Essays on Stock Market

Principles of finance

Undiversifiable risk is also known as known as systematic risk. This is a risk, which is common to all securities, for example the market risk. However, diversifiable risk is also known as unsystematic or idiosyncratic risk. This is the risk associated with individual assets or certain sector of economy or a specific company. A major lawsuit against one large corporation is a diversifiable risk because its effects will be felt in that corporation only and not the entire economy or market (French, 2003).
A substantial rise in oil prices is an undiversifiable risk because Continue reading...

Introduction

Financial markets in the economy have a role of linking the demanders and also the suppliers of funds. They enable firms and individuals to access capital and invest any surpluses. These are the markets that allow the financial sectors of the economy to run smoothly. However, many individuals do not understand these markets despite their crucial role in the economy. They have varied reasons for their failure to comprehend these markets and these reasons limit their understanding of the markets. This serves as the foundation for the thesis of this paper that is – accountants have a role to play Continue reading...

Answer 1)

Dividing the period of analysis in three periods i.e 1981-1991, 1992-1997, 1998-2011 we could easily interpret the actual trend in the bond ratings by Standard and Poors.
1981-1991: This was the period of slow economic growth and as a result, once could witness that till 1991, number of bonds downgraded had exceeded the number of bonds upgraded.
1992-1997: This was the time of blue chip stocks and when US economy was introduced to the boom of technology. As a result, with the rejuniveation of US economy, the number of bonds upgraded exceeded the number of bonds being downgraded.
1998-2011: Continue reading...

The Dow Jones Industrial Average Yearly Return I have obtained from the following table:

http://www.1stock1.com/1stock1_139.htm

We use the last column.

The U.S. GDP growth rate is below:

We use third column.

- Compute the average, standard deviation and the coefficient of variation of each of the variables. In addition, graph the values of the DJIA on the percentage grow rate of the GDP.
I use Minitab 16 statistical software to complete this question:

Descriptive Statistics: GDP per capita growth, %; Dow Jones Rate

Variable Mean StDev CoefVar
GDP per capita growth, % 1,755 1,994 113,65
Dow Jones Rate 9,67 15,24 157,63
- Compute a 95% confidence interval for the population mean of each variable.

One-Sample T: GDP per capita growth, %; Dow Jones Rate

Variable N Mean StDev SE Mean 95% CI
GDP per capita growth, % 31 Continue reading...

After completing the “Play a Virtual Market” simulation, my knowledge regarding how the stock market works was greatly enhanced. My basic strategy was to invest in oil, banks and energy stocks. I also picked a few stocks whose name I recognized. Fundamentally, my strategy was to buy low and sell high. I was estimating that the price of these stocks will go up because of the increase in oil prices, which then increases the energy prices.
I realize that Investing in the stock market is a risky investment. However, that riskiness can be decreased by investing in options. An Continue reading...

Abstract

The Nelson – Siegel – Svensson model is one of the preferred methods by which investors determine the value of bonds in the long run and thus make informed guesses as to the viability of each investment option. It is an accurate method of prediction when an investment portfolio needs to be set up. In this paper, by using the Nelson – Siegel – Svensson process, an attempt will be made to inform investors like to the best option for a fixed income portfolio. The paper would demonstrate how the process is to be used and applied to the data related to treasury Continue reading...

In the study of stock market prices, percentage change of interest and, the percentage change of market indices are key determinants in predicting the future performance of the stock market. When buying shares in the stock market, an investor usually compares the current price and, the future expected increase in price, which will result in profits. The future expected profit is usually calculated at the existing interest rates. Any future change in the interest will automatically have an impact on the future expected earnings. For instance, a rise in interest rate may result from inflation. As a result, future Continue reading...

I believe that economic globalization brings both benefits and shortcomings to international portfolio investments, but is overall beneficial. On the one hand, economic globalization leads to expanded markets for companies who are now able to address the need of more customers than before. Because of this, companies can use economies of scale to their own benefits and generate better returns on capital. The globalization allows for a more efficient allocation of resources, for instance by manufacturing products in the area where the prices are the most competitive (e.g. European textile brands manufacturing clothes in Bangladesh). These are all benefits Continue reading...

(Candidate’s Full Name)

Movie Review:

Plot
“Get rich or die trying!” This is the motto for the 2013 American movie titled The Wolf of Wall Street. Directed by Martin Scorsese, the film is an on-screen adaptation of a memoir of the same name written by Jordan Belfort, a former stock broker convicted of stock market manipulation and running a penny stock boiler room in USA. Starring Leonardo DiCaprio as Jordan Belfort, the film narrates his career as a certified stockbroker with L.F. Rothschild, before losing his job due to the 1987 stock market crash. Using his brilliant salesman skills, he Continue reading...

Wolf of Wall Street is an American black comedy movie based on Jordan Belfort. It is directed by Martin Scorsese, and the screenplay is written by Terence Winter. It was released on 25th December 2013 a film based on the true story of Jordan Belfort. Jordan is portrayed as wealthy stock-broker who lives large, spends a lot of money, and lives an exceedingly high life, until he falls due to involvement in corruption, crime, and federal government. It is a very funny and entertaining movie that features other characters including; Margot Robbie, Jonah Hill, Matthew Mc Conaughey, Rob Reiner, Continue reading...

Cross-listing is a process to access other stock exchange markets to collect the investments. The main advantage of cross-listing for the share-issuing companies is that due to the different business time zones, the companies have the opportunity to trade for more than the normal trading hours available. Therefore, more trading hours allow the companies to complete their ‘right issue campaigns’ in a short time. Another main advantage of cross-listing is that the companies which are listed in different countries are in a position to collect funds in different currencies that reduce their translation and currency risk. Moreover, the list Continue reading...

Introduction to finance and quantitative methods

Question one
- Ways of classifying financial markets
Financial markets refer to markets where exchanges of financial instruments take place. Financial markets can be categorized in the following ways:
- Nature of the products: Financial markets can be classified based on products ownership, the duration it takes to mature, how it is traded, size and how it can be transferred. Examples of such financial markets are equity and derivatives.
- Market participants: Market participants may be made up of professionals, non-professionals or officials of an institution. Under this criterion, financial markets can be classified as commercial banks, Central banks Continue reading...

Russia is vulnerable to disruptive terms of trade because of its dependency on oil. Because of fluctuating oil prices, sluggish domestic demands, weak external environment and high rate of inflation, Russia’s economic growth declined in the year 2012 to 3.4 percent, and it is projected to be constant in 2013. Capital outflows in the Russia are expected to increase while debt ratios are expected to be favorable.
Russia is a large size economy and its Gross Domestic Product (GDP) growth rate is 3.4 percent. The adjusted dollar terms of the GDP, purchasing power and income per capita is $ Continue reading...

Aggressive Equity investors

Aggressive equity investors play their equity game both actively and vigorously. They spend most of their time and effort in managing their portfolio better than their conservative counterparts. The aggressive equity investors are inclined towards taking greater risks, although in a calculated manner, in order for them to earn superior rates of return. They seem to enjoy the pleasure and adventure of playing the equity game (Chandra, 2008). The following guidelines are relevant to for aggressive equity investors for investment decisions.
If equity investors wish to manage their investment well they should know that they should have knowledge of Continue reading...

Lehman Brothers Holdings Inc. was ranked as the fourth largest bank in the US before it declared bankruptcy in 2008. The company was dealing in investment banking, equity and fixed income-income sales and trading, research, investment management, private equity, and private banking. A significant number of clients withdrew their accounts from Lehman Brothers and the share price of the stocks fell at an exponential rate. Consequently, on September 15, 2008 the company filed for bankruptcy under Chapter 11. Lehman Brothers played a major role in the recession of the late 2000’s which drastically affected the entire country. The Continue reading...

Investment Policy

This investment policy has been drafted after consideration of a number of policies on the part of the client. It also describes all the prudent investment factors that the investor deems appropriate. In this investment policy, the investor is offered asset classes that are managed under specified management styles for achieving the set objectives (Craig, 2012). The main return objective for this investment policy is maintaining the returns for the investor at a minimum of 7.5% while maintaining a moderate risk level in comparison to other market investments. It also aims at capital preservation and long term growth for Continue reading...

Summary

The global economic crisis that happened between the year 2000 and 2010 was largely due to the issue of mortgage securitization. Mortgage securitization emanated from firms developing new securities from the mortgage obtained by buyers and developing business with investors from these new securities. The development of mortgage securities begins with the buyer of a homeowner paying cash to secure ownership of the house. To obtain the cash, the buyer secures a mortgage using a mortgage broker who secures the mortgage from a securitizing firm. The securitizing firm then creates new securities, which it sells to potential investors. The Continue reading...

- Introduction
The report describes the process of the analysis of two stocks which has been done using the Single Index Model. It includes collecting and sorting the data, analysis this data using the SIM and regression analysis and the explanation and the evaluation of the results. The findings are useful for decision making in the financial planning.
- Stocks Analyzed
The table above contains the information about two analyzed stocks: the company name, stock code, relevant sector, the average return and the standard deviation of the return. Last two points have been computed using the monthly price data spanning Continue reading...

i) Calculating cost of equity using CAPM Model:
Capital Asset Pricing Model, often abbreviated as ‘CAPM’, is the most fundamental concept in the investment theory of present time. This is an equilibrium model that predicts the expected return on a stock, given the expected return on the market, the stock’s beta-coefficient and the risk free rate. Considered from the borrower point of view, this model is used to calculate the cost of equity for the company using the following formula:
Cost of Equity= RFR+ Beta(Equity Risk Premium)

Below is the detailed explanation of cost of equity calculated for Tim Hortons Inc:

Risk Free Rate: This refers to rates being offered by Continue reading...

Introduction

The Journal of Banking and Finance (JBF) essentially undertakes the mandate of publishing both the empirical and theoretical research, it doesn’t publish any other research but rather those within the span of finance and banking. Its main objective as stated within the scope of their mission is fundamentally to ascertain a flow and availability of research that pertains to capital, money, and operations of the financial institutions. Ensuing the fact that this journal accomplishes the mandate of assuring a continued flow of research materials about banking and finance, recent articles from this journal will be analyzed to deduce Continue reading...

Answer a)

Market is said to be efficient when the same amount of information is available to all investors at the same amount of time. In other words, an ‘Informational Efficient Market’ is said to be efficient Nobel Laureate, Eugene Fama was the strong proposer that the market is efficient, i.e. , since similar amount of information Is available to all the investors at same amount of time, all the stocks in the market are perfectly priced and no investor can beat the market returns.
However, whether the stock markets are efficient or not, the topic is still in debate despite of Continue reading...

Article Summaries

Article Summaries

Weibo has been performing well in China the same way in which Twitter is doing across the world. It is perhaps due to this reason that the owners have decided to initiate an IPO in the US. As is expected of any company planning an IPO, Weibo has to provide the IPO filing to prospective investors (read the general public). The author clearly highlights the major details embedded within the filling in a bid to inform his readers on what each of them means.
Specifically, the author emphasizes on the risk factors directly affecting the company. This Continue reading...

In the article, ‘Trying to See Apple from a Different Angle’, Jeff Somer on February 1, 2014, has explained about the Apple Incorporation, which has started its business in 1970, and then worked hard and retained its identity. Now Apple Incorporation is the biggest company of the world and is enjoying favorable investments from the investors. The author further tells that, in the year 2010, the company has generated 52% revenue, which has risen to 66% in 2011 and then fell to 45% in the year 2012. Recently in 2014, the company has introduced iPhone, which has gained remarkable Continue reading...

Currency Hedging

Introduction
Currency risk is an intrinsic aspect in the foreign market. The enterprises that operate in this environment have a variety of derivative instruments that can be used in connection with these risks. Managing these risks requires enterprise wide coordination otherwise; these international exposures will affect the value of the currency. Therefore, global equity portfolio managers have resulted in a variety of methods to currency hedging to manage the uncertainties in the foreign market. This is so because currency hedging reduces the financial risk, which occurs in the foreign market. Therefore, the paper will evaluate the currency hedging and Continue reading...

NPV

NPV (the net present value) is used to calculate, and analyze how much is a project is useful also to find out the difference between the present value of cash inflows and the present value of cash outflows. Also, we should know that the NPV analysis is sensitive when we calculate the future cash inflows for the project's revenues. Simply the NPV method shows whether we should undertake a project or reject it; it is useful to make decisions and it is easy to use.
According to the primary investment rule, if the NPV is positive that means the Continue reading...

Since, the portfolio construction is based on Moderately Conservative Risk Tolerance, this is a clear indication that the investor is either retired or is retired and is solely relying on paychecks from the portfolio income. Another extreme case can be that the investor has already faced the negative side of investment and has lost his money in the past and thus, he prefers to be moderately conservative in his investment approach. Thus, being an ethical investment advisor firm, we cannot force the investor to change his investment approach and thus, we shall continue with the portfolio construction as per Continue reading...

Analysis: IBM vs. Infosys Inc

As per the definition, Large Cap stocks refer to the stocks of the company, whose market capitalization exceeds $10 Billion. The term ‘’ Large Cap’’ is an abbreviation for the term large capitalization of a company which is calculated by multiplying number of shares outstanding to market price per share. For growth stocks, such stocks are expected to provide returns higher than the above market rate of return. Generally, market analyst considers the technology or the blue chip stocks to be growth stocks.
For the given task, I have selected two blue chip stocks i.e., IBM from USA and Infosys Continue reading...

Stock Analysis of Amazon and J.C. Penney
- The two stocks selected are Amazon (AMZN) and J.C. Penney (JCP). Amazon is an American e-commerce company (online retailer) with a market capitalization of $171B, and J.C.Penney is an American clothes retailer with a market capitalization of $2.64B. These two stocks are of particular interest for our study period. Amazon is interesting because it is a strong growth internet company who is trying to innovate and convince its investors of its ability to sustain high growth rates. J.C. Penney is interesting because it is considered as a “fallen angel”, a previously Continue reading...

Definition

Finance is science, which explains about the management, creation, money, banking, credit, investment, assets and liabilities. The finance has financial systems. It has public, private, and government phases. There are three types of finance public, corporate, and private finance.

Efficient Market

An investment that states impossible to beat the market because the stock market efficiency causes the existing price to the corporate, EMH says, the stock always fall value on stock exchanges. It is impossible to outperform in the overall market based on the expert stock selection. The efficient market deals with the market research and efficiency.

Primary Market

A market issues new Continue reading...

Introduction

A Ponzi scheme is a type of investment fraud that contains processing of expected returns to current investors from the amount of funds collected from the new investors. Ponzi scheme regulators usually convince the potential investors by giving them an assurance of high returns depending on the amount of fund that they deepen into the scheme. This comes with a guarantee of high returns with minute or no risk. Ponzi scheme began in 1920s; it was started by an English man known as; Charles Ponzi. He convinced plenty of English citizens into believing that, by investing in a postage Continue reading...

It may be a mere co-incidence or accidental turn of events that the theme, concept, content, genre and approach of two generically different kinds of books can have so much of close association. In order to appreciate this feature, an analytical study of the following two books was made.

1: Technical Book:

- Description: A supplement for undergraduate and Graduate Investments Courses.
- Publisher: Prentice Hall, 5th Edition (January 8, 2013)
- Language: English
- Paperback: 160 Pages
2. Non-fiction Book
- Publisher: W.W. Norton & Company
- Contents: 213 pages
- Language: English
3. Article 1
- Published: Wall Street Journal on Continue reading...

Introduction

Investors are interested in knowing the intrinsic and market value of a company so that they can make wise investment decisions based on the available information. In determining the monetary value of a business, investors use the following three methods:
Asset approach- this method looks at the liabilities and assets of a business. The difference between the assets and liabilities is the business value.
Market approach-this method is based on the market forces of demand and supply in arriving at an equilibrium price acceptable to both the buyer and the seller of the company. This makes the fair market Continue reading...

ARTICLE REVIEW

This article deals with an important topic in finance. The article is related to increase in earnings for Australian companies and how this affects the sentiments of investors ,which in turn affect the value of the stock index. The major finding of this article is that ASX 200 index , that is an index made up of the 200 of the biggest companies in Australia by market capitalization has increased in value.
The major sectors which have experienced increased in earnings are the resource sector and the banking sector. Specifically amongst the resource sector Rio Tinto and BHP Billiton, both Continue reading...

Since the beginning of the economic revolution, the united states have experienced recessions at least, but none was severe or lasted as long as the great depression. It is only with the shift in the economy towards war armament in the late 1930s that the hold of the recession eased. Stock prices had been rising gradually since 1920, but in 1928 and 1929 their prices surged forward with average stock gaining over 40% in value. At the time, the stick was totally unregulated, and this led to a lot of margin buying as customers borrowed up to 70% of Continue reading...

Investing in the FutureFirst Name MI Last NameInstitution Name

Investment means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. It is a current commitment of Rupees for a period in order to derive future cash flows. The investment may include an enterprise, stocks, and other forms of equity participation in an enterprise, bond, debenture, and other debt instruments. Individual invests because by saving or investing money, instead of spending it now, individual’s trade-off present consumption Continue reading...

A self-directed investment is a retirement account in which the investor is responsible for all the decisions. The individual who holds the account makes decisions based on his/her own choices. People use this account as a means of diversifying investments apart from stocks, bonds, and mutual funds. The investments in this account are administered by a custodian or trustee who is appointed by the investor himself/herself.
The greatest advantage for a self-directed IRA is that; a person can invest in whatever he wants. These investment decisions may range from gold coins to horse farms (Tuchman, 2013). However, people have Continue reading...

An overview of the financial statements does not convince me to suggest the management for the purchase of a major shareholding in Squirros Limited. My decision is based on the visible trend in the major portions of Balance Sheet and Income Statement.
First, the turnover of the company has consistently decreased over the years. The same goes with the gross profit margins and net profit margins of the company that courtesy low turnover has decreased significantly over the years. Another negative consideration for the company was increasing administrative cost and interest expense. To be noted that since the company Continue reading...

The British Empire operated three different types of colonies during the height of their occupation of the United States. These were royal colonies; proprietor colonies and company colonies also known as a corporate colony or a charter colony (Fishkin 6).
Charter colonies were grown because of the need for free enterprise. They were established by individuals or groups of settlers who received charters from the King (Fishkin 12). They then created chartered companies to pool likeminded investors and shareholders for purposes of exploration, colonization and trade. Most chartered companies were formed in the 16th century by European investors (Fishkin Continue reading...

The Crash of 1929

Stock market crash of 1929 was the result of one of the largest in the history of crazy speculation. Few years, anticipating the year 1924, the U.S. Dow Jones index, estimating shares of industrial companies fluctuated within a relatively narrow price range with strong pressure from sellers at every level reaches 110. At the end of 1924 year stock broke through this level, demonstrating the tremendous rise to 150 in 1925. Rise of the stock index warned about a few good years in the future. Since 1921, when the stock market was very depressed, and by 1928 the volume Continue reading...

This is an INDIVIDUAL assignment. Submit your answers in hardcopy at the beginning of class. Check the syllabus for the due date. Handwritten answers are NOT acceptable. Use Word to write your answers.

Chapter 4: Investing

Please choose a publicly traded company that you find interesting or would like to invest in, and find their ticker symbol on www.money.msn.com or www.finance.yahoo.com.

Two factors have been shown significant in determining the long-run performance of stocks:

- The size of the company, known as “market capitalization” (often shortened to “market cap”)
- The price of the stock, relative to its book value (price to book)
- Go to http://www.morningstar.com/ and enter the ticker for your chosen stock Continue reading...