Martingale Asset Management -Jaimin

Suppose that the price of an asset equals its fundamentalvalue. What behavioral features might then ensure that investors continue totrade? Answer this question specifically in the context of the models that havebeen taught in your course.

Asset allocation is performed to A) reduce the load that intermediaries charge maximize the earning potential of an B) investment vehicle C) maximize the earning potential of a portfolio protect against significant declines in any D) one investment vehicle O E) maximize the returns from any one vehicle

Financial advisors generally recommend that their clients allocate more to higher risk–return asset classes (like equities) if their investment horizons are long. Is this advice consistent with the basic M-V model? Does adding a shortfall constraint to the M-V model make a difference? If so, how? If not, why not? Assuming investment opportunities change over time, what type of asset return behavior would justify this advice within the M-V framework?

Select all that are true with respect to the theory of market efficiency. Group of answer choices If markets are efficient, investors cannot earn positive returns If markets are efficient, it means prices are always "right" in that the reflect perfect foresight into what will happen in the future Strong form market efficiency suggests that all information, public or private, is reflected in current prices in an unbiased way Market efficiency suggests that relevant information is quickly impounded into prices If transaction costs are high, then prices are less likely to reflect all available information

basic economics can give us the sniff test. It provides us with a basic set of rules to which any decent investment advice must conform." These "set of rules" include all of the below EXCEPT THIS ONE. Which of the below is NOT one of these rules for wise investment? Group of answer choices   Invest for the long run.   Take risk, earn reward,.   Engage in high risk short-term trading.   Diversify your investments.

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Which of the following statements describing the elements of intrinsic valuation is most accurate? A.) When the present value of the cashflows is discounted with the appropriate rate and this present value is positive, then the asset providing these cashflows has a value to the investor. B.) The risk-free rate is the lowest rate that an investor can earn from short-term investments. C.) Cashflows may include depreciation expenses and amortization costs. D.) A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.

1. How to compare different assets in investment selection process? 2. What are the quantitative characteristics of the assets and how to measure them? 3. How does one asset in the same portfolio influence the other one in the same portfolio? 4. And what could be the influence of this relationship to the investor’s portfolio? 5. What is relationship between the returns on an asset and returns in the whole market (market portfolio)?

Which of the following is an approach to value? Pick the best answer. Question 1 Select one: a.Discounted cash flow b. Asset based c. Comparable companies d. Industry rules of thumb

Current Attempt in Progress Describe how investing in more than one asset can reduce risk through diversification. B I U T₂ T² T = = || E

Answer following questions:1.- What should an investor recognize if required rate on his fixed income investments, whose business model is to do branding, increases significantly?2.- What is understood by bringing values of an investment to “AMORTIZED COST”?

An investor’s first step of investing in the financial markets is to establish an investment objective aligned with his or her long-term financial goals and needs. The critical part of the investment process is to earn the maximum return possible while minimizing risk. Portfolio diversification is the cornerstone of reducing risk in a portfolio. How would you use the Excel spreadsheet to quantify and reduce the risk in your risky asset investment portfolio?

Select all that are true with respect to why it is that systematic (and not unsystematic) risk is what matters when trying to understand discount rates. Group of answer choices Because systematic risk can be cheaply/easily eliminated through diversification Because discount rates are fully determined by an individual asset's risk Because unsystematic risk can be cheaply/easily eliminated through diversification Because in a competitive market, investors can largely eliminate unsystematic risk cheaply/easily, and thus, don't demand to be paid for bearing it.

Which of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.

Which of the following best explains the role of diversification as part of an investment strategy?   a.Choosing investment vehicles with varying levels of risk/reward   b.Spreading investments out over time   c.Balancing investment amounts with debt amounts   d.Soliciting the opinions of multiple financial planners

The ultimate goal of the financial system in a market economy is to make the price of financial assets correctly reflect their true value (informational efficiency) achieve the financial equality among different people and organizations make the costs of financial transactions as low as possible (operational efficiency) allocate funds to their best use (allocational efficiency)

An investor who believes that markets are efficient should follow: A. An active management strategy B. A market timing strategy C. A passive investment strategy

Describe an investment strategy that tries to grow money. You can only use for the description terms like such as day trading, short term and long term investing, risk- averse, risk tolerant etc.

Explain what’s wrong with the following logic to construct multifactor asset pricing models. Start with a simple asset pricing model, e.g. CAPM Consider which patterns are explained by it and which are left unexplained. If some firm characteristic “X” is unexplained, construct and include a new factor on the basis of this characteristic. By definition your new model (with new factor would explain “X”) Repeat steps 2 and 3 until all/most important anomalies are accounted for

explain the unique characteristics of the asset class, their associated risks and potential returns. Foreach asset class, you should use one or two examples to support your explanation. Asset Class           Characteristics Risk Potential Returns ExampleCash Products Fixed Income Equities CurrenciesDerivatives

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