Austin Murphy - Böcker

This book provides a practical analysis of the typical investments and funding sources of depository institutions. With a particular emphasis on mortgage-related investments (ARMs, CMOs, IOs, and POs), state-of-the-art valuation models are included that incorporate both call and default risk. Equity funding issues are also analyzed in detail. In addition, the author summarizes the history of the depository institution crisis, discusses the future outlook, and suggests a creative solution to the deposit insurance crisis that permits government deposit insurance without risk or cost to taxpayers.After proposing a system of private deposit insurance backed by minimal market-to-market collateral requirements, the author focuses on micro topics. In particular, the book includes a comprehensive evaluation of default risk data, precise equations for valuing complex mortgage securities, a theoretical model for making hedging and capital adequacy decisions (including an econometric model for estimating the return on the market portfolio and market risk premiums), and a practical discounted cash flow valuation model for analyzing depository institution stock (that incorporates financial statement items and footnotes as well as mortgage prepayments and the term structure of interest rates). The work represents an excellent handbook for financial institution executives, consultants, regulators, investors, and students.

A state-of-the art treatment offering scientific procedures that require no special scientific expertise, Murphy's unusual new book provides a unified framework for the evaluation of investment assets and strategies—a particularly useful way to conduct security analysis, portfolio management, and trading, and for other general investment applications. Murphy covers practical methods for credit analysis and demonstrates ways to value equities using a pro forma model that integrates forecasting with the detailed use of financial statements and footnotes.Scientific Investment Analysis explains how to evaluate both fixed income securities and equities, as well as options, futures, and investment companies. It illustrates the use of practical dynamic software for valuing complex call, conversion, and other option features embedded in security contracts. The valuation concepts he presents are well grounded in theory and empirical investigation and explained within the context of international portfolio management. The effects of trading, tax, and regulatory environments on market prices and investment strategies are thoroughly discussed. This is an important resource for investment analysts, researchers, advisers, and brokers, an as excellent text for students in advanced investment or portfolio management at upper university levels.

The recent stock market bubble of the late 1990s and subsequent crash has made people more aware of the need to conduct practical financial analysis. Practical financial economics, i.e., the application of financial theory to practical financial analysis, is explained here with respect to a number of different topics, with a focus on valuation. Largely normative (instead of being theoretical, empirical, or descriptive, as most academic work seems to be), yet solidly grounded in theory (instead of being ad hoc, as much purely practitioner work seems to be), this book represents a collection of articles that are designed to have useful implications for both practitioners and academics.Much of the book is focused on the concept of practical valuation of assets, such as individual stocks, the stock market, and foreign currencies. At least partially because one of the most important financial theories, the theory of efficient markets, makes practical valuation analysis virtually useless by assuming the intrinsic value of any asset is determined by its market price, the subject of practical valuation has been largely neglected in academic research. However, the efficient markets theory itself, being based on a general assumption that investors properly value securities by their trading, requires the very practical valuation that a belief in market efficiency makes useless. Within this context, it is not surprising that individual stocks, such as Enron's, and the entire stock market itself, can be effectively mispriced, as this book shows.