...Bangladesh 7 2.2 Economic outlook 7 Industry Analysis 8 COMPANY ANALYSIS 9 ANALYSIS & INTERPRETATION 9 Conclusion 13 EXECUTIVE SUMMARY Today’s business world is so much competitive as a result every person has to be very cautious while taking an investment decision. Various types of analysis are performed by the investors to choose the most perfect securities. In a portfolio construction a person analysis the whole macro as well as micro economic scenario of a nation, in industry analysis the industry condition, movement is closely examined and in a company analysis the specific firm is analyzed to take a decision. This are steps of fundamental analysis.. In this report all this are performed on ten firms. Our selected firms are from different industries. All of these companies’ shares are category A shares in DSE. We have collected our necessary information from primary and secondary sources. In our entire report we try to focus on portfolio construction from an investor’s perspective. We have divided the topics of the report into different segments. First we have discussed about the origin of the report, objectives and scope of the study, the method of preparing the report, limitation of the study. Then we have chosen the companies. At first we did the macro economic analysis, than industry analysis and last company analysis. Then we constructed the portfolio including with and without short sells. After all analysis we have given our suggestion as well as findings...
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...Regression Analysis of Verizon Communications, Berkshire Hathaway, and Wyndham Worldwide The stock market plays a pivotal role in the world today, bringing together investors with companies looking to raise funds. The government, organizations, and individual shareholder’s all have a stake in actively following and participating in the stock market. The problem that hinders common traders and professional investors alike becomes differentiating between the thousands of publicly traded companies in the U.S. alone to pick the best investments. By comparing three large, but very different companies to the market as a whole this paper will demonstrate how Beta can be used to measure the volatility of a stock. The three dependent variables will be acquired from historical stock returns from the communications conglomerate Verizon Communications (VC), Berkshire Hathaway Inc. (BRK-A) the multinational holding company best known its chairman Warren Buffet, and Wyndham Worldwide Corporation (WYN) one of the world’s largest hotel and resort chains. After comparing relevant statistical factors to each other a regression analysis will be done for each company comparing the excess market returns for each company (found by subtracting out the market free rate) to the market excess return. Table 1: Stock Return Statistics | Average Price/Share | Mean Return | Largest Gain | Largest Loss | Standard Deviation | Coefficient of Variation | VZ | $34.73 | 1.43% | 12.58% | -10...
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...U.S and conduct an event study and make a consensus on their responsiveness to an Earnings Surprise. We also need to establish a relationship between the Market Index and the Stock in itself. This relationship can be determined by running a regression and using the Market as the independent variable and the Stock as the dependent variable. In order to analyze the responsiveness of a stock, we need to understand and imply the concept of the beta. The beta is a measure of the volatility, or systematic risk, or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns. Beta is calculated using regression analysis and you can think of beta as the tendency of a security’s returns to respond to swings in the market. A beta of less than 1 means that the security will be less volatile than the market. Now, we are going to conduct an event study for 3 companies. 1.) Parker Drilling 2.) Autobytel Inc. 3.) Auxilium Pharmaceuticals, Inc. 1. Parker Drilling Company Introduction Parker Drilling is part of the Oil & Gas Equipment & Services industry. The company was founded in 1934 and is headquartered in Houston, Texas. Parker Drilling specializes in barge drilling, onshore drilling and various tools that are required by drillers. Parker does not venture way into the ocean and drill mines in the confines of...
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...Excel to Conduct Analysis, which may help you with running regressions in Microsoft Excel. You may also wish to use a basic statistics text for guidance if needed. I have also provided you with a table with the t distribution. If you have an older version of EXCEL and have not previously loaded the Analysis ToolPak, go to TOOLS, ADD-INS, Analysis Tool Pak. This will load the regression software that you will need. Then go to TOOLS, DATA ANALYSIS, Regression. Now you are ready to run regressions in EXCEL. Alternatively, if you have the most recent version of EXCEL, go to HELP and enter Load the Analysis ToolPak. Excel HELP will explain how to load the software. Once you have loaded the software you find it in DATA, DATA ANALYSIS, Regression. Now you are ready to run regressions in EXCEL 1. Measuring Systematic Risk: Beta Coefficients The management of a publicly traded firm is interested in determining the firm’s cost of equity capital using the security market line (SML) version of the capital asset pricing model (CAPM). Management has measured the weekly returns for the market (S&P 500), its own stock, and the risk-free rate. The returns were annualized. The annualized percentage returns for each of the last 20 weeks are provided. 1a. See data in Excel file provided with this assignment. Using Excel, determine the excess rate of return on the firm’s stock (firm return less risk-free return) and the excess rate of return on the market (market...
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...of the acquiring banks only experience positive excess return during announcement period, which is during 3-day event window { t-1, t+1} and 31-day event window {t-30,t+1}. For 3-day period, shareholders experience 0.43% of excess return. In long term, they experience negative excess return. Shareholders of target banks experience significant and considerably large positive excess return during pre-announcement and post-announcement. During a 3-day event window {t-1, t+1}, the average excess return is 23.17%. When we look at the correlation between total announced value and the excess return, total announced value has negative correlation with acquirers’ excess return only during event window {t-1, t+1}. Similarly, negative correlation is spotted between total announced value and target’s excess return during the same window. The difference in excess return between large and small deal gives us an overview of the relationship between transaction value and excess return. For both acquirers and targets, majority speaking, small deals give them more excess return pre-announcement, announcement, and post-announcement period. Only 1 year after the announcement that large deals allow them to experience more excess return. Regression analysis shows us that financial crisis positively impacts the excess return experienced by shareholders of acquiring banks. The variable Large Deal has negative relationship with the excess return for all event windows except 3-months before announcement...
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...data analysis of portfolio of two common stocks. Firstly, we download 84 months data including returns, risk free and s&p500 index. Then we use return minus risk free to get the excess return for each company, because we need to use the excess return to graph the investment opportunity set and regression. For the second requirement, we need to compute the arithmetic mean, which is the historical average return. We find the Union Pacific average excess return is greater than the ConAgra. It means the Union Pacific can gain more than the ConAgra. However, the geometric mean is different from the arithmetic mean, we need to use the formula: g=arithmetic mean of return- (1/2)*variance, the variance is the simple historical variance, which is 1/(n-1)∑[r(s)-r ̅ ]^2. The standard deviation is the square root of the variance. The variance and standard deviation are measure the risk. We can see the risk of Union Pacific is greater than the ConAgra. That’s the high return, high risk. Besides, the historical beta of each company is come from the coefficient of regression analysis. The beta of Union Pacific is greater than 1, it’s greater than the average beta and the ConAgra’s beta less than 1, it means less than average beta. The alpha of each company is come from intercept coefficient of regression analysis, which means s&p500 raise or fall 1 percent, union pacific raise or fall 1.4 percent and ConAgra only raise or fall o.4 percent. We get beta and alpha by using the excess return...
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...to Conduct Analysis, which may help you with running regressions in Microsoft Excel. You may also wish to use a basic statistics text for guidance if needed. I have also provided you with a table with the t distribution. If you have an older version of EXCEL and have not previously loaded the Analysis ToolPak, go to TOOLS, ADD-INS, Analysis Tool Pak. This will load the regression software that you will need. Then go to TOOLS, DATA ANALYSIS, Regression. Now you are ready to run regressions in EXCEL. Alternatively, if you have the most recent version of EXCEL, go to HELP and enter Load the Analysis ToolPak. Excel HELP will explain how to load the software. Once you have loaded the software you find it in DATA, DATA ANALYSIS, Regression. Now you are ready to run regressions in EXCEL 1. Measuring Systematic Risk: Beta Coefficients The management of a publicly traded firm is interested in determining the firm’s cost of equity capital using the security market line (SML) version of the capital asset pricing model (CAPM). Management has measured the weekly returns for the market (S&P 500), its own stock, and the risk-free rate. The returns were annualized. The annualized percentage returns for each of the last 20 weeks are provided. 1a. See data in Excel file provided with this assignment. Using Excel, determine the excess rate of return on the firm’s stock (firm return less risk-free return) and the excess rate of return...
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...Federal funds target on equity prices, with the aim of both estimating the size of the typical reaction, and understanding the reasons for the market’s response. On average over the May 1989 to December 2001 sample, a “typical” unanticipated 25 basis point rate cut has been associated with a 1.3 percent increase in the S&P 500 composite index. The estimated response varies considerably across industries, with the greatest sensitivity observed in cyclical industries like construction, and the smallest in mining and utilities. Very little of the market’s reaction can be attributed to policy’s effects on the real rate of interest or future dividends, however. Instead, most of the response of the current excess return on equities can be traced to policy’s impact on expected future excess returns. JEL codes: E44, G12. 1 Introduction The reaction of the stock market to monetary policy is clearly a topic of intense interest both to market participants and policymakers. Those holding equities would obviously like to know how possible Federal Reserve actions might affect the value of their portfolios. Similarly, an estimate of the likely effect of policy on asset prices is an important ingredient in assessing the transmission of monetary policy through the “wealth effect.” The size of and of Governors of the Federal Reserve System and Princeton University (Bernanke) and Federal Reserve Bank of New York (Kuttner). Correspondence to Ken Kuttner, Federal Reserve Bank of New York, 33 Liberty...
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...Journal of Economic Behavior & Organization Vol. 64 (2007) 250–268 Myopic loss aversion, disappointment aversion, and the equity premium puzzleଝ David Fielding a , Livio Stracca b,∗ b a Department of Economics, University of Otago, Dunedin, New Zealand European Central Bank (ECB), Kaiserstrasse 29, 60311 Frankfurt am Main, Germany Received 7 March 2003; accepted 5 July 2005 Available online 24 May 2006 Abstract This paper takes a close look at the “behavioural finance” explanations of the equity premium puzzle, namely myopic loss aversion [Benartzi, S., Thaler, R.H.,1995. Myopic loss aversion and the equity premium puzzle. Quarterly Journal of Economics 110, 73–92] and disappointment aversion [Ang, A., Bekaert, G., Liu, J., 2005. Why stocks may disappoint. Journal of Financial Economics 76, 471–508]. The paper proposes a simple specification of loss and disappointment aversion and brings these theories to the data. The main conclusion is that a highly short-sighted investment horizon is required for the historical equity premium to be explained by loss aversion, while reasonable values for disappointment aversion are found also for long investment horizons; stocks may not only lose in the short term, but also disappoint in the long term. © 2006 Elsevier B.V. All rights reserved. JEL classification: G11; G12 Keywords: Myopic loss aversion; Disappointment aversion; Equity premium puzzle; Investment horizon; Reference dependence 1. Introduction The...
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.../ 29 Testing the CAPM: Background CAPM is a model It is useful because it tells us what expected returns should be. We want test whether it is a good model. Remember, whenever we test a model we are jointly testing market efficiency. Testable Implication of the CAPM The market portfolio is the tangency portfolio: E (ri ) = rf + βiM [E (rM ) − rf ], where βiM = cov(ri , rM ) σ 2 (rM ) Karl B. Diether (Fisher College of Business) Testing the CAPM 2 / 29 Testing the CAPM: The Approach Average Return vs CAPM Prediction The most common approach is two compare historical average returns to the CAPM’s prediction. We compute the CAPM’s estimated prediction by estimating beta (β), the market premium (E (rM ) − rf ), and the risk free rate (rf ). We want the estimated prediction error (called α): ˆ αi = ¯i − CAPM Prediction ˆ r ˆ r = ¯i − ¯f − βim (¯M − ¯f ) r r r The CAPM and α ˆ α will not always be zero even if the CAPM is true. Why? ˆ What can we say about prediction error if the CAPM holds? Karl B. Diether (Fisher College of Business) Testing the CAPM 3 / 29 A Good Strategy? Stock tip: Invest in mid-cap stocks. It is a good strategy because everyone ignores mid-cap stocks. Investor want blue chips, or they want to invest in small start-up companies with growth opportunities. Therefore, mid-cap stocks tend to be undervalued and have high returns on average. Testing Is this true? What do you think of this strategy? How can we test this empirically...
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...of $134.8 million, the Beutel Goodman International Equity fund has produced an annual return of 4.41% since its inception in August 1992. This fund is not managed by a separate entity; the sponsor is also the manager. In charge of portfolio management, KC Parker (CFA) and Colin Ramkissoon have chosen to invest in a variety of different equity sectors such as consumer discretionary, financials, materials, energy, and many more. Equity comes mainly from British companies (UK), Japanese companies and Norwegian firms. The purpose of this fund is to seek long-term enhancement of capital, primarily through investments in common stocks of non-North American based companies. Beutel Goodman Int’l exhibits a relatively lower MER than the average international equity fund, standing at 1.48%, as opposed to the average of 2.54%. The funds top ten holdings represent 42.56% of the total portfolio and come from fairly varied sectors. None of these top ten holdings are from the same sector, and only three of them come from the same geographical area (Japan). Perhaps these varied holdings explain the perfect correlation that this fund has with its benchmark index: the MSCI EAFE (According to the Globe & Mail, 3 year beta is 1.00). The three biggest sectors that the fund is comprised of are Consumer Discretionary (21.93%), Financials (18.65%) and Materials (13.65%). Findings of the regression analysis are as follows: The 12-year beta (15 year performance of the benchmark was unavailable)...
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...investment for companies given the unprecedentedly high cost of advertisement during this event. An event study is necessary to analyze the commitment of large investments of sponsoring companies and its effect on the companies’ stock prices. This particular event study tests these effects on sponsors of Super Bowl XLVII that took place in February of 2013. The results indicate a favorable impact leading up to event with little movement of returns days thereafter the announcement date, thus supporting the semi-strong form of market efficiency. Research Problem The most common way to test the efficiency of the market is with an event study. An event should be chosen that has a quantifiable impact that can be theoretically justified to ensure a proper test of the market. The event this project will analyze is Super Bowl XLVII. This event took place February 3, 2013 in New Orleans with a matchup of the AFC Champions Baltimore Ravens and NFC Champions San Francisco 49ers. This event can be theoretically justified because of the expected favorable returns sponsors of Super Bowl XLVII would experience due to the high popularity and broadcasts of the event. By conducting several experimental tests throughout this study, it will be proven if the event provided new and significant information to the market. Evaluating stock prices for the company cannot be used as the only measure of how much impact an event had for three reasons (Bacon, 9/11). First, while the event researched took place...
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...ACCT 6344 FINANCIAL STATEMENT ANALYSIS A+ Graded Tutorial Available At: http://hwsoloutions.com/?product=financial-statement-analysis Visit Our website: http://hwsoloutions.com/ Product Description ACCT 6344 Financial Statement Analysis, Multiple Choice Question The objective of forecasting is to develop Answer stand-alone financial statements for future analysis. a set of realistic expectations for future value-relevant payoffs. a balance sheet and income statement that articulate. financial statements for comparison to industry averages. Add Question Here Multiple Choice Question Nichols and Wahlen’s 2004 study showed that superior forecasting provides the potential to earn superior security returns. Nichols and Wahlen’s findings indicate Answer that an investor could earn excess returns if the investor could predict accurately the sign of the change in earnings one year ahead. that an investor could earn excess returns if the investor could predict accurately the magnitude of the change in earnings one year ahead. that an investor could earn excess returns if the investor could predict accurately the sign of the change in cash flows from operations one year ahead. that an investor could earn excess returns if the investor could predict accurately the sign of the change in working capital one year ahead. Add Question Here Multiple Choice Question Financial statement forecasts rely on additivity within financial statements and articulation across financial...
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...Lecture Handouts for Chapter 5 Chapter 5 is covered in lectures 31 and 32. Risk and Return The return from an investment is the change in market price, plus any cash payments received due to ownership, divided by the beginning price. The risk of a security can be viewed as the variability of returns from those that are expected. Measurement of Risk The expected return is simply a weighted average of the possible returns, with the weights being the probabilities of occurrence. The conventional measure of dispersion, or variability, around an expected value is the standard deviation σ. The square of the standard deviation σ2 is known as the variance (σ2). The standard deviation can sometimes be misleading in comparing the risk, or uncertainty, surrounding alternative investments if they differ in size. To adjust for the size, or scale, problem, the standard deviation can be divided by the expected return to compute the coefficient of variation (CV) – a measure of “risk per unit of expected return.” Investor’s Attitude towards Risk Investors have different attitudes while deciding between the risk and return in an investment. Investors are, by and large, risk averse. This implies that they demand a higher expected return, the higher the risk. The expected return from a portfolio The expected return from a portfolio (or group) of investments is simply a weighted average of the expected returns of the securities comprising that portfolio. The weights are equal to the proportion...
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...Katrina, one of the most deadly and destructive natural disasters to occur in the United States, on stock prices in insurance industry. It hypothesizes that insurance providers who offer services in the areas affected by Hurricane Katrina should incur a loss in the market-price of their stock following the natural disaster. This event study analyzed fifteen publicly-traded major insurance providers and the risk-adjusted rate of return on their stock before and after the date of dissipation of the hurricane, observed as August 30th, 2005. Results show stock returns, although dropping slightly after Hurricane Katrina, not having any measurable negative effect as a result of the storm. These results support the efficient market theory, as the insurance industry did not have any adverse effect from the devastation of Hurricane Katrina, allowing for no opportunity for abnormal return or avoidance of a loss. Appropriate statistical tests for significance conducted in this study show that Hurricane Katrina had no significant impact on the risk adjusted rate of return on selected insurance industry stock prices over the event study period. INTRODUCTION AND BACKGROUND Natural disasters have an opportunity to affect the stock market, but how soon subsequently to such events does the market react? Is it possible to avoid a capital loss by selling an insurance industry stock prior to such an event? The purpose of this event study is to test the market efficiency theory by analyzing the...
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