Equity Markets and Portfolio Analysis

In recent years, changes have swept through the investment industry like wildfire. Academia has followed along and provided new lenses for viewing this transformation, as well as new strategies for gaining a true understanding and knowledge of investment and financial markets. Now, Equity Markets and Portfolio Analysis has been created to further inform investment professionals and finance students on the basic concepts and strategies of investments, and to provide more detailed discussions on advanced strategies and models. The concepts covered in this book will help readers gain a better understanding of the markets and uses for an increasing number of securities, strategies, and methodologies.

Equity Markets and Portfolio Analysis is the only core investment book that covers the functionality of Bloomberg terminals, increasingly critical tools both in the classroom and on the trading floor. As Bloomberg terminals now play a key role in the research, teaching, and managing of student investment funds, understanding the system's information and analytical functions has become more important than ever.

• In-depth coverage of fundamentals through more detailed concepts for students and professionals who want to better understand the evaluation, selection, and management of securities
• One-of-a-kind training and instructional course, introduction to Bloomberg investment subjects, and reference for CFA preparation
• Bloomberg material provided in an appendix accompanying each chapter, a useful option for professors
• Ideal for finance practitioners, investment bankers, and academics

This unique resource will give readers both the foundational knowledge and the analytical tools necessary for investment success, both in the classroom and in the real world.

Preface ix

Acknowledgments xiii

Chapter 1 Overview of the Financial System 1

Chapter 2 Overview and Guide to the Bloomberg System 29

Chapter 3 Stock and Bond Valuation and Return 73

Chapter 4 Equity Securities, Markets, and Trading 131

Chapter 5 Investment Funds, Intermediate Securities, and Global Equity Markets 179

Chapter 6 Expected Rate of Return and Risk—Stock 221

Chapter 7 Portfolio Evaluation 267

Chapter 8 Portfolio Selection—Markowitz Model 303

Chapter 9 The Capital Asset Pricing Model 347

Chapter 10 The Arbitrage Pricing Theory 365

Chapter 11 The Financial Anatomy of a Company—Fundamental Analysis 385

Chapter 12 Applied Fundamental Analysis 437

Chapter 13 Market and Industrial Analysis: Top-Down Approach 487

Chapter 14 Technical Analysis 537

Chapter 15 Efficient Markets 581

Chapter 16 Options Markets 623

Chapter 17 Futures Markets 669

Index 695

R. STAFFORD JOHNSON is Professor of Finance at the Williams College of Business, Xavier University. He is the author of five books: Options and Futures, Introduction to Derivatives, two editions of Bond Evaluation, Selection, and Management, and Debt Markets and Analysis. He has also written articles appearing in journals such as Applied Economics, Journal of Financial Education, International Review of Economics & Business, Journal of Economics, The Financial Review, and the Review of Quantitative Finance and Accounting.

Managing securities in today's dynamic investment environment requires an understanding of an increasing number of markets, strategies, and methodologies. In response, many of today's most successful practitioners manage their securities and portfolios using a Bloomberg terminal. As part of Bloomberg Financial's three-part series on securities, Equity Markets and Portfolio Analysis focuses on the functionality of Bloomberg terminals with regard to stocks and stock portfolios.

The Bloomberg system is common on trading floors and is becoming increasingly common in university programs, and its understanding is essential for gaining a competitive advantage in the marketplace. This book is part two in the series, offering a complete guide to the basic concepts, strategies, and fundamentals of the Bloomberg system. It also includes a more detailed discussion of advanced strategies and models that can then be applied to investment analysis in the real world. Topics include: stocks and bonds, equity securities, portfolio evaluation and selection, capital assets, fundamental analysis, market and industrial analysis, and technical analysis.

Written to help professionals as well as MBA, MS, or undergraduate students, Equity Markets and Portfolio Analysis helps readers understand the complexities and subtleties involved in securities while also providing the necessary structure to apply that understanding to real-world investment decisions. The text is ideal for a one-semester investment course for students or as a training and instructional course for professionals. It can also be used as an effective reference for CFA preparation.

Equity Markets and Portfolio Analysis takes a comprehensive look at the Bloomberg system, including equity securities and markets, the major theories and models, and the practical applications of these models. This book contains fundamental resources and analytical methods for academic and professional utility.

• Extensive coverage of basic market concepts, strategies, models, and methodologies
• Detailed explanation of the Bloomberg system and how to fuse Bloomberg information and analytics with fundamental investment concepts
• Useful, practical Bloomberg exercises to expand knowledge of investments and further illustrate the breadth of financial information and analytical tools available through the Bloomberg system

The book also presents case and empirical studies that not only give readers a better foundation in understanding financial markets, but also the ability to grasp how "it is done on the Street."

Written as the only core investment book to teach the functionality of Bloomberg terminals, Equity Markets and Portfolio Analysis is an ideal resource for finance practitioners, investment bankers, and academics looking to gain a competitive advantage in the marketplace.