Advanced Investments
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Episodes
S1 E1 - Investment Decisions and Goals
October 31, 202331minWhen it comes to wealth, more is better. But how important is liquidity to you? How important is risk? How important is being able to leave a legacy to members of your family or to causes you hold dear? As preparation for the course, consider these and other personal goals.Free trial of The Great Courses Living or buyS1 E2 - A Framework for Investing
October 31, 202330minLearn how to layer various types of active management strategies on top of a passive market portfolio. Professor Slezak outlines three primary strategies: timing the market, reallocating money across sectors, and picking stocks that may outperform their sector. He also describes shorting and arbitrage.Free trial of The Great Courses Living or buyS1 E3 - Mistakes Investors Make
October 31, 202331minIt’s easy to fool yourself when making important investment decisions. Examine three common cognitive errors: framing, biased self-attribution, and seeing patterns where none exist. These natural human tendencies highlight the need to avoid emotional or illogical reactions to financial information.Free trial of The Great Courses Living or buyS1 E4 - The Characteristics of Security Returns
October 31, 202332minReview concepts from probability and statistics that are essential to know in investing. Focus on formulas that measure three characteristics of an asset: its expected return, its return variance (or volatility), and the covariance (or correlation) of its return with the returns on other assets.Free trial of The Great Courses Living or buyS1 E5 - The Theory of Efficient Markets
October 31, 202331minIs it possible to make money by actively trading in the market? According to the efficient markets hypothesis, you are better off as a passive investor, because prices almost always reflect true value. Explore three versions of this theory, including the weak form, which holds that prices follow what is called a random walk.Free trial of The Great Courses Living or buyS1 E6 - Evidence on Efficient Markets
October 31, 202331minContinue your study of the efficient markets hypothesis by investigating data from actual markets. Focus on momentum phenomena and volatility anomalies as possible evidence of market inefficiencies. Are these real opportunities to beat the market or only illusions that snare overconfident investors?Free trial of The Great Courses Living or buyS1 E7 - Valuation Formulas
October 31, 202335minExplore one of the most basic building blocks of any financial valuation method: the concept of the time value of money. Obtain formulas for present value, future value, and net present value. Then use these tools to solve a problem in retirement planning.Free trial of The Great Courses Living or buyS1 E8 - Bond Pricing
October 31, 202332minInvestigate bond pricing, which compared to stock pricing is beautifully predictable—if complex. Understand why interest rates vary across different bonds. Practice calculating the bond price for a given rate. Then take the price as given, and determine the yield to maturity.Free trial of The Great Courses Living or buyS1 E9 - The Term Structure of Interest Rates
October 31, 202333minAt a given moment, interest rates vary with the time to maturity of different bonds. Examine the yield curve and the term structure of interest rates, learning how to weigh your investment choices. Discover that bond prices are a window to the expected future performance of the market.Free trial of The Great Courses Living or buyS1 E10 - The Risks in Bonds
October 31, 202332minLearn how to think about the risks of owning bonds. Start by considering interest rate risk. Then examine how default or credit risk affects the yields on bonds. While most investors only want to consider highly rated bonds, significant return can be earned by bearing default risk.Free trial of The Great Courses Living or buyS1 E11 - Quantifying Interest Rate Risk
October 31, 202331minGet an intuitive feel for the features that raise or lower interest rate risk on bonds. Practice calculating duration, and discover that the time to maturity may not be particularly close to the duration of a bond. This underscores the importance of focusing on the duration of your bond investments.Free trial of The Great Courses Living or buyS1 E12 - Value Creation and Stock Prices
October 31, 202332minConsider how the equity returns on two firms that are essentially in the same business can be very different based solely on differences in capital structure. Both can be efficiently priced, but one will have a higher equity return due to its higher leverage and resulting risk.Free trial of The Great Courses Living or buyS1 E13 - Present Value of Growth Opportunities
October 31, 202334minUse the formulas developed in Lecture 7 to analyze the present value of a firm under different scenarios. By employing a simple model, you will be able to identify how managerial decisions in a well-run company can lead to increased stock price.Free trial of The Great Courses Living or buyS1 E14 - Modeling Investor Behavior
October 31, 202332minGood investors are not necessarily those who can find good investments, but those who can predict what stocks others will pick. Learn how economists model investor behavior, focusing on the indirect utility function, which can predict people’s aversion to variations in outcome.Free trial of The Great Courses Living or buyS1 E15 - Managing Risk in Portfolios
October 31, 202332minInvestors do not—and should not—hold just one security at a time. Explore strategies for combining securities into a variety of optimal portfolios. For any level of risk, such portfolios have the highest average return; and, for any level of average return, they have the lowest risk.Free trial of The Great Courses Living or buyS1 E16 - The Behavior of Stock Prices
October 31, 202330minLearn to use regression analysis to quantify the characteristics of a security, particularly its risk and possible mispricing relative to an asset pricing model. One of Professor Slezak’s goals is to introduce techniques that allow you to analyze data that is widely available on the Internet.Free trial of The Great Courses Living or buyS1 E17 - The Capital Asset Pricing Model (CAPM)
October 31, 202333minStudy the characteristics of an equilibrium asset pricing model. Then build the most popular version—the capital asset pricing model (CAPM)—which allows you to measure risk for a portfolio. According to CAPM, the cross- section of returns is driven by common risks that cannot be eliminated through diversification.Free trial of The Great Courses Living or buyS1 E18 - How to Exploit Mispriced Securities
October 31, 202330minExplore three steps for exploiting mispriced securities. First, investigate the strategy of short selling. Then, develop a measure of mispricing called alpha. Finally, use information about a stock’s alpha and its volatility to form an optimal risky portfolio.Free trial of The Great Courses Living or buyS1 E19 - Performance Evaluation
October 31, 202335minHow do you know if an actively managed portfolio is producing worthwhile results? Survey several performance metrics: the Sharpe ratio, the Treynor measure, Jensen’s alpha, the M-squared measure, and the information ratio. The measure you need depends on how you are using the portfolio you are evaluating.Free trial of The Great Courses Living or buyS1 E20 - Market Making and Liquidity
October 31, 202332minProbe the nature of liquidity, learning how it is defined, how to measure it, and when to pay the market price for a liquid security. Many less-well-known stocks may be less liquid. But because they are less well-known, they are more likely to be mispriced, presenting potential trade opportunities.Free trial of The Great Courses Living or buyS1 E21 - Understanding Derivatives
October 31, 202331minBegin your examination of derivative securities, first by defining them and then by looking at option contracts called “puts” and “calls.” Also examine how a lack of transparency in a type of derivative called credit default swaps contributed to instability during the financial crisis of 2008.Free trial of The Great Courses Living or buyS1 E22 - Using Derivatives
October 31, 202330minInvestigate two uses for options: speculation and hedging. Follow the steps for betting on the direction of movement in the price of a security. Then see that hedging is less risky and can be compared to buying insurance. Learn that the important variables in a hedge are the hedge ratio and the option delta.Free trial of The Great Courses Living or buyS1 E23 - Pricing Derivatives
October 31, 202333minContinue your study of derivatives by looking at the two most popular strategies for pricing options: the binomial method and the revolutionary Black-Scholes formula. The key insight of these pricing models is that you can build structures out of existing securities that behave just like the underlying option.Free trial of The Great Courses Living or buyS1 E24 - Trade Opportunities or Risk?
October 31, 202333minReturn to the capital asset pricing model introduced in Lecture 17, evaluating its effectiveness. Then analyze alternatives to CAPM along with anomalies that are at odds with existing models. Close by putting the course into perspective, stressing the wisdom and profit of trusting the market in the long term.Free trial of The Great Courses Living or buy
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