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1、Chapter1: The Investment EnvironmentChapter OpenerPART Ip. 1AN INVESTMENTCommitment of current resources in the expectation of deriving greater resources in the future. IS the current commitment of money or other resources in the expectation of reaping future benefits. For example, an individual mig
2、ht purchase shares of stock anticipating that the future proceeds from the shares will justify both the time that her money is tied up as well as the risk of the investment. The time you will spend studying this text (not to mention its cost) also is an investment. You are forgoing either current le
3、isure or the income you could be earning at a job in the expectation that your future career will be sufficiently enhanced to justify this commitment of time and effort. While these two investments differ in many ways, they share one key attribute that is central to all investments: You sacrifice so
4、mething of value now, expecting to benefit from that sacrifice later.This text can help you become an informed practitioner of investments. We will focus on investments in securities such as stocks, bonds, or options and futures contracts, but much of what we discuss will be useful in the analysis o
5、f any type of investment. The text will provide you with background in the organization of various securities markets; will survey the valuation and risk-management principles useful in particular markets, such as those for bonds or stocks; and will introduce you to the principles of portfolio const
6、ruction.Broadly speaking, this chapter addresses three topics that will provide a useful perspective for the material that is to come later. First, before delving into the topic of “investments,” we consider the role of financial assets in the economy. We discuss the relationship between securities
7、and the “real” assets that actually produce goods and services for consumers, and we consider why financial assets are important to the functioning of a developed economy. Given this background, we then take a first look at the types of decisions that confront investors as they assemble a portfolio
8、of assets. These investment decisions are made in an environment where higher returns usually can be obtained only at the price of greater risk and in which it is rare to find assets that are so mispriced as to be obvious bargains. These themesthe riskreturn trade-off and the efficient pricing of fi
9、nancial assetsare central to the investment process, so it is worth pausing for a brief discussion of their implications as we begin the text. These implications will be fleshed out in much greater detail in later chapters.We provide an overview of the organization of security markets as well as the
10、 various players that participate in those markets. Together, these introductions should give you a feel for who the major participants are in the securities markets as well as the setting in which they act. The financial crisis that began playing out in 2007 and peaked in 2008 dramatically illustra
11、tes the connections between the financial system and the “real” side of the economy. We look at the origins of the crisis and the lessons that may be drawn about systemic risk. We close the chapter with an overview of the remainder of the text.1.1 Real Assets versus Financial Assetsp. 2The material
12、wealth of a society is ultimately determined by the productive capacity of its economy, that is, the goods and services its members can create. This capacity is a function of the real assetsReal assets are land, buildings, and equipment that are used to produce goods and services. Financial assets a
13、re claims such as securities to the income generated by real assets. of the economy: the land, buildings, machines, and knowledge that can be used to produce goods and services.In contrast to real assets are financial assetsReal assets are land, buildings, and equipment that are used to produce good
14、s and services. Financial assets are claims such as securities to the income generated by real assets. such as stocks and bonds. Such securities are no more than sheets of paper or, more likely, computer entries, and they do not contribute directly to the productive capacity of the economy. Instead,
15、 these assets are the means by which individuals in well-developed economies hold their claims on real assets. Financial assets are claims to the income generated by real assets (or claims on income from the government). If we cannot own our own auto plant (a real asset), we can still buy shares in
16、Ford or Toyota (financial assets) and thereby share in the income derived from the production of automobiles.While real assets generate net income to the economy, financial assets simply define the allocation of income or wealth among investors. Individuals can choose between consuming their wealth today or investing for the future. If they choose to invest, they may place their wealth in financial assets by purchasing various securities. When investors buy these securities from
