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.

How do I/What is the process for solving this problem: You are an investment manager for Simple Asset Management, a company that specializes in developing simple investment portfolios consisting of no more than three assets such as stocks, bonds, etc., for investors who like to keep things simple. One of your more popular investments is called the All World Fund and is composed of global stocks with good dividend yields. A client is interested in constructing a portfolio that consists of the All World Fund and the Treasury Index Fund, which consists of U.S. Treasury securities (government bonds). You calculate a 7.8% expected return on the All World Fund with a return standard deviation (a measure of risk) of 18.90%. The expected return of the Treasury Index Fund is 5.50% with a return standard deviation of 4.6%. To analyze the relationship between the two investments, you also calculate the covariance between the two of –12.4.   Expected return on a portfolio of…

Consider the following statement: “In contexts of increased uncertainty, the usefulness of real options when valuing an investment opportunity increases”. Do you agree with this statement? Explain your answer.

The recent financial crisis clearly depicted a positive correlation between asset prices and, as a result, could warrant consideration for optimal portfolio strategies. Why would an investor prefer a constrained portfolio optimization approach?

Read the exerpt below and then answer the questions: The idea behind diversification is that if you spread your investment dollars around to various investments, if one goes down, the others will protect you from losing everything and if you diversify perfectly, the other investments may move in the opposite direction, so that your gains offset your losses.  So maybe some of your investments produce positive returns, while others are losing money.  But what if a particular stock produces huge gains? Consider Twitter. Its IPO was at the beginning of Nov 2013 and the stock opened at a price of about $42. By the end of the year 2013, the stock was trading at $69 a share. So, if you had $100,000 to invest and you put it all into Twitter at the IPO, your investment was worth about $164,000 at the end of 2013 – a gain of $64,000 in about 2 months! But what if you had diversified and put only $20,000 in Twitter and you invested $80,000 in other stocks? At the end of 2013, your Twitter stock…

Market efficiency requires:   all investors are rational all the time. all investors are rational in the short term. all investors are rational in the long term. all investors are irrational in the short term. many investors are rational at any point in time. All of the above answers are correct. None of the above answers is correct.

You've heard the expression "no pain, no gain"? In the investment world, the comparable phrase would be "no risk, no reward." How you feel about risking your money will drive many of your investment decisions. The risk-comfort scale extends from very conservative (you don't want to risk losing a penny regardless of how little your money ears) to very aggressive (you're willing to risk much of your money for the possibility that it will grow tremendously). As you might guess, most investors' tolerance for risk falls somewhere in between. If you're unsure of what your level of risk tolerance is, this quiz should. 10. Your attitude toward money is best described as: (a) a dollar saved is a dollar earned, (b) you've got to spend money to make money, (c) cash and carry only, (d) whenever possible, use other people's money.

You are looking for an investment vehicle that has two characteristics. First, you want an incentive structure for asset managers where they earn more money when you (the investor) earns more money. Second, you want a mostly diversified pool of investments. Which vehicle is your best option? O Hedge fund Closed-end mutual fund Open-end mutual fund

No risk, no reward. Most people intuitively understand that they have to bear some risk to achieve an acceptable return on their investment portfolios. But how much risk is right for you? If your investments turn sour, you may put at jeopardy your ability to retire, to pay for your kid's college education, or to weather an unexpected need for cash. These worst-case scenarios focus our attention on how to manage our exposure to uncertainty. Assessing and quantifying-risk aversion is, to put it mildly, difficult. It requires confronting at least these two big questions. First, how much investment risk can you afford to take? If you have steady high-paying job, for example, you have greater ability to withstand investment losses. Conversely, if you are close to retirement, you have less ability to adjust your lifestyle in response to bad investment outcomes. Second, you need to think about your personality and decide how much risk you can tolerate. At what point will you be unable to…

You believe you have found a trading strategy that could make significant profits. It requires looking at analyst forecasts and purchasing stock where therehas been an upgrade in the recommendation and selling shares where there has been a downgrade in the recommendation.a. Describe which form the Efficient Market Hypothesis will be viola ed if you are able to make significant profits from your trading strategy in the future.b. List three factors that you may be overlooking in assessing the profitability of your trading strategy.