...Individual Stocks VII. The CML and SML VIII. “Overpricing”/“Underpricing” and the SML IX. X. Uses of CAPM in Corporate Finance Additional Readings Equilibrium Process, Supply Equals Demand, Market Price of Risk, Cross-Section of Expected Returns, Risk Adjusted Expected Returns, Net Present Value and Cost of Equity Capital. Buzz Words: 1 Foundations of Finance: The Capital Asset Pricing Model (CAPM) I. Readings and Suggested Practice Problems BKM, Chapter 9, Sections 2-4. Suggested Problems, Chapter 9: 2, 4, 5, 13, 14, 15 Web: Visit www.morningstar.com, select a fund (e.g., Vanguard 500 Index VFINX), click on Risk Measures, and in the Modern Portfolio Theory Statistics section, view the beta. II. Introduction: from Assumptions to Implications A. Economic Equilibrium 1. Equilibrium analysis (unlike index models) Assume economic behavior of individuals. Then, draw conclusions about overall market prices, quantities, returns. 2. The CAPM is based on equilibrium analysis Problems: – – There are many “dubious” assumptions. The main implication of the CAPM concerns expected returns, which can’t be observed directly. 2 Foundations of Finance: The Capital Asset Pricing Model (CAPM) B. Implications of the CAPM: A Preview If everyone believes this theory… then (as we will see next): 1. There is a central role for the market portfolio: a. This simplifies portfolio selection. b. Provides a rationale for a “market-indexing” investment strategy. ...
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... Objectives/Benefits • Assist natural work teams in charting roles and responsibilities in a consistent manner • Assist natural work teams with development of implementation tool kits • Clarify individual/departmental roles and responsibilities • Identify accountabilities • Eliminate misunderstandings, encourage teamwork • Reduce duplication of effort • Establish “consults” and “informs” resulting in better communication 3 Critical Issue Summary Opportunity Roles and Responsibilities Accountability • To clarify Responsibilities • To identify authority Job responsibility • To empower employees with authority to do it Role of middle manager • To bring up to speed with organization structure Approval 4 • To better understand • To improve communications • To reduce uncertainty of multiple reporting Guidelines • Remember new culture philosophy when defining roles and responsibilities ! Eliminate “checkers checking checkers” ! Encourage teamwork ! 100% accuracy not always required • Place accountability (A) and responsibility (R) at the level closest to the action or knowledge • There can be only one accountability per activity • Authority must accompany accountability • Minimize the number of consultants (C) and informs (I) • All roles and responsibilities must be documented and...
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...Marketing Management Tutorial Group: 4 Reading 6: Collaborative advantage 1. Collaborative advantage is synergy achieved by integrating resources plus expertise of one organization and provides a foundation or counterbalance to “Competitive Advantage” 2. The 3 main fundamental characteristics of collaborative advantage is that they must yield benefits for the partners and they are more than just the deal. They are also alliances that both partners ultimately deem successful involve collaboration rather than mere exchange. Collaborative advantage cannot be controlled by formal systems but require a dense web at interpersonal connections and internal infrastructures that enhance learning. 3. There are also 3 varieties of relationships which are mutual service consortia that means similar industries pool their resources together to gain benefit too expensive to acquire alone. Joint ventures are companies pursuing an opportunity that requires capabilities from each of them and value-chain partnerships are supplier-consumer relationships. 4. Relationships between companies begin, grow and develop much like relationship between people. Like romances and alliances, they are built on hopes and dreams, what might happen if certain opportunities are pursued? 5. The 8 I’s that create a successful we are first individual excellence, importance, independence, investment, information, integration, institutionalization and integrity. 6. The 8 I’s show that both partners are...
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...Running Head: Systems Thinking 1 Systems Thinking Management Process Systems Thinking 2 Table of Contents Introduction to Systems Thinking Reflections on readings Applying SIMILAR to an area needing improvement Conclusions Systems Thinking 3 Systems thinking is a very new concept to me. It is an outstanding approach with a global view of the entire system and not viewing each department as a separate entity thus preventing the siloed effect. First and foremost, I think it is critical to define just exactly what constitutes a system. According the Dr. Deming’s book, a system is defined as “a series of functions or activities within and organization that work together for the aim of the organization” (Latzko, 1995, p. 35). I at first struggled with the systems concept. Using this approach all components of the system gain and not at a cost to another. With that definition in mind we can apply this thinking to any organization or process. I love the analogy Dr. Deming used by looking at an orchestra as a perfect system. My translation of this analogy is that the sum is greater than the parts. The combined efforts of each member of the orchestra are an outstanding product, beautiful music, regardless of the instrument played. All the orchestra members have the same common purpose (Dr. Deming’s 1st point for management). Thus, providing...
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...Cost Allocation in Multiagent Settings Author(s): Madhav V. Rajan Source: The Accounting Review, Vol. 67, No. 3 (Jul., 1992), pp. 527-545 Published by: American Accounting Association Stable URL: http://www.jstor.org/stable/247976 Accessed: 13/12/2008 09:19 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=aaasoc. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. American Accounting Association is collaborating with JSTOR to digitize, preserve and extend access to...
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...In a world where anyone can say anything, it is important to be able to identify the reasons behind the speaker’s purpose and what the individual is actually implying. The person I will be doing rhetorical analysis on is Donald Trump. Trump is sixty-nine years of age and he is currently a Chairman as well as president of The Trump Organization. I think Trump will be rhetorically interesting because I have done rhetorical analysis on him about his Facebook page previously. He was good at using rhetorical appeals to his audience at the right spots. To start off, for Trump, obviously his overall goal is to get votes. At the main republican presidential debate (excerpt on page 3), he present himself as someone respectful of his opponents by using...
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...Introduction Managing portfolio and investing in stocks is very risky and could be tricky, as a result, financial experts and investors view it as necessary or smart to know what to expect when they invest. Due to this, different statistical models have emerged to attempt to scientifically measure the potential returns on an investment. The Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT) are two of such models. The purpose of this essay is to critically compare the Arbitrage Pricing Theory with the Capital Asset Pricing Model as used by fund managers in the United Kingdom. Captial Asset Pricing Model (CAPM) When Sharpe (1964) and Lintner (1965) proposed the Capital Asset Pricing Model (CAPM), it was seen as a leading tool in measuring if an investment will yield in positive or negative returns. It attempts to explain the relationship between investment risk and expected reward of risky securities (Ushad, 2011; Reilly and Brown, 2011; Heshmat, 2012). The CAPM helps to determine the required rate of return for any risky asset (Reilly and Brown, 2011). “The CAPM states that the expected return on a security or a portfolio equals the rate on a risk-free security plus a risk premium” (Heshmat, 2012: 504). It indicates that the expected return on an asset has a positive linear relationship with the non-diversifiable risk of the security (beta) (Heshmat, 2012). Ushad (2011) explains that the CAPM is based on the premise that higher returns should be...
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...Choice Modeling: Marketing Engineering Technical Note 1 Table of Contents Introduction Description of the Multinomial Logit (MNL) Model Properties of the MNL Model S-shaped response function Inverted “U” Marginal response Elasticity of response Proportional Draw Logit Model Estimation via Maximum Likelihood Using Logit Models for Customer Targeting Using Logit Models for Customer Segmentation Determining the number of latent segments in MNL models Summary References Introduction Firms today have access to increasing amounts of market response data at the level of individual customers, including data from scanner panels, direct marketing efforts, online retailing, loyalty programs, and the like. These data include both the marketing effort directed at a customer (e.g., price discount, or specific email sent to that customer) and the associated specific behaviors (e.g., purchase, customer support) of that customer. Consequently, there is also increasing interest among marketers in developing and using response models specified at the individual level. Analyses of individual-level data are useful for firms even for making decisions about aggregate marketing actions, such as TV advertising. After all, markets are composed of individuals, and acknowledging This technical note is a supplement to the materials in Chapter 1,2, and 7 of Principles of Marketing Engineering, by Gary L. Lilien, Arvind Rangaswamy, and Arnaud De Bruyn (2007). © (All rights reserved) Gary L. Lilien...
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...Meghan Wilcox ECON 3340 - 102 Corporate Research Paper Bruce MacKeen T700E Table of Contents Introduction 1 Non-Market Environment 1 Baron's Four I's Analysis 3 Issues. 3 Interests. 3 Institutions. 3 Information. 4 Non-Market Strategy 4 Conclusion and Recommendations 5 Introduction The Hudson's Bay Company formed in England in 1670 when the attempted to set up a trading post around Hudson's Bay. This company is very much involved in Canada's political and economic structure. In the beginning of its existence, they were predominantly involved with trading furs to the native people within Canada. It wasn't until the twentieth century that HBC turned into the retailing company that they are known for today, however, they still maintained their position in the fur trade industry (HBC, 2013). HBC's current operations range from financial services and mortgages to their most well known functions as one of Canada's largest retailers. There are multiple stores that are included in the HBC franchise, for example, The Bay, Zellers, Home Outfitters and Saks. Hudson's Bay Company also owns Lord and Taylors in the United States. As a combined total in Canada and the United States, HBC has 29,000 employees. The most well-known product line sold by HBC vendors is its Canadian Olympic clothing line (Hudson's Bay Company, 2013). Along with providing services and products to its consumers, HBC also is highly involved in the community. HBC has established...
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...ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA: NEW INSIGHTS INTO THE CAUSALITY RELATIONSHIP AN ECONOMETRICS ASSIGNMENT SUBMITTED BY ------------------------------------------------- OLUWAFEMI JOSHUA IBRAHIM MATRIC NUMBER: 121937 LEVEL: 700 LECTURER IN-CHARGE: PROFESSOR E.O. OGUNKOLA November, 2010 1) STATEMENT OF THE PROBLEM Electricity plays a very important role in the socio-economic and technological development of every nation. It is widely accepted that there is a strong correlation between socio-economic development and the availability of electricity (Sambo, 2008). It is generally recognized that energy, including electricity, plays a significant role in economic development, not only because it enhances the productivity of capital , labour and other factors of production, but also that increased consumption, particularly commercial energy like electricity, signifies high economic status of a country(Aklas & Yilmaz, 2008). The relationship that exists between electricity consumption and economic growth has been of great interest to many researchers. The study of this relationship arises from the need to understand the complex links between these variables. Such understanding is basic to regulators and investors in deregulated electricity markets, in order to design a system that is reliable, efficient and growth-efficient. The empirical argument has been centered on whether economic growth responds to increase in electricity consumption, or whether...
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...“Bricks-and-Mortar” vs. “Clicks-and-Mortar”: an Equilibrium Analysis Fernando Bernstein Jing-Sheng Song Xiaona Zheng The Fuqua School of Business The Fuqua School of Business Guanghua School of Management Duke University Duke University Peking University Durham, NC 27708 Durham, NC 27708 Beijing, China 100871 Forthcoming in European Journal of Operational Research The Internet has provided traditional retailers a new means with which to serve customers. Consequently, many “bricks-and-mortar” retailers have transformed to “clicks-and-mortar” by incorporating Internet sales. Examples of companies making such a transition include Best Buy, Wal-Mart, Barnes & Noble, etc. Despite the increasing prevalence of this practice, several fundamental questions remain: (1) Does it pay off to go online? (2) Which is the equilibrium industry structure? (3) What is the implication of this business model for consumers? We study these issues in an oligopoly setting and show that clicks-and-mortar arises as the equilibrium channel structure. However, we find that this equilibrium does not necessarily imply higher profits for the firms: in some cases, rather, it emerges as a strategic necessity. Consumers are generally better off with clicks-and-mortar retailers. If firms align with pure e-tailers to reach the online market, we show that a prisoner’s dilemma-type equilibrium may arise. Keywords: Supply chain management, Game theory, E-commerce, MNL model...
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...Choosing Cost versus Fair Value: International Evidence from the European Real Estate Industry Upon Adoption of IFRS Karl A. Muller, III Pennsylvania State University Edward J. Riedl * Harvard Business School Thorsten Sellhorn Ruhr-Universität Bochum PRELIMINARY – PLEASE DO NOT QUOTE WITHOUT PERMISSION December 2007 ABSTRACT: We examine the determinants of investment property firms’ choice to use the cost or fair value model to account for their primary asset, real estate. Our examination exploits the European Union’s adoption of International Financial Reporting Standards, which require firms to make this choice under IAS 40 – Investment Property. We hypothesize and find evidence that firms are more likely to choose the fair value model when the firm’s pre-IFRS domestic standards permitted or required fair values on the balance sheet, and when the firm exhibits a greater commitment to reporting transparency. We also find limited evidence that firms are more likely to choose the fair value model when ownership is more dispersed, and when the property market in which they operate has higher liquidity. Overall, our results reveal both the occurrence and causes of variation in firms’ reporting choices when differing accounting treatments are permitted. Key Terms: Fair value, accounting choice, IFRS, real estate, investment property, IAS 40 JEL Classification: M41, G15, G38 Acknowledgements: We appreciate useful discussion and data assistance...
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...Case Study Analysis EDU/215 January 23, 2012 Kimberly Holloway Carl Robins, newly employed with ABC, Inc. is a recruiter for the company. He has recruited new employes and has high hopes of getting them started in work as soon as possible. Carl will soon learn that he has a long road to travel, and more on the job training to complete himself before accomplishing his goals. Carl Robins has recruited 15 new trainees. The trainees are to work for Monica Carrolls, the operations supervisor. Carl recruited these trainees in April. Monica has contacted Carl two months prior to a July start and Carl has assured Monica that the new recruits will be able to start work when anticipated. The key problems with Carl's plan are one, Carl failed to see that the new trainees files were completed updated and complete. Carl did not notice that this was not accomplished until 2 weeks after the original call from the Operations Supervisor, more than a month after Carl recruited the trainees. Another key problem are the incomplete orientation manuals, and the fact that there are only three of them. The last key problem is that although Carl scheduled orientation, he did not follow the proper procedures of setting up the class and then reserving the training room, by use of the training log. In all Carl could have kept his promise to the Operations Supervisor, and made his life easier by using some alternative methods in his recruitment...
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...Introduction to Campus Journalism What is Journalism? According to Wikipedia, Journalism is: - a method of inquiry and literary style used in social and cultural representation. - it is a public service machinery in the dissemination and analysis of news and information. Whereas, according to The Free Dictionary, it is: - the collecting, writing, editing, and presenting of news or news articles in newspapers and magazines and in radio and television broadcasts. What/Who is a Journalist? - a person who practices or prepares journalism. - a professional who collects, organizes, writes, edits, presents, and distributes news or information via the newspaper, magazine, TV, radio. What is Campus Journalism? - journalism carried out by students on subjects related to campus life or issues published in publications only intended for campus distribution and readership. History of Campus Journalism Early School Journalism * Before 1900-the principle was that “where there is a student body there is a need for a news organ” * School publication was just a dotted account with little significance other than the birth of the school publication. * 1920-literary essay had given way to the feature story. * 1920-poetry abdicated its position to the columns, news story suggested interpretation, and editorial entered the paper. * Half of the school papers that are published today began between 1920 to 1940. Four Distinct Types of Publication emerged: ...
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...symmetric equilibria 49 Prerequisite: Chapter 1. 2.1 Strategic games is a model of interacting decision-makers. In recognition of the interaction, we refer to the decision-makers as players. Each player has a set of possible actions. The model captures interaction between the players by allowing each player to be affected by the actions of all players, not only her own action. Specifically, each player has preferences about the action profile—the list of all the players’ actions. (See Section 17.4, in the mathematical appendix, for a discussion of profiles.) More precisely, a strategic game is defined as follows. (The qualification “with ordinal preferences” distinguishes this notion of a strategic game from a more general notion studied in Chapter 4.) A STRATEGIC GAME D EFINITION 11.1 (Strategic game with ordinal preferences) A strategic game (with ordinal preferences) consists of • a set of players • for each player, a set of actions • for each player, preferences over...
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