AI Basics

Question 1

Which types of financial market are there?

Answer 1

Capital markets
Money markets
Alternatives

Question 2

Capital markets

Answer 2

Stock market, bond market

Question 3

Three components of market efficiency

Answer 3

• operating efficiency: conduct operations at minimum possible costs
• information efficiency: all relevant information impacting on value is immediately and fully impounded into share prices in an unbiased way
• allocation efficiency: allocate the economy’s savings to their highest value uses

Question 4

types of market efficiency

Answer 4

weak form: security prices reflect all historical price information
semi-strong form: sec. prices reflect all publicly available information
strong form: sec. prices reflect all information (public and private)

Question 5

How to measure investment performance?

Answer 5

Sharpe ratio
Comparison with a benchmark
CAPM

Question 6

Downside of Sharpe ratio

Answer 6

• does not price a direct comparison with alternative strategies or benchmark

Question 7

Comparison with a benchmark

Answer 7

• comparing with a benchmark is what a fund manager does.

Question 8

How is a fund manager evaluated?

Answer 8

• based on the information ratio

= average active returns/ active risk

Question 9

average active returns

Answer 9

average percentage difference in return between a strategy and benchmark

Question 10

active risk

Answer 10

SD of active return

Question 11

What is alpha

Answer 11

• the strategy that provides higher returns than a passive benchmark

Question 12

Two Fama and French factors

Answer 12

SMB and HML

Question 13

SMB (returns of firms)

Answer 13

the return on a portfolio of small firms minus the return on a portfolio of large firms

Question 14

HML (return portfolio of firms with high BM-value of p. with low BM-value)

Answer 14

return on a portfolio of firms with a high ratio of book-to-market value minus the return of a portfolio with low book-to-market value

Question 15

feasibility analysis

Answer 15

• provides guidance for decision-makers
• aim: min. risk and max. opportunity to developer and investors
• economic and financial feasibility.
• regulatory requirements and attitudes of neighbors and public officials

Question 16

Four basic questions to be answered in a market analysis

Answer 16

1. Will there be clients to rent or buy the property?
2. To what rent price while the project be valued in the market?
3. How can it be marketed?
4. Stakeholder analysis which have an influence on the realization of the project.

Question 17

How is the real estate market segmented?

Answer 17

• by location and product

Question 18

trade areas for each property?

Answer 18

• customers
• employees
• competitors

Question 19

Segmentation in retail

Answer 19

primary: the geographical area from which the site will derive its target share of potential users 70%)
- secondary: infrequent users, (20%)
- tertiary: occasional users (10%)

Question 20

Capture rate

Answer 20

• how much of future new demand should be yours?

Question 21

Absorption rates:

Answer 21

• the pace at which the property is sold

Question 22

two opposing views when making a new project in real estate

Answer 22

• investor: for profit, short term

- public sectors: area development, public interest, long term