投资管理-投资学全英文4-

Chapter4Return

andRiskChapter4ReturnandRisksLearningGoalsReviewtheconceptofreturn,itscomponents,theforcesthataffecttheinvestor’slevelofreturn,andhistoricalreturns.Discusstheroleoftimevalueofmoneyinmeasuringreturnanddefiningasatisfactoryinvestment.Describereal,risk-free,andrequiredreturnsandthecalculationandapplicationofholdingperiodreturn.ReturnandRisksLearningGoalsReturnandRisksLearningGoals(cont’d)Explaintheconceptandcalculationofyieldandhowtofindgrowthrates.Discussthekeysourcesofriskthatmightaffectpotentialinvestments.Understandtheriskofasingleasset,riskassessment,andthestepsthatcombinereturnandrisk.ReturnandRisksLearningGoalsTheConceptofReturnReturnThelevelofprofitfromaninvestment,orTherewardforinvestingComponentsofReturnIncome:cashornear-cashthatisreceivedasaresultofowninganinvestmentCapitalgains(orlosses):thedifferencebetweentheproceedsfromthesaleofaninvestmentanditsoriginalpurchasepriceTotalReturn:thesumoftheincomeandthecapitalgain(orloss)earnedonaninvestmentoveraspecifiedperiodoftimeTheConceptofReturnReturnWhyReturnisImportantTherateofreturnindicateshowrapidlyaninvestorcanbuildwealth.Allowsusto“keepscore”onhowourinvestmentsaredoingcomparedtoourexpectationsHistoricalPerformanceProvidesabasisforfutureexpectationsDoesnotguaranteefutureperformanceExpectedReturnReturnaninvestorthinksaninvestmentwillearninthefutureDetermineswhataninvestoriswillingtopayforaninvestmentoriftheyarewillingtomakeaninvestmentWhyReturnisImportantTheratKeyFactorsinReturnInternalCharacteristicsTypeorriskofinvestmentIssuer’smanagementIssuer’sfinancingExternalForcesPoliticalenvironmentBusinessenvironmentEconomicenvironmentInflationDeflationKeyFactorsinReturnInternalTable4.4HistoricalReturnsforSelectAssetClasses(1900-2011)Table4.4HistoricalReturnsTheTimeValueofMoneyandReturnsThesooneryoureceiveareturnonagiveninvestment,thebetterAdollarreceivedtodayisworthmorethanadollarreceivedinthefutureThesooneryourmoneycanbeginearninginterest,thefasteritwillgrowTheTimeValueofMoneyandReDeterminingaSatisfactoryInvestmentSatisfactoryInvestment:oneforwhichthepresentvalueofbenefitsequalsorexceedsthepresentvalueofitscostsDeterminingaSatisfactoryInvMeasuringReturnRequiredReturnTherateofreturnaninvestormustearnonaninvestmenttobefullycompensatedforitsriskMeasuringReturnRequiredReturMeasuringReturn(cont’d)RealRateofReturnEqualsthenominalrateofreturnminustheinflationrateMeasuresthechangeinpurchasingpowerprovidedbyaninvestmentExpectedInflationPremiumTheaveragerateofinflationexpectedinthefutureMeasuringReturn(cont’d)RealMeasuringReturn(cont’d)Risk-freeRateTherateofreturnthatcanbeearnedona

risk-freeinvestmentThemostcommon“risk-free”investmentisconsideredtobethe3-monthU.S.TreasuryBillMeasuringReturn(cont’d)Risk-MeasuringReturn(cont’d)RiskPremiumAdditionalreturnaninvestorrequiresonariskyinvestmenttocompensateforrisksbaseduponissueandissuercharacteristicsIssuecharacteristicsarethetype,maturityandfeaturesIssuercharacteristicsareindustryandcompanyfactorsMeasuringReturn(cont’d)RiskHoldingPeriodReturn(HPR)HoldingPeriod:theperiodoftimeoverwhichaninvestorwishestomeasurethereturnonaninvestmentvehicleRealizedReturn:currentreturnactuallyreceivedbyaninvestorduringthegivenreturnperiodPaperReturn:returnthathasbeenachievedbutnotyetrealized(nosalehastakenplace)HoldingPeriodReturn(HPR)HolHoldingPeriodReturn(HPR)HoldingPeriodReturnThetotalreturnearnedfromholdinganinvestmentforaspecifiedholdingperiod(usually1yearorless)HoldingPeriodReturn(HPR)HolTable4.6KeyFinancialVariablesforFourInvestmentsTable4.6KeyFinancialVariaUsingHPRinInvestmentDecisionsAdvantagesofHoldingPeriodReturnEasytocalculateEasytounderstandConsidersincomeandgrowthDisadvantagesofHoldingPeriodReturnDoesnotconsidertimevalueofmoneyRatemaybeinaccurateiftimeperiodislongerthanoneyearUsingHPRinInvestmentDecisiYield:InternalRateofReturn(IRR)InternalRateofReturn:determinesthecompoundannualrateofreturnearnedonaninvestmentheldforlongerthanoneyearYield(IRR)Example:Whatis

theyield(IRR)onaninvestment

costing$1,000todaythatyou

expectwillbeworth$1,400at

theendofa5-yearholdingperiod?Yield:InternalRateofReturnCalculatinganInvestmentsYieldUsinganExcelSpreadsheetCalculatinganInvestmentsYieUsingIRRinInvestmentDecisions(cont’d)AdvantagesofInternalRateofReturnUsesthetimevalueofmoneyAllowsinvestmentsofdifferentinvestmentperiodstobecomparedwitheachotherIftheyieldisequaltoorgreaterthantherequiredreturn,theinvestmentisacceptableDisadvantagesofInternalRateofReturnCalculationiscomplexUsingIRRinInvestmentDecisiYield(IRR)foraStreamofIncomeSomeinvestments,suchasbonds,provideunevenstreamsofincomeovertheinvestmentperiodCalculateyield(IRR)byfindingthediscountratethatequatesthePVoftheinvestment’sincomestreamtoitsmarketpriceTable4.7PresentValueAppliedtoanInvestmentYield(IRR)foraStreamofInInternalRateofReturn(IRR):

UsinganExcelSpreadsheetInternalRateofReturn(IRR):InterestonInterest:

TheCriticalAssumptionUsingyield(IRR)tomeasurereturnassumes

thatallincomeearnedovertheinvestment

horizonisreinvestedatthesamerateasthe

originalinvestment.ReinvestmentRateistherateofreturnearnedoninterestorotherincomereceivedfromaninvestmentoveritsinvestmenthorizon.Fullycompoundedrateofreturnistherateofreturnthatincludesinterestearnedoninterest.InterestonInterest:

TheCriFigure4.1EarningInterestonInterestFigure4.1EarningInterestoFindingGrowthRatesRateofGrowthThecompoundannualrateofchangeinthevalueofastreamofincomeUsedtoseehowquicklyastreamofincome,suchasdividends,isgrowingFindingGrowthRatesRateofGrFindingGrowthRatesGrowthRateExample:

Stockpaid$0.92dividend

in2002and$1.85in2011.

What’stheaverageannual

growthrateoverthisperiod?FindingGrowthRatesGrowthRatFindingGrowthRates:

UsinganExcelSpreadsheetFindingGrowthRates:

UsingaSourcesofRiskRisk-ReturnTradeoffistherelationshipbetweenriskandreturn,inwhichinvestmentswithmoreriskshouldprovidehigherreturns,andviceversaRiskisthechancethattheactualreturnfromaninvestmentmaydifferfromwhat

isexpectedSourcesofRiskRisk-ReturnTraSourcesofRisk(cont’d)BusinessRiskisthedegreeofuncertaintyassociatedwithaninvestment’searningsand

theinvestment’sabilitytopaythereturns

owedtoinvestors.TypesofInvestmentsAffectedCommonstocksPreferredstocksExamplesofBusinessRiskDeclineincompanyprofitsormarketshareBadmanagementdecisionsSourcesofRisk(cont’d)BusineSourcesofRisk(cont’d)FinancialRiskisthedegreeofuncertaintyofpaymentresultingfromafirm’smixofdebtandequity;thelargertheproportionofdebtfinancing,thegreaterthisrisk.TypesofInvestmentsAffectedCommonstocksCorporatebondsExamplesofFinancialRiskCompanycan’tgetadditionalloansforgrowthortofundoperationsCompanydefaultsonbondsSourcesofRisk(cont’d)FinancSourcesofRisk(cont’d)PurchasingPowerRiskisthechancethatchangingpricelevels(inflationordeflation)willadverselyaffectinvestmentreturns.TypesofInvestmentsAffectedBonds(fixedincome)CertificatesofdepositExamplesofPurchasingPowerRiskMoviethatwas$8.00lastyearis$9.00thisyearSourcesofRisk(cont’d)PurchaSourcesofRisk(cont’d)InterestRateRiskisthechancethatchanges

ininterestrateswilladverselyaffectasecurity’svalue.TypesofInvestmentsAffectedBonds(fixedincome)PreferredstocksExamplesofInterestRateRiskMarketvaluesofexistingbondsdecreaseasmarketinterestratesincreaseIncomefromaninvestmentisreinvestedatalowerinterestratethantheoriginalrateSourcesofRisk(cont’d)IntereSourcesofRisk(cont’d)LiquidityRiskistheriskofnotbeingabletoliquidateaninvestmentconvenientlyandatareasonableprice.TypesofInvestmentsAffectedSomesmallcompanystocksRealestateExamplesofLiquidityRiskThepriceofahousehastobeloweredforaquicksaleSourcesofRisk(cont’d)LiquidSourcesofRisk(cont’d)TaxRiskisthechancethatCongresswillmakeunfavorablechangesintaxlaws,drivingdown

theafter-taxreturnsandmarketvaluesof

certaininvestments.TypesofInvestmentsAffectedMunicipalbondsRealestateExamplesofTaxRiskLowertaxratesreducethetaxbenefitofmunicipalbondinterestLimitsondeductionsfromrealestatelossesSourcesofRisk(cont’d)TaxRiSourcesofRisk(cont’d)EventRiskcomesfromanunexpectedeventthathasasignificantandunusuallyimmediateeffectontheunderlyingvalueofaninvestment.TypesofInvestmentsAffectedAlltypesofinvestmentsExamplesofEventRiskDecreaseinvalueofinsurancecompanystockafter

amajorhurricaneDecreaseinvalueofrealestateafteramajorearthquakeSourcesofRisk(cont’d)EventSourcesofRisk(cont’d)MarketRiskistheriskofdeclineininvestmentreturnsbecauseofmarketfactorsindependentofthegiveninvestment.TypesofInvestmentsAffectedAlltypesofinvestmentsExamplesofMarketRiskStockmarketdeclineonbadnewsPoliticalupheavalChangesineconomicconditionsSourcesofRisk(cont’d)MarketSourcesofRisk(cont’d)CurrencyExchangeRiskistheriskcausedbythevaryingexchangeratesbetweenthecurrenciesoftwocountries.(DiscussedinChapter2)TypesofInvestmentsAffectedInternationalstocksorADRsInternationalbondsExamplesofCurrencyExchangeRiskU.S.dollargets“stronger”againstforeigncurrency,reducingvalueofforeigninvestmentSourcesofRisk(cont’d)CurrenMeasuresofRisk:SingleAssetStandarddeviationisastatisticusedtomeasurethedispersion(variation)ofreturnsaroundanasset’saverageorexpectedreturnCoefficientofvariationisastatisticusedtomeasuretherelativedispersionofanasset’sreturns;itisusefulincomparingtheriskofassetswithdifferingaverageorexpectedreturnsHighervaluesforbothindicatehigherriskMeasuresofRisk:SingleAssetTable4.10HistoricalReturnsandStandardDeviationsforSelectAssetClasses(1900–2011)Table4.10HistoricalReturnsFigure4.2Risk-ReturnTradeoffs

forVariousInvestmentsFigure4.2Risk-ReturnTradeoAcceptableLevelsofRiskDependUpontheIndividualInvestorRisk-indifferentdescribesaninvestorwhodoesnotrequireachangeinreturnascompensationforgreaterriskRisk-aversedescribesaninvestorwhorequiresgreaterreturninexchangeforgreaterriskRisk-seekingdescribesaninvestorwhowillacceptalowerreturninexchangeforgreaterriskAcceptableLevelsofRiskDepeFigure4.3RiskPreferencesFigure4.3RiskPreferencesStepsintheDecisionProcess:

CombiningReturnandRiskEstimatetheexpectedreturnusingpresentvaluemethodsandhistorical/projectedreturnratesAssesstheriskoftheinvestmentbylookingathistorical/projectedreturnsusingstandarddeviationorcoefficientofvariationofreturnsEvaluatetherisk-returnofeachinvestmentalternativetomakesurethereturnisreasonablegiventhelevelofriskSelecttheinvestmentsthatofferthehighestexpectedreturnsassociatedwiththelevelofriskyouarewillingtoacceptStepsintheDecisionP