Table of contents for Fundamentals of investments : valuation and management / Bradford D. Jordan , Thomas W. Miller.

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PART 1	Introduction
1	A Brief History of Risk and Return
1.1	Returns
	Dollar Returns
	Percentage Returns
1.2	The Historical Record
	A First Look
	A Longer Range Look
	A Closer Look
1.3	Average Returns: The First Lesson
	Calculating Average Returns
	Average Returns: The Historical Record
	Risk Premiums
	The First Lesson
1.4	Return Variability: The Second Lesson
	Frequency Distribution and Variability
	The Historic Variance and Standard Deviation
	The Historical Record
	Normal Distribution
	The Second Lesson
1.5	More on Average Returns	
	Arithmetic versus Geometric Averages
	Calculating Geometric Average Returns
	Arithmetic Average Return or Geometric Average Return?
1.6	Risk and Return
	The Risk-Return Trade-Off
	A Look Ahead
1.7	Summary and Conclusions
2	Buying and Selling Securities
2.1	Getting Started
	Choosing a Broker
	Online Brokers
	Security Investors Protection Corporation
	Broker-Customer Relations
2.2	Brokerage Accounts
	Cash Accounts
	Margin Accounts
	A Note on Annualizing Returns
	Hypothecation and Street Name Registration
	Other Account Issues
2.3	Short Sales
	Basics of a Short Sale
	Short Sales: Some Details
2.4	Investor Objectives, Constraints, and Strategies
	Risk and Return
	Investor Constraints
	Strategies and Policies
2.5	Summary and Conclusions
3	Overview of Security Types
3.1	Classifying Securities
3.2	Interest-Bearing Assets	
	Money Market Instruments
	Fixed-Income Securities
3.3	Equities
	Common Stock
	Preferred Stock
	Common Stock Price Quotes
3.4	Derivatives
	Futures Contracts
	Futures Price Quotes
	Gains and Losses on Futures Contracts
3.5	Option Contracts
	Option Terminology
	Options versus Futures
	Option Price Quotes
	Gains and Losses on Option Contracts
	Investing in Stocks versus Options
3.5	Summary and Conclusions
4	Mutual Funds
4.1	Investment Companies and Fund Types
	Open-End versus Closed-End Funds
	Net Asset Value
4.2	Mutual Fund Operations
	Mutual Fund Organization and Creation
	Taxation of Investment Companies
	The Fund Prospectus and Annual Report
4.3	Mutual Fund Costs and Fees
	Types of Expenses and Fees
	Expense Reporting
	Why Pay Loads and Fees?
4.4	Short-Term Funds
	Money Market Mutual Funds
	Money Market Deposit Accounts
4.5	Long-Term Funds
	Stock Funds
	Taxable and Municipal Bond Funds
	Stock and Bond Funds
	Mutual Fund Objectives: Recent Developments
4.6	Mutual Fund Performance Objectives
	Mutual Fund Performance Information
	How Useful Are Fund Performance Ratings?
	Closed Funds	
4.7	Closed-End Funds, Exchange-Traded Funds, and Hedge Funds
	Closed-End Funds Performance Information
	The Closed-End Fund Discount Mystery
	Exchange-Traded Funds
	Hedge Funds
4.8	Summary and Conclusions
PART 2	Stock Markets
5	The Stock Market
5.1	The Primary and Secondary Stock Markets
	The Primary Market for Common Stock
	The Secondary Market for Common Stock
	Dealers and Brokers
5.2	The New York Stock Exchange
	NYSE Membership
	Types of Members
	NYSE-Listed Stocks
5.3	Operation of the New York Stock Exchange
	NYSE Floor Activity
	Special Order Types
	NASDAQ Operations
	NASDAQ Participants
	The NASDAQ System
5.5	NYSE and NASDAQ Competitors
5.6	Stock Market Information
	The Dow Jones Industrial Average
	Stock Market Indexes
	More on Price-Weighted Indexes
	The Dow Jones Divisors
	More on Index Formation: Base-Year Values
5.7	Summary and Conclusions
6	Common Stock Valuation
6.1	Security Analysis: Be Careful Out There
6.2	The Dividend Discount Model
	Constant Dividend Growth Rate Model
	Constant Perpetual Growth
	Applications of the Constant Perpetual Growth Model
	Historical Growth Rates
	The Sustainable Growth Rate
6.3	The Two-Stage Dividend Growth Model
	Discount Rates for Dividend Discount Models
	Observations on Dividend Discount Models
6.4	The Residual Income Model
	Residual Income
	The RIM versus the Constant Growth DDM
6.5	Price Ratio Analysis
	Price-Earnings Ratios
	Price-Cash Flow Ratios
	Price-Sales Ratios
	Price-Book Ratios
	Applications of Price Ratio Analysis
6.6	An Analysis of the McGraw-Hill Company	
	Using the Dividend Discount Model
	Using the Residual Income Model
	Using Price Ratio Analyses
6.7	Summary and Conclusions
7	Stock Price Behavior and Market Efficiency
7.1	Introduction to Market Efficiency
7.2	What Does ?Beat the Market? Mean?
7.3	Foundations of Market Efficiency
7.4	Forms of Market Efficiency
7.5	Why Would a Market Be Efficient?
7.6	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?
	Event Studies
7.7	Informed Traders and Insider Trading
	Informed Trading
	Insider Trading
7.8	How Efficient Are Markets?
	Are Financial Markets Efficient?
	Some Implications of Market Efficiency
7.9	Market Efficiency and the Performance of Professional Money Managers
7.10	Anomalies
	The Day-of-the-Week Effect
	The Amazing January Effect
	Turn-of-the-Year Effect
	Turn-of-the-Month Effect
	The Earnings Announcement Puzzle
	The Price/Earnings (P/E) Puzzle
7.11	Bubbles and Crashes
	The Crash of 1929
	The Crash of October 1987
	The Asian Crash
	The ?Dot-Com? Bubble and Crash
7.12 	Summary and Conclusions
8	Behavioral Finance and the Psychology of Investing
8.1	Introduction to Behavioral Finance
8.2	Prospect Theory
	Frame Dependence
	Mental Accounts and Loss Aversion
	House Money
8.3	Overconfidence
	Overconfidence and Trading Frequency
	Overtrading and Gender: ?It?s (basically) a guy thing?
	What Is a Diversified Portfolio to the Everyday Investor?
8.4	Misperceiving Randomness and Overreacting to Chance Events
	The ?Hot-Hand? Fallacy
	The Gambler?s Fallacy
8.5	Sentiment-Based Risk and Limits to Arbitrage
	Limits to Arbitrage
	The 3Com/Palm Mispricing
	The Royal Dutch/Shell Price Ratio
8.6	Technical Analysis
	Why Does Technical Analysis Continue to Thrive?
	Dow Theory
	Elliott Waves
	Support and Resistance Levels
	Technical Indicators
	Relative Strength Charts
	Fibonacci Numbers
	Other Technical Indicators
8.7	Summary and Conclusions
PART 3	Interest Rates and Bond Valuation
9	Interest Rates
9.1	Interest Rate History and Money Market Rates
	Interest Rate History
	Money Market Rates
9.2	Money Market Prices and Rates
	Bank Discount Rate Quotes
	Treasury Bill Quotes
	Bank Discount Yields versus Bond Equivalent Yields
	Bank Equivalent Yields, APRs, and EARs
9.3	Rates and Yields on Fixed-Income Securities
	The Treasury Yield Curve
	Rates on Other Fixed-Income Investments
9.4	The Term Structure of Interest Rates
	Treasury STRIPS
	Yields for U.S. Treasury STRIPS
9.5	Nominal versus Real Interest Rates
	Real Interest Rates
	The Fisher Hypothesis
	Inflation-Indexed Treasury Securities
9.6	Traditional Theories of the Term Structure
	Expectations Theory
	Maturity Preference Theory
	Market Segmentation Theory
9.7	Determinants of Nominal Interest Rates: A Modern Perspective
	Problems with Traditional Theories
	Modern Term Structure Theory
	Liquidity and Default Risk
9.8	Summary and Conclusions
10	Bond Prices and Yields
10.1	Bond Basics
	Straight Bonds
	Coupon Rate and Current Yield
10.2	Straight Bond Prices and Yield to Maturity
	Straight Bond Prices
	Premium and Discount Bonds
	Relationships among Yield Measures
	A Note on Bond Price Quotes
10.3	More on Yields
	Calculating Yields
	Yield to Call
10.4	Interest Rate Risk and Malkiel?s Theorems
	Promised Yield and Realized Yield
	Interest Rate Risk and Maturity
	Malkiel?s Theorems
10.5	Duration
	Macaulay Duration
	Modified Duration
	Calculating Macaulay Duration
	Properties of Duration
10.6	Bond Risk Measures Based on Duration
	Dollar Value of an 01
	Yield Value of a 32nd
10.7	Dedicated Portfolios and Reinvestment Risk
	Dedicated Portfolios
	Reinvestment Risk
10.8	Immunization
	Price Risk versus Reinvestment Rate Risk
	Immunization by Duration Matching
	Dynamic Immunization
10.9	Summary and Conclusions
PART 4	Portfolio Management
11	Diversification and Risky Asset Allocation
11.1	Expected Returns and Variances
	Expected Returns
	Calculating the Variance
11.2	Portfolios
	Portfolio Weights
	Portfolio Expected Returns
	Portfolio Variance
11.3	Diversification and Portfolio Risk
	The Effect of Diversification: Another Lesson from Market History
	The Principle of Diversification
11.4	Correlation and Diversification
	Why Diversification Works
	Calculating Portfolio Risk	
	The Importance of Asset Allocation, Part 1
	More on Correlation and the Risk-Return Trade-Off
11.5	The Markowitz Efficient Frontier
	The Importance of Asset Allocation, Part 2
11.6	Summary and Conclusions
12	Return, Risk, and the Security Market Line
12.1	Announcements, Surprises, and Expected Returns
	Expected and Unexpected Returns
	Announcements and News
12.2	Risk: Systematic and Unsystematic
	Systematic and Unsystematic Risk
	Systematic and Unsystematic Components of Return
12.3	Diversification, Systematic Risk and Unsystematic Risk
	Diversification and Unsystematic Risk
	Diversification and Systematic Risk
12.4	Systematic Risk and Beta
	The Systematic Risk Principle
	Measuring Systematic Risk
	Portfolio Betas
12.5	The Security Market Line
	Beta and Risk Premium
	The Reward-to-Risk Ratio
	The Basic Argument
	The Fundamental Result
	The Security Market Line
12.6	More on Beta
	A Closer Look at Beta
	Where Do Betas Come From?
	Why Do Betas Differ?
12.7	Extending CAPM
	A (Very) Brief History of Testing CAPM
	The Fama-French Three-Factor Model
12.8	Summary and Conclusions
13	Performance Evaluation and Risk Management
13.1	Performance Evaluation
	Performance Evaluation Measures
	The Sharpe Ratio
	The Treynor Ratio
	Jensen?s Alpha	
13.2	Comparing Performance Measures
	Sharpe-Optimal :Portfolios
13.3	Investment Risk Management
13.4	More on Computing Value-at-Risk
13.5	Summary and Conclusions
PART 5	Futures and Options
14	Futures Contracts
14.1	Futures Contracts Basics
	Modern History of Futures Trading
	Futures Contract Features
	Futures Prices
14.2	Why Futures?
	Speculating with Futures
	Hedging with Futures
14.3	Futures Trading Accounts
14.4	Cash Prices versus Futures Prices
	Cash Prices
	Cash-Futures Arbitrage
	Spot-Futures Parity
	More on Spot-Futures Parity
14.5	Stock Index Futures
	Basics of Stock Index Futures
	Index Arbitrage
	Hedging Stock Market Risk with Futures
	Hedging Interest-Rate Risk with Futures
	Futures Contract Delivery Options
14.6	Summary and Conclusions
15	Stock Options
15.1	Options on Common Stocks
	Option Basics
	Option Price Quotes
	Stock Option Ticker Symbols
15.2	The Options Clearing Corporation
15.3	Why Options?
15.4	Option ?Moneyness?
15.5	Option Payoffs and Profits
	Option Writing
	Option Payoffs
	Payoff Diagrams
	Options Profits
15.6	Option Strategies
	The Protective Put Strategy
	The Covered Call Strategy
15.7	Option Prices, Intrinsic Values, and Arbitrage
	The Upper Bound for a Call Option Price
	The Upper Bound for a Put Option Price
	The Lower Bounds on Option Prices
15.8	Employee Stock Options
	ESO Features
	ESO Repricing
	ESOs at The Gap, Inc.
15.9	Put-Call Parity
15.10	Stock Index Options
	Index Options: Features and Settlement
	Index Option Price Quotes
15.11	Summary and Conclusions
PART 6	Topics in Investments
16	Option Valuation	
16.1	The Black-Scholes-Merton Option Pricing Model
16.2	Valuing Employee Stock Options
16.3	Varying the Option Price Input Values
	Varying the Underlying Stock Price
	Varying the Option?s Strike Price
	Varying the Time Remaining until Option Expiration
	Varying the Volatility of the Stock Price
	Varying the Interest Rate
	Varying the Dividend Yield
16.4	Measuring the Impact of Input Changes on Option Prices
	Interpreting Option Deltas
	Interpreting Option Etas
	Interpreting Option Vegas
	Interpreting an Option?s Gamma, Theta, and Rho
16.5	Implied Standard Deviations	
	CBOE Implied Volatilities for Stock Indexes
16.6	Hedging Stock with Stock Options
	Hedging Using Call Options--The Prediction
	Hedging Using Call Options--The Results
	Hedging Using Put Options--The Prediction
	Hedging Using Put Options--The Results
16.7	Hedging a Stock Portfolio with Stock Index Options
16.8	Summary and Conclusions
17	Projecting Cash Flows and Earnings
17.1	Sources of Financial Information
17.2	Financial Statements
	The Balance Sheet
	The Income Statement
	The Cash Flow Statements
	Performance Ratios and Price Ratios
17.3	Financial Statement Forecasting
	The Percentage of Sales Approach
	The Pro Forma Income Statement
	The Pro Forma Cash Flow Statement
	The Pro Forma Balance Sheet	
	Scenario One
	Scenario Two
	Projected Profitability and Price Ratios
17.4	Starbucks Corporation
	Pro Forma Income Statement
	Pro Forma Balance Sheet
	Valuing Starbucks Using Ratio Analysis
	Valuing Starbucks Using a Two-Stage Residual Income Model
	Valuing Starbucks: What Does the Market Say?
17.5	Summary and Conclusions
18	Corporate Bonds
18.1	Corporate Bond Basics
18.2	Types of Corporate Bonds
18.3	Bond Indentures
	Bond Seniority Provisions
	Call Provisions
	Put Provisions
	Bond-to-Stock Conversion Provisions
	Graphical Analysis of Convertible Bond Prices
	Bond Maturity and Principal Payment Provisions
	Sinking Fund Provisions
	Coupon Payment Provisions
18.4	Protective Covenants
18.5	Event Risk
18.6	Bonds without Indentures
18.7	Preferred Stock
18.8	Adjustable-Rate Bonds and Adjustable-Rate Preferred Stock
18.9	Corporate Bond Credit Ratings
	Why Bond Ratings Are Important
18.10	Junk Bonds
18.11	Bond Market Trading
18.12	Summary and Conclusions
19	Government Bonds
19.1	Government Bond Basics
19.2	U.S. Treasury Bills, Notes, Bonds, and STRIPS
	Treasury Bond and Note Prices
	Treasury Inflation-Protected Securities
19.3	U.S. Treasury Auctions
19.4	U.S. Savings Bonds
	Series EE Savings Bonds
	Series I Savings Bonds
19.5	Federal Government Agency Securities
19.6	Municipal Bonds
	Municipal Bond Features
	Types of Municipal Bonds
	Municipal Bond Credit Ratings
	Municipal Bond Insurance
19.7	Equivalent Taxable Yield
19.8	Taxable Municipal Bonds
19.9	Summary and Conclusions
20	Mortgage-Backed Securities
20.1	A Brief History of Mortgage-Backed Securities
20.2	Fixed-Rate Mortgages
	Fixed-Rate Mortgage Amortization
	Fixed-Rate Mortgage Prepayment and Refinancing
20.3	Government National Mortgage Association
	GNMA Clones
20.4	Public Securities Association Mortgage Prepayment Model
20.5	Cash Flow Analysis of GNMA Fully Modified Mortgage Pools
	Macaulay Durations for GNMA Mortgage-Backed Bonds
20.6	Collateralized Mortgage Obligations
	Interest-Only and Principal-Only Mortgage Strips
	Sequential Collateralized Mortgage Obligations
	Protected Amortization Class Bonds
20.7	Yields for Mortgage-Backed Securities and Collateralized Mortgage 
20.8	Summary and Conclusions
A	Answers to Test Your Investment Quotient Questions
B	Answers to Selected Questions and Problems

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