Discount model is in terms of conditional moments The first order condition is,u'( BE, [u'(c )x 1] The expectation is conditional expectation on investor's time t information; The basic pricing equation is P, =E, (m +1X1+)

Predictions and applications CAPM: in market equilibrium, investors are only rewarded for bearing the market risk; APT: in the absence of arbitrage, investors are only rewarded for bearing the factor risk Applications: ---professional portfolio managers: evaluating security returns and

Consumption-Based Model and Basic Pricing model Basic question to decide for an investor: (1) how much to save; (2)how much to consume; (3)what portfolio of assets to hold. Pricing equation come from the first order condition for this decision

Discussion Points How to measure returns? How to choose benchmark? How to adjust for risk? Performance attribution. Active return and risk

Stock market index Stock market index is an indicator that is designed to reflect the performance of an entire market or a particular market segment. Indexes have many uses in investments: --allow us to quickly and easily assess market performance; --Serve as underlying securities for futures and options contracts;

Arbitrage Pricing Theory Arbitrage-arises if an investor can construct a zero investment portfolio with a sure profit Since no investment is required, an investor can create large positions to secure large levels of profit

INVESTMENTS Individhual assets and frontier portfolio So far we have learned: 1. Investor hold portfolios to reduce risk. \Non-systematic risks\ of individual assets does not matter. only \systematic risks\matter. 2. Investors hold only frontier portfolios. The natural questions to ask next are:

Capital allocation The choice of proportion in safe asset and proportion in risky asset; Most institutional investors follows top- down analysis---The first part is asset allocation and the next part is security selection decision

Course overview The focus of this course is on financial theory and empirical evidence that are useful for investment decisions. The topics include: Financial theory: This include portfolio theory, CAPM, APT, discount factor model, they are important for decision-making in investments;

第一章会计基本理论 第二章币资金 第三章应妆款项 第四章存货 第五章投资 第六章固定资产 第七章无形资产和其他资产 第八章流动负债 第九章长期负债