF to printer

xii Contents
bod72160fmi-xxvi.indd xii 10/08/20 03:23 PM
18.6 Performance Attribution Procedures 602
Asset Allocation Decisions 604
Sector and Security Selection Decisions 604
Summing Up Component Contributions 605
End-of-Chapter Material 607–618
19 International Diversification 619
19.1 Global Markets for Equities 620
Developed Countries 620
Emerging Markets 621
Market Capitalization and GDP 622
Home-Country Bias 622
19.2 Exchange Rate Risk and International
Diversification 623
Exchange Rate Risk 623
Imperfect Exchange Rate Risk Hedging 627
Investment Risk in International Markets 628
International Diversification 630
Are Benefits from International
Diversification Preserved in Bear Markets? 634
19.3 Political Risk 635
19.4 International Investing and
Performance Attribution 638
Constructing a Benchmark Portfolio of
Foreign Assets 638
Performance Attribution 639
End-of-Chapter Material 640–645
20 Hedge Funds 646
20.1 Hedge Funds versus Mutual Funds 647
20.2 Hedge Fund Strategies 648
Directional versus Nondirectional Strategies 648
Statistical Arbitrage 650
High-Frequency Strategies 650
20.3 Portable Alpha 651
An Example of a Pure Play 651
20.4 Style Analysis for Hedge Funds 653
20.5 Performance Measurement for Hedge Funds 655
Liquidity and Hedge Fund Performance 655
Hedge Fund Performance and Selection Bias 657
Hedge Fund Performance and Changing Factor
Loadings 658
Tail Events and Hedge Fund Performance 659
20.6 Fee Structure in Hedge Funds 662
End-of-Chapter Material 665–669
Cash versus Actual Delivery 556
Regulations 557
Taxation 557
17.3 Futures Market Strategies 557
Hedging and Speculation 557
Basis Risk and Hedging 560
17.4 Futures Prices 560
Spot-Futures Parity 560
Spreads 565
17.5 Financial Futures 565
Stock-Index Futures 565
Foreign Exchange Futures 567
Interest Rate Futures 568
17.6 Swaps 570
Swaps and Balance Sheet Restructuring 571
The Swap Dealer 571
End-of-Chapter Material 573–580
Part SIX
ACTIVE INVESTMENT
MANAGEMENT 581
18 Evaluating Investment
Performance 582
18.1 The Conventional Theory of Performance
Evaluation 583
Average Rates of Return 583
Time-Weighted Returns versus
Dollar-Weighted Returns 583
Adjusting Returns for Risk 584
Risk-Adjusted Performance Measures 585
The Sharpe Ratio for Overall Portfolios 586
The Treynor Ratio 588
The Information Ratio 590
The Role of Alpha in Performance Measures 591
Implementing Performance Measurement: An
Example 592
Selection Bias and Portfolio Evaluation 594
18.2 Style Analysis 594
18.3 Morningstar’s Risk-Adjusted Rating 596
18.4 Performance Measurement with
Changing Portfolio Composition 597
18.5 Market Timing 598
The Potential Value of Market Timing 600
Valuing Market Timing as a Call Option 601
The Value of Imperfect Forecasting 602
Final PDF to printer

Contents xiii
bod72160fmi-xxvi.indd xiii 10/08/20 03:23 PM
22 Investors and the Investment
Process 689
22.1 The Investment Management Process 690
22.2 Investor Objectives 692
Individual Investors 692
Professional Investors 694
22.3 Investor Constraints 697
Liquidity 697
Investment Horizon 697
Regulations 697
Tax Considerations 698
Unique Needs 698
22.4 Investment Policies 699
Taxes and Investment Policies for Individual
Investors 701
Top-Down Policies for Institutional Investors 702
Active versus Passive Policies 703
22.5 Monitoring and Revising Investment Portfolios 704
End-of-Chapter Material 705–711
Appendixes
A References 712
B References to CFA Questions 718
Index 721
21 Taxes, Inflation, and Investment
Strategy 670
21.1 Taxes and Investment Returns 671
Equity, Debt, and Tax Deferral 671
Tax-Protected Retirement Plans 672
Deferred Annuities 673
Sheltered versus Unsheltered Savings 673
21.2 Saving for the Long Run 674
A Hypothetical Household 674
The Retirement Annuity 674
21.3 Accounting for Inflation 675
A Real Savings Plan 676
An Alternative Savings Plan 677
21.4 Accounting for Taxes 678
21.5 Tax Shelters and the Savings Plan 679
A Benchmark Tax Shelter 679
The Effect of the Progressive Nature
of the Tax Code 680
Roth Accounts with the Progressive
Tax Code 682
21.6 Social Security 683
21.7 Home Ownership: The Rent-Versus-Buy
Decision 684
21.8 Uncertain Longevity and Other
Contingencies 684
End-of-Chapter Material 686–688
Final PDF to printerbod72160fmi-xxvi.indd xiv 10/08/20 03:23 PM
Essentials of Investments, Twelfth Edition, is intended as a
textbook on investment analysis most applicable for a student’s first
course in investments. The chapters are written in a modular format
to give instructors the flexibility to either omit certain chapters or
rearrange their order. The highlights in the margins describe updates
and important features in this edition.

概括

该书为《投资学精要》第十二版，适用于投资分析入门课程。全书采用模块化编排，便于教师灵活调整章节顺序或选择性授课。内容涵盖投资基础理论（如风险收益、资产定价模型、市场有效性）、证券分析（股票债券估值、财务报表解读）、衍生品市场（期权期货）以及投资组合管理（国际分散化、对冲基金策略）。重点章节包括：投资公司类型与共同基金费用结构、被动与主动投资策略对比、行为金融学对市场异象的解释、多因子模型在资产定价中的应用，并新增了智能贝塔因子等前沿内容。附录提供CFA考试相关参考题目，适合金融专业学生及CFA考生使用。