Path: Top Journal Jurnal_Teknologi_&_Manajemen_Informatika 2006

Investment theories: historical examination and conceptual evolution

Jurnal Teknologi & Manajemen Informatika, Volume 3, nomor 3, Desember 2005
Journal from JIPTUNMERPP / 2009-01-08 19:53:51
Oleh : Pramayanti Meitisari , Faculty of Information Technology Merdeka University Malang
Dibuat : 2006-04-01, dengan 0 file

Keyword : Investment, risk return, random walk, efficient market, capital asset pricing model, and anomaly.

This paper examines the investment concepts to explain market behavior using historical and evolution approach. The theoretical explanations are developed to discuss each of the fundamental concepts of investment. The concepts include random walk concepts, efficient market hypothesis, standard portfolio theory, capital assets pricing model (CAMP), and arbitrage pricing theory (APT). The random walk concept shows that near-zero serial correlation of security price changes is the very basic explanation to understand the security market price behavior. The concept clarifies that risk of unpredictable price movement exits in investment market. Anticipating security price random movement, Markowitz (1952) introduced an investment strategy to optimize the risk-return trade-off in a portfolio set. The concept is called portfolio theory. The mean and variance arithmetic approach of the portfolio selection represents the risk and return of investment assets. The efficient market hypothesis further explains that the random effect is caused by information and stipulates that securities are priced to reflect all available information. Fama (1965) pioneers the classification of information into three different forms that explain the essence of information in capital market. Sharpe (1964) and Lintner (1965) extended the portfolio concept into the capital asset pricing model (CAMP) by offering a much more simple computation. Black and Scholes (1973) developed their eponymous options pricing model on the idea of arbitrage. The anomalies in real capital market behavior are presented to show the implication of the theories. The arbitrage pricing theory recognizes only a few systematic factors affect the long-term average returns of financial assets and focuses on the major forces that move aggregates of assets in large portfolios.

Deskripsi Alternatif :

This paper examines the investment concepts to explain market behavior using historical and evolution approach. The theoretical explanations are developed to discuss each of the fundamental concepts of investment. The concepts include random walk concepts, efficient market hypothesis, standard portfolio theory, capital assets pricing model (CAMP), and arbitrage pricing theory (APT). The random walk concept shows that near-zero serial correlation of security price changes is the very basic explanation to understand the security market price behavior. The concept clarifies that risk of unpredictable price movement exits in investment market. Anticipating security price random movement, Markowitz (1952) introduced an investment strategy to optimize the risk-return trade-off in a portfolio set. The concept is called portfolio theory. The mean and variance arithmetic approach of the portfolio selection represents the risk and return of investment assets. The efficient market hypothesis further explains that the random effect is caused by information and stipulates that securities are priced to reflect all available information. Fama (1965) pioneers the classification of information into three different forms that explain the essence of information in capital market. Sharpe (1964) and Lintner (1965) extended the portfolio concept into the capital asset pricing model (CAMP) by offering a much more simple computation. Black and Scholes (1973) developed their eponymous options pricing model on the idea of arbitrage. The anomalies in real capital market behavior are presented to show the implication of the theories. The arbitrage pricing theory recognizes only a few systematic factors affect the long-term average returns of financial assets and focuses on the major forces that move aggregates of assets in large portfolios.

Copyrights : Copyright (c) 2009 by Digital Library Universitas Merdeka Malang. Verbatim copying and distribution of this entire article is permitted by author in any medium, provided this notice is preserved.

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PropertiNilai Properti
ID PublisherJIPTUNMERPP
OrganisasiFaculty of Information Technology Merdeka University Malang
Nama KontakDra. Wiwik Supriyanti, SS
AlamatJl. Terusan Halimun 11 B
KotaMalang
DaerahJawa Timur
NegaraIndonesia
Telepon0341-563504
Fax0341-563504
E-mail Administratorperpus@unmer.ac.id
E-mail CKOwsupriyanti@yahoo.com

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  • Editor: Wiwik Supriyanti, Dra. SS.