Equity Markets Investors Perspective Market Efficiency Risk-Return Capital Market Line CAPM Diversification Index Equity Investors - private equity 1. • Individuals 2. • Corporates 3. • Seed funding (friends, family; (…) …. • Pension Funds 3. •
Reasons for Market Efficiency Many investors Investors have access to the same information Investors use similar valuation techniques Market price reflects the demand and supply at a given point What are investors doing if a they find shareprice too low? What happens with the price? Market ...
Why is liquidity important Allows to close the position quickly and without a significant influence on the price Volume Liquid markets: Deep Safe Intuition With the same expected return do you prefer risky or riskless asset? What does the risky asset give you that the riskless cannot? Y...
How to do it? Buy the shares of Company that you think would outperform its Compatitor(s) and… Sell short the shares of Compatitor(s) HSBC will outperform Citi Buy HSCB shares Sell Citi shares for the same amount Fingers crossed… Advantage...
