CHAPTER ONE Introduction to Investing and Valuation Concept Questions C1.1. Yes. Stocks would be efficiently priced at the agreed fundamental value and the market price would impound all the information that investors are using. Stock prices would change as new information arrived that revised the fundamental value. But that new information would be unpredictable beforehand. So changes in prices would also be unpredictable: stock prices would follow a “random walk.” C1.2. Index investors buy a market index--the S&P 500, say--at its current price. With no one doing fundamental analysis, no one would have any idea of the real worth of stocks. Prices would wander aimlessly, like a “random walk.” A lone fundamental investor might have difficulty making money. He might discover that stocks are mispriced, but could not be sure that the price will ultimately return to “fundamental value.” C1.3. Fundamental risk arises from the inherent risk in the business – from sales revenue falling or expenses rising unexpectedly, for example. Price risk is the risk of prices deviating from fundamental value. Prices are subject to fundamental risk, but can move away from fundamental value, irrespective of outcomes in the fundamentals. When an investor buys a stock, he takes on fundamental risk – the stock price could drop because the firm’s operations don’t meet expectations – but he also runs the (price) risk of buying a stock that is overpriced or selling a stock that is underpriced. See Box 1.1. Chapter 18 elaborates. Introduction to Investing and Valuation – Chapter 1 p. 1 C1.4. A beta technology measures the risk of an investment and the required return that the risk requires. The capital asset pricing model (CAPM) is a beta technology; is measures risk (beta) and the required return for the beta. An alpha technology involves techniques that identify mispriced stocks than can earn a return in excess of the required return (an alpha return). See Box 1.1. The appendix to Chapter 3 elaborates of beta technologies. C1.5. This statement is based on a statistical average from the historical data: The return on stocks in the U.S. and many other countries during the twentieth century was higher than that for bonds, even though there were periods when bonds performed better than stocks. So, the argument goes, if one holds stocks long enough, one earns the higher return. However, it is dangerous making predictions from historical averages when risky investment is involved. Those averages from the past are not guaranteed in the future. Stocks are more risky than bonds – they can yield much lower returns than past averages. The investor who holds stocks (for retirement, for example) may well find that her stocks have fallen when she comes to liquidate them. Waiting for the “l
财务报表分析与证券定价(第二版)答案(英文版).pdf
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