Books

Notes#

Highlights#

1. [y] “smart beta”
2. [y] modern portfolio theory, whose insights will enable you to reduce risk while possibly earning a higher return
3. [o] investors can increase their returns by assuming a certain kind of risk
4. [i] psychology, not rationality, rules the market, and that there is no such thing as a random walk
5. [z] they should constitute the core of all portfolios
6. [y] The efficient-market hypothesis explains why the random walk is possible.
7. [i] Because of the actions of the pros, the prices of individual stocks quickly reflect all the news that is available.
8. [b] Samuel Butler
9. [z] the method of beating the market, they say, is not to exercise superior clairvoyance but rather to assume greater risk
10. [y] The dividend of the company may be cut
11. [s] Thus, financial risk has generally been defined as the variance or standard deviation of returns.
12. [j] Although the pattern of historical returns from individual securities has not usually been symmetric, the returns from well-diversified portfolios of stocks are at least roughly symmetric.
13. [v] Thus, in two-thirds of the months the returns from this portfolio were between +5½ percent and –3½ percent, and 95 percent of the returns were between 10 percent and –8 percent.
14. [y] October 1987 is the most dramatic change in stock prices during a brief period since the 1930s
15. [y] there are ways in which investors can reduce risk.
16. [s] What Markowitz discovered was that portfolios of risky (volatile) stocks might be put together in such a way that the portfolio as a whole could be less risky than the individual stocks in
17. [s] quadratic programming
18. [o] although both companies were risky (returns were variable from year to year), the companies were affected differently by weather conditions
19. [j] negative covariance
20. [z] most investors will realize that when the market gets clobbered, just about all stocks go down
21. [t] anything less than perfect positive correlation can potentially reduce risk
22. [y] can there be too much of a good thing? diversification: yes
23. [v] fifty equal-sized and well-diversified U.S. stocks
24. [v] total risk is reduced by over 60 percent
25. [y] increases in the price of oil and raw materials have a negative effect on Europe, Japan, and even the United States,
26. [y] oil price increases have a very positive effect on Indonesia and oil-producing countries in the Middle East.
27. [y] international diversified portfolio tends to be less risky than the one drawn purely from U.S. stocks
28. [y] EAFE (developed foreign country
29. [y] The paradoxical result of this analysis is that overall portfolio risk is reduced by the addition of a small amount of riskier foreign securities.

garbage text. Hardy was a sad man. A soul that withered away like a rock in the ocean.

feeble, uninspiring.

lacking lustre.

My copy by the “Hawk Press” publisher was riddled with typos which reduced the enjoyment of the reading further more.

manufactured by amazon!

there is also a corresponding solution manual which I have found