Retained Features:

• Excel Problems —Selected chapters contain problems, denoted by an icon, specifically linked to Excel templates that are available on the book website at www.mhhe.com/bkm
   
• Excel spreadsheets with Excel Application boxes and exhibits set in Excel give students tools to explore concepts more deeply. These spreadsheets are available on the book’s web site at www.mhhe.com/bkm and provide a taste of the sophisticated analytic tools available to professional investors.
   
• Words from the Street boxed readings contain short articles from business periodicals that enliven, reinforce and apply the material within the context of the real-world.
   
• The authors continue to present material in a framework that is organized by a central core of consistent fundamental principles. As such, they have stripped away unnecessary mathematical and technical detail to concentrate on providing the intuition to guide students and practitioners in their professional lives.
   
• Devotes considerable attention to Modern Portfolio Theory, which focuses on the techniques and implications of efficient diversification for the proper measurement of risk and the risk-return relationship.
   
• Provides complete coverage of futures, options and other derivative security markets. These markets have become crucial and integral to the financial universe and are the major sources of innovation in that universe. Understanding these markets is extremely important to finance professionals as well as to the sophisticated individual investor.
   
• To link theory with practice, the authors approach is consistent with that of the CFA Institute. End of chapter problem sets contain questions from past CFA exams (identified with an icon and now separated into their own section). The Appendix at the back of the book lists each CFA question in the text and the exam from which it was taken. Also, Chapter 3 includes excerpts from the "Code of Ethics and Standards of Professional Conduct" of the CFA Institute. Chapter 28, which discusses investors and the investment process, is modeled after the CFA Institutes framework.
   
• End of chapter questions that require the use of Standard & Poor’s Educational Version of Market Insight. Access to this online resource is free with each new copy of the book. The site contains quantitative and qualitative data on over 1000 top companies; it is powered by S&P’s renowned COMPUSTAT® database.
   
• E-Investments boxes appear at the end of every chapter. These exercises provide students with a structured set of steps to investigate financial data on the Internet. Easy-to-follow instructions and questions are presented so students can use what they’ve learned.
   
• Provides plentiful Internet content and information, with Internet questions in every chapter, end of chapter website listings (now available on the OLC only), free online access to S&P’s Educational Version of Market Insight (new books only), and a dynamic Online Learning Center at www.mhhe.com/bkm.
   
• Includes pedagogical features to help students understand, absorb and apply the concepts and techniques presented. These features include a chapter opening vignette, numbered examples, key terms presented in boldface type with a listing at the end of each chapter and a glossary, and a chapter summary. Concept Checks are included in the body of the text, which are self-test questions and problems to reinforce and check the understanding of key concepts (solutions to concept checks are found at the end of each chapter).
   

What's New:

• End of chapter problem sets are now separated by level of difficulty: quiz, problems, and challenge problems.
   
• NEW! Chapter 26 Hedge Funds: Topics include: various hedge fund strategies; market neutral investing and portable alpha; performance evaluation for hedge funds with changing risk exposures; selection bias in hedge fund performance; tail risk in hedge fund portfolios; and hedge fund fees.
   
• Chapter 7 Optimal Risky Portfolios: This chapter contains additional material on the “art” of selecting reasonable parameter values for portfolio construction, and a discussion of what can go wrong when inputs are derived solely from recent historical experience.
   
• Chapter 9 The Capital Asset Pricing Model: We introduce new material generalizing the intuition of the simple CAPM to more sophisticated treatments of risk, for example, consumption risk. We have also updated the material on liquidity and asset pricing throughout the set of chapters dealing with portfolio theory.
   
• Chapter 11 The Efficient Market Hypothesis: We critically evaluate recent suggestions for “fundamental indexing” as a response to market errors in security valuation. We show that these strategies are nothing more than variations on the value-tilted portfolio strategies discussed earlier in the chapter.
   
• Chapter 13 Empirical Evidence on Security Returns: We add considerable new material on the interpretation of risk premiums. For example, we examine new evidence on the relation between the Fama-French risk factors and more fundamental measures of security risk.
   
• Chapter 14 Bond Prices and Yields: The chapter has new material explaining collateralized debt obligations (CDOs) as well as the role of credit rating agencies in the recent credit market crisis.
   
• Chapter 19 Financial Statement Analysis: The chapter has been updated to address current issues in fair value accounting. It also contains additional discussion of the proper interpretation of market-to-book ratios.
   
• Chapter 20 Options Markets: We have added a discussion of options backdating to this chapter.
   
• Chapter 23 Futures and Swaps: New material on credit default swaps to this chapter. We show how these securities are constructed, and how they are used to transfer credit risk.
   
• Chapter 28 Investment Policy and the Framework of the CFA Institute: This chapter has been updated to reflect the CFA Institute’s expanded rubric for constructing a statement of investment policy.