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<p><b>Chapter 1 Introduction 1</b></p> <p>What Is an Investment Philosophy? 2</p> <p>Why Do You Need an Investment Philosophy? 3</p> <p>The Big Picture of Investing 4</p> <p>Categorizing Investment Philosophies 7</p> <p>Developing an Investment Philosophy 10</p> <p>Conclusion 12</p> <p>Exercises 13</p> <p><b>Chapter 2 Upside, Downside: Understanding Risk 15</b></p> <p>What Is Risk? 16</p> <p>Equity Risk: Theory-Based Models 16</p> <p>Assessing Conventional Risk and Return Models 32</p> <p>Equity Risk: Alternative Measures 34</p> <p>Equity Risk: Assessing the Field 45</p> <p>Default Risk 46</p> <p>Conclusion 50</p> <p>Exercises 51</p> <p><b>Chapter 3 Numbers Don’t Lie—Or Do They? 53</b></p> <p>The Basic Accounting Statements 53</p> <p>Asset Measurement and Valuation 55</p> <p>Measuring Financing mix 62</p> <p>Measuring Earnings and Profitability 69</p> <p>Measuring Risk 75</p> <p>Differences in Accounting Standards and Practices 82</p> <p>Conclusion 82</p> <p>Exercises 85</p> <p><b>Chapter 4 Show Me the Money: The Basics of Valuation 87</b></p> <p>Intrinsic Value 87</p> <p>Relative Valuation 110</p> <p>Valuing an Asset with Contingent Cash Flows (Options) 119</p> <p>Conclusion 121</p> <p>Exercises 122</p> <p><b>Chapter 5 Many a Slip: Trading, Execution, and Taxes 125</b></p> <p>The Trading Cost Drag 125</p> <p>The Components of Trading Costs: Traded Financial Assets 127</p> <p>Trading Costs with Nontraded Assets 146</p> <p>Management of Trading Costs 148</p> <p>Taxes 150</p> <p>Conclusion 159</p> <p>Exercises 160</p> <p><b>Chapter 6 Too Good to Be True? Testing Investment Strategies 163</b></p> <p>Why Does Market Efficiency Matter? 163</p> <p>Efficient Markets: Definition and Implications 164</p> <p>Behavioral Finance: The Challenge to Efficient Markets 170</p> <p>A Skeptic’s Guide to Investment Strategies 204</p> <p>Conclusion 206</p> <p>Exercises 207</p> <p><b>Chapter 7 Smoke and Mirrors? Price Patterns, Volume Charts, and Technical Analysis 209</b></p> <p>Random Walks and Price Patterns 209</p> <p>Empirical Evidence 211</p> <p>The Foundations of Technical Analysis 239</p> <p>Technical Indicators and Charting Patterns 240</p> <p>Conclusion 255</p> <p>Exercises 256</p> <p><b>Chapter 8 Graham’s Disciples: Value Investing 259</b></p> <p>Who Is a Value Investor? 259</p> <p>The Passive Screener 260</p> <p>The Contrarian Value Investor 284</p> <p>Activist Value Investing 293</p> <p>Conclusion 326</p> <p>Exercises 326</p> <p><b>Chapter 9 The Allure of Growth: Small Cap and Growth Investing 329</b></p> <p>Who Is a Growth Investor? 329</p> <p>Passive Growth Investing 330</p> <p>Activist Growth Investing 365</p> <p>Conclusion 372</p> <p>Exercises 373</p> <p><b>Chapter 10 Information Pays: Trading on News 375</b></p> <p>Information and Prices 376</p> <p>Trading on Private Information 378</p> <p>Trading on Public Information 398</p> <p>Implementing an Information-Based Investment Strategy 421</p> <p>Conclusion 422</p> <p>Exercises 423</p> <p><b>Chapter 11 A Sure Profit: The Essence of Arbitrage 425</b></p> <p>Pure Arbitrage 425</p> <p>Near Arbitrage 450</p> <p>Speculative Arbitrage 460</p> <p>Long/Short Strategies—Hedge Funds 465</p> <p>Conclusion 469</p> <p>Exercises 470</p> <p><b>Chapter 12 The Impossible Dream? Timing the Market 473</b></p> <p>Market Timing: Payoffs and Costs 473</p> <p>Market Timing Approaches 477</p> <p>The Evidence on Market Timing 506</p> <p>Market Timing Strategies 514</p> <p>Market Timing Instruments 518</p> <p>Connecting Market Timing to Security Selection 521</p> <p>Conclusion 521</p> <p>Exercises 522</p> <p><b>Chapter 13 Ready to Give Up? The Allure of Indexing 525</b></p> <p>The Mechanics of Indexing 525</p> <p>A History of Indexing 527</p> <p>The Case for Indexing 530</p> <p>Why Do Active Investors Not Perform Better? 554</p> <p>Alternative Paths to Indexing 562</p> <p>Conclusion 571</p> <p>Exercises 572</p> <p><b>Chapter 14 A Road Map to Choosing an Investment Philosophy 575</b></p> <p>A Self-Assessment 575</p> <p>Finding an Investment Philosophy 579</p> <p>The Right Investment Philosophy 581</p> <p>Conclusion 583</p> <p>Exercises 584</p> <p>Index 585</p>

<p><b>ASWATH DAMODARAN</b> is Professor of Finance at New York University's Leonard N. Stern School of Business. He has been the recipient of numerous awards for outstanding teaching, including the NYU university-wide Distinguished Teaching Award, and was named one of the nation's top business school teachers by <i>BusinessWeek</i> in 1994. In addition, Damodaran teaches training courses in corporate finance and valuation at many leading investment banks. His publications include <i>Investment Valuation</i> (now in its third edition), <i>Damodaran on Valuation: Security Analysis for Investment and Corporate Finance; Corporate Finance;</i> <i>Investment Management;</i> and <i>Applied Corporate Finance</i>, all published by Wiley, and <i>The Dark Side of Valuation</i>.</p>

<p>Praise from the first edition of <i>Investment Philosophies</i></p> <p>"Damodaran is a well-informed scholar with a gift for organized, clearly written syntheses of complex topics in modern finance. With <i>Investment Philosophies</i> he provides the uncensored facts about winning in the marketplace. If you are a fund manager, an investor, or simply a student of finance, you will want to read this book."<br /> <b>—Tom Copeland</b>, Managing Director of Corporate Finance, Monitor</p> <p>"Professor Damodaran has zeroed in on the most important missing element of many investment management processes: a clearly defined investment philosophy which can serve as a beacon in difficult markets. He offers a cornucopia of philosophies and strategies that have worked for many of the most successful investors, and which have stood the test of time."<br /> <b>—Rob Arnott, Chairman</b>, First Quadrant, LP; Editor, <i>Financial Analysts Journal</i></p> <p>"As an investor, I always have to look back to my philosophy and strategy for taking risk and making money. This book is an invaluable aid for 'taking stock' before buying stock. It lays out the concepts and tools for understanding the basics of risk and return in the stock market, and presents a framework for any investor to construct his or her own investment philosophy."<br /> <b>—Mitch Julis</b>, Managing Partner, Canyon Capital Advisors</p>

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