Unit 13: Portfolio Analysis Flashcards
Asset Allocation
distribution across stocks, bonds, cash
Diversification
distribution across securities, markets and industries
Modern Portfolio Theory
portfolio that has greatest level of return at different risk levels
diversified to reduce volatility
Investors should buy _________ stocks in a expansionary period
Cyclical stocks
Investors should buy _________ stocks in a recessionary period
Defense stocks
Technical Analysis based on…
Charted Price & Volume data/patterns
NOT: economic trends, business fundamentals
Advance/Decline Line
plots the number of stocks in an index that appreciated vs declined
If the index rises but the AD line shows a negative slope its time to…
sell
Short interest theory
as a stocks short interest increase, greater likelihood of a bullish move
Fundamental Analysis based on…
company’s business fundamentals, industry trends
NOT: historic data, trading trends/patterns
Working Capital =
current assets - current liabilities
Current Ratio =
current assets / current liabilities
Quick Ratio (acid test)
(current assets - inventory) / current liabilities
Earnings per Share (EPS) =
(net income - pref dividend) / common shares outstanding
Current Yield =
annual dividend / EPS
