THE FIFTH EDITION   Following is a summary of the content changes in the Fifth Edition:     How Securities Are Traded (Chapter 3)   Chapter 3 has been thoroughly updated to reflect changes in financial markets such as elec- tronic communication networks (ECNs), online and Internet trading, Internet IPOs, and the impact of these innovations on market integration. The chapter also contains new material on globalization of stock markets.     Capital Allocation between the Risky Asset and the Risk- Free Asset (Chapter 7)   Chapter 7 contains new spreadsheet material to illustrate the capital allocation decision us- ing indifference curves that the student can construct and manipulate in Excel.     The Capital Asset Pricing Model (Chapter 9)   This chapter contains a new section showing the links among the determination of optimal portfolios, security analysis, investors buy/sell decisions, and equilibrium prices and expected rates of return. We illustrate how the actions of investors engaged in security analysis and optimal portfolio construction lead to the structure of equilibrium prices.     Market Efficiency (Chapter 12)   We have added a new section on behavioral finance and its implications for security pricing.     Empirical Evidence on Security Returns (Chapter 13)   This chapter contains substantial new material on the equity premium puzzle. It reviews new evidence questioning whether the historical-average excess return on the stock market is indicative of future performance. The chapter also examines the impact of survivorship bias in our assessment of security returns. It considers the potential effects of survivorship bias on our estimate of the market risk premium as well as on our evaluation of the perfor- mance of professional portfolio managers. Front Matter Preface The McGraw−Hill Companies, 2001