28 Jan DQ1 Discuss how securities

FIN655 Investments

Week 1 Discussion

DQ1 The relationship between risk and expected return is typically described as linear (e.g. the Security Market Line or SML). What is the relationship in terms of the slope of the SML? Why is this important?

DQ2 A conservative investment advisor foresees a downturn in the economy and recommends low risk investments. An aggressive investor has a very positive outlook and recommends taking a higher risk. What advice do you take? Discuss the effect of the advice received on your long term asset allocation.

FIN655 Investments

Week 2 Discussion

DQ1 An innovative technology company is planning a NASDAQ IPO. One year ahead of the planned IPO the company is already raising capital through private placement markets. What you can infer from the company success in the private market about the success of the IPO?

DQ2 The DJIA is often criticized as not being representative of the economy given that it comprises of stocks of only 30, large, mature, and less volatile companies. It has been observed that the DJIA performance often does not mimic that of the NYSE. What are the merits or demerits of the DJIA composition? Provide examples to support your answer.

FIN655 Investments

Week 3 Discussion

DQ1 Extensive resources and innovative computer technology have enabled some individuals to create efficient capital markets. In these markets many analysts and portfolio managers have an increased difficulty to consistently achieve superior results. What are some ways in which portfolio managers can improve their performance in these markets?

DQ2 There are investors who claim they only invest in companies with great products and outstanding management, and ignore the stock price. Does it still make sense to develop an efficient frontier while adhering to this approach to investment? Discuss why or why not.

FIN655 Investments

Week 4 Discussion

DQ1 Discuss the similarities and differences between the CML and SML as models of the risk-return tradeoff. Is one model better than the other when evaluating a well-diversified portfolio? Explain your answer.

DQ2 Discuss a scenario in which the CAPM and APT models would lead to contradicting conclusions regarding the selection of stocks for your portfolio. How would you address the contradiction: would you prefer CAPM over APT or find a different solution?

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Week 5 Discussion

DQ1 A manufacturing company from a country considered to be an emerging market has just issued an IPO on NYSE. The company is increasingly becoming a popular outsourcing partner for many US firms. How are market conditions in the US and the company’s country of origin factored? Why is it important to perform a post-IPO risk and growth analysis?

DQ2 Several factors affect the assessment of the risk premium for an investment in a stock. Companies in different countries differ in the levels of financial leverage they exercise. How does a company use financial leverage to assess its risk premium?

FIN655 Investments

Week 6 Discussion

DQ1 A company has just launched a franchising opportunity. Discuss the two factors that would determine its franchise value. What if the company was known for differentiating? How would this affect its franchise value?

DQ2 Technical analysis is largely based on the assumption that trends persist. Contrast and discuss how technical analysts and efficient market advocates would each address high volatility in a market. Is one approach more suitable than other to guide investment decisions in a highly volatile market?

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Week 7 Discussion

DQ1 Discuss how securities backed by title loans differ from securities backed by cash-flow generating assets in terms of risk and liquidity. How do high-yield bonds affect each type of security?

DQ2 Discuss the reliability of the yield curve as a basis for determining individual values of bonds (using an individual spot rate for each cash flow). How do spot rates imply investor expectations about future rates?

FIN655 Investments

Week 8 Discussion

DQ1 In a diversified mutual fund an investor must take into account changes across a variety of stocks. A less diversified one might offer a higher degree of performance predictability. Which type of fund (if any) has a higher degree of return predictability? Explain your answer.

DQ2 As interest rates in the second decade of the 21st century are at historic lows, discuss whether this trend dampens the incentive to trade bonds actively. Discuss whether there is a fundamental difference between bond portfolio evaluation in a high-interest market versus a low-interest one.