Investing Concepts Part Deux

This time around we didn't really have any questions about our concepts as we have one helluva prof. (insert extra credit here) Searching through some documents and things however we came across a few concepts that were interesting.

1) Random Walk Theory; what is the random walk theory you ask. Well we will tell you. It all started way back in the olden days, 1973 to be exact. There was a man named Burton Malkiel who along with being a man was an author. He wrote the wall street classic "A Random Walk Down Wall Street". It suggests that market fluctuations and stock prices cannot be predicted by what has happened in the past with them. The theory states that stock price fluctuations are independent of themselves, but over a period of time prices maintain an upward trend.

2) CAPITAL ASSET PRICING MODEL, or the reason we chose this CAPM. Pretty awesome reason, we know. CAPM was originally developed in 1952 by a gentleman named Harry Markowitz. This model is used today to describe the relationship between risk and expected return, and it serves as a model for the pricing of risky securities.


3) Asset Allocation is a smart thing to do! If you are an investor and you are going to have your money invested for a long time then stocks are a good area to put it in. They generally have grown more over time than any other investment instrument. If you are an investor with a short amount of time, however; asset allocation suggests that you invest with other more stable tools. It is all up to the investor and what their goals are.