Fundamentals of Investments: Valuation and Management

Citation

Jordan, B. D., Miller, T. W., & Dolvin, S. D. (2026). Fundamentals of Investments: Valuation and Management (2026 Release). McGraw Hill.

Chapter Summary

The 2026 Release is the latest version of a textbook whose tenth edition appeared in 2023 (about 750 pages). The publisher lists twenty chapters in six parts, plus an online chapter on mortgage-backed securities. In the preface the authors explain the book's approach: investments texts usually belong either to a portfolio-management camp heavy in portfolio theory or to a security-analysis camp focused on equity valuation, and books that try to cover both often end up long and inconsistent, with options and futures "tacked on the back". This book aims instead at a consistent treatment of the main types of investment, written for students with little background and with an emphasis on intuition, basic principles and examples from familiar companies. Earlier catalogue descriptions add that it treats students as investment managers and is organised so that topics can be applied to a portfolio simulation or to real life.

Part 1: Introduction (Chapters 1–4)

Chapter 1: A Brief History of Risk and Return; Chapter 2: The Investment Process; Chapter 3: Overview of Security Types; Chapter 4: Mutual Funds, ETFs, and Other Investment Companies. The opening part starts with the historical record of returns and risk, then covers the investment process, the main types of securities, and pooled investment vehicles such as mutual funds and exchange-traded funds.

Part 2: Stock Markets (Chapters 5–8)

Chapter 5: The Stock Market; Chapter 6: Common Stock Valuation; Chapter 7: Stock Price Behavior and Market Efficiency; Chapter 8: Behavioral Finance and the Psychology of Investing. How stock markets operate, how common stocks are valued, what the evidence says about market efficiency, and how psychological biases affect investors' decisions and prices.

Part 3: Interest Rates and Bond Valuation (Chapters 9–10)

Chapter 9: Interest Rates; Chapter 10: Bond Prices and Yields. The determinants of interest rates, and the pricing of bonds and the calculation of their yields.

Part 4: Portfolio Management (Chapters 11–13)

Chapter 11: Diversification and Risky Asset Allocation; Chapter 12: Return, Risk, and the Security Market Line; Chapter 13: Performance Evaluation and Risk Management. Diversification and the allocation of a portfolio among risky assets, the relationship between systematic risk and expected return, and how portfolio performance is measured and risk managed.

Part 5: Futures and Options (Chapters 14–16)

Chapter 15: Stock Options; Chapter 16: Option Valuation. As its title indicates, this part covers derivative securities: futures, the basics of stock options and how options are valued.

Part 6: Topics in Investments (Chapters 17–20, online Chapter 21)

Chapter 17: Alternative Investments; Chapter 18: Corporate and Government Bonds; Chapter 19: Projecting Cash Flow and Earnings; Chapter 20: Global Economic Activity and Industry Analysis; Chapter 21 (online): Mortgage-Backed Securities. The final part extends the core material: investments outside stocks and bonds, the features of corporate and government debt, forecasting a company's cash flows and earnings for valuation, the macroeconomic and industry analysis that precedes stock selection, and securitised mortgage debt.

Key Concepts

Parts 1–2: Introduction and Stock Markets

• Risk-return trade-off: the historical record shows that higher average returns have come with greater variability.
• Investment companies: mutual funds, ETFs and similar vehicles that pool investors' money in diversified portfolios.
• Common stock valuation: estimating what a share is worth from its expected dividends, earnings or cash flows.
• Market efficiency and behavioural finance: whether prices reflect available information, and how investor psychology can lead them astray.

Parts 3–4: Bonds and Portfolio Management

• Bond prices and yields: the inverse relationship between interest rates and bond prices, and measures of a bond's return.
• Diversification and asset allocation: reducing risk by combining assets, and choosing how much to hold of each.
• Security market line: expected return as a function of systematic (beta) risk.
• Performance evaluation: judging a portfolio's return relative to the risk taken.

Parts 5–6: Derivatives and Further Topics

• Options: contracts giving the right to buy or sell an asset at a set price, and their valuation.
• Futures: contracts to trade an asset at a future date at a price agreed today.
• Fundamental analysis: projecting cash flow and earnings and analysing the economy and industries to value stocks.
• Alternative investments: assets outside the traditional stocks and bonds.

Critical Analysis

Strengths

• A deliberate, consistent design. The preface identifies a real problem with investments textbooks, the split between portfolio theory and security analysis and the resulting inconsistency, and the book is organised to give stocks, bonds and derivatives a unified treatment rather than a loose assortment.
• Accessible to beginners. The publisher describes it as written for students with little background, with an emphasis on intuition and basic principles and examples from familiar companies; the authors also wrote Fundamentals of Corporate Finance and share its approach of intuition before technique.
• Practical orientation. The book treats students as investment managers and is organised to support portfolio simulations and real-life decisions. The publisher also presents it as a foundation for later study towards credentials such as the CFA; one author is a CFA charterholder who oversees student-run portfolios.
• Wide coverage at an introductory level. Behavioural finance, performance evaluation, options, alternative investments and industry analysis all have chapters, so students meet the full range of the subject in one book.

Limitations

• Long for one course. Twenty chapters plus an online chapter, about 750 pages in the tenth edition, exceed what a single semester can cover; instructors must choose.
• Less rigorous on theory. The book is designed as an introduction; its approach favours intuition, so students heading for graduate study or quantitative finance will need a more theoretical text for portfolio theory and asset pricing.

Where It Fits in the Course

This is the introductory textbook for the investments and financial markets course. Burton Malkiel's A Random Walk Down Wall Street is the natural companion: a non-technical book that makes the case for efficient markets and index investing through history and evidence. Read Malkiel for the argument and the big picture, and Jordan, Miller and Dolvin for the tools: valuation models, bond pricing, portfolio construction and option valuation, supported by hands-on activities.

Mishkin and Eakins's Financial Markets and Institutions complements it with the institutional side of markets and intermediaries. Bodie, Kane and Marcus's Investments covers much of the same ground at a graduate level with more portfolio theory and equilibrium pricing; it is the logical next step after Parts 4 and 5. The specialised books in the course, on fixed income securities and markets, derivatives and risk-neutral valuation, and credit risk, build on Chapters 9–10, 15–16 and 18 respectively.

How to Use This Book

An introductory finance or corporate finance course is helpful, together with basic algebra and statistics. The book suits second-year business students and finance minors taking their first investments course.

• Core: Part 1 (Chapters 1–4) for the vocabulary and historical evidence, Part 2 (Chapters 5–8) on stocks and market efficiency, Part 3 (Chapters 9–10) on bonds, and Part 4 (Chapters 11–13) on portfolios and risk.
• Commonly added: Part 5 on options and futures, which most introductory courses cover at least briefly.
• Selective: the Part 6 chapters, chosen by course focus: Chapters 19–20 for a security-analysis emphasis, Chapter 18 for fixed income, Chapter 17 for alternative assets.

If the course runs a portfolio simulation, start it early and link each part of the book to decisions in the simulated portfolio. Practise valuation and bond-pricing calculations until they are routine, since Parts 4 and 5 build on them. Comparing Chapters 7–8 with Malkiel's chapters on efficiency and behavioural finance is a useful way to see the same debate at two levels of technicality.