CHAPTER 1 Investments - Background and Issues This

Transcript:CHAPTER 1 Investments - Background and Issues This:
CHAPTER 1 Investments - Background and Issues This chapter takes an overview of what we will learn in the text book Defining an investment (投資) Investment targets: financial or real assets (金融資產或實質資產) Different classes of financial assets (Ch 2 and Parts 3, 4, and 5) Roles of financial markets (Ch 3) Corporate governance (公司治理) Investment process Risk-return trade-off and efficient markets (Part 2) Players and innovations in financial markets (Ch 4) Financial crisis in 2008 Learning Goals of Chapter 1 1.1 REAL ASSETS VERSUS FINANCIAL ASSETS Real Assets (tangible (有形) or intangible (無形)) Assets used to produce goods and services, e.g., land, buildings, equipment, inventory, or patents Can generate net income to the economy Financial Assets Claims (所有權) on real assets or the income generated by them, e.g., equity shares or debt of firms Essence of investment: sacrifice something now, invest in real assets or financial assets, and expect to benefit from that sacrifice later Focus on investing in financial assets in the course Goal of smoothing consumption: invest in good time periods, and realize investments when you need more consumption Financial Versus Real Assets Balance Sheet (資產負債表) of U.S. Households 2022 ※ The largest parts of assets and liabilities both come from the house owned ※ The position of deposits is usually maintained for liquidity of consumption ※ Pension reserves (退休準備) is the money or assets invested for future retired life ※ Equity in noncorporate business may come from the investment in sole proprietorship (獨資) or partnership companies (合夥) Net worth of the economy = Sum of real assets Financial assets and liabilities must balance over all households, firms, and banks Banks account, corporate stock, or corporate bonds are not only financial assets of households but also the liabilities of the issuers Banks use the proceeds of deposits to lend to firms or households or to buy some financial asset issued by firms Firms issue financial assets (e.g., corporate stock or bonds) to pay for the acquirement of real assets For the aggregated balance sheet, only real assets remain as the net worth of the economy Financial Versus Real Assets Domestic Net Worth in the U.S. 2022 1.2 A CLASSIFICATION OF FINANCIAL ASSETS Major Classes of Financial Assets Debt (fixed income securities) (Part 3: Debt Securities) Pay a specified cash flow over a specific period Money market instruments (貨幣市場工具) (shorter term (< 1 yr.), lower risk), e.g., Treasury bills