...Tony Loton STOP ORDERS A practical guide to using stop orders for traders and investors Hh Stop Orders A practical guide to using stop orders for traders and investors by Tony Loton HARRIMAN HOUSE LTD 3A Penns Road Petersfield Hampshire GU32 2EW GREAT BRITAIN Tel: +44 (0)1730 233870 Fax: +44 (0)1730 233880 Email: enquiries@harriman-house.com Website: www.harriman-house.com First edition published in Great Britain in 2009 by Harriman House. Copyright © Harriman House Ltd The right of Tony Loton to be identified as the author has been asserted in accordance with the Copyright, Design and Patents Act 1988. 978-1-906659-28-8 British Library Cataloguing in Publication Data A CIP catalogue record for this book can be obtained from the British Library. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher. Printed in the UK by CPI Antony Rowe, Chippenham No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, or by the employer...
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...For other uses, see Beta. In finance, the beta (β) of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole.[1] An asset with a beta of 0 means that its price is not at all correlated with the market. A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market; the asset generally decreases in value if the market goes up and vice versa.[2] The beta coefficient is a key parameter in the capital asset pricing model (CAPM). It measures the part of the asset's statistical variance that cannot be mitigated by the diversification provided by the portfolio of many risky assets, because it is correlated with the return of the other assets that are in the portfolio. Beta can be estimated for individual companies using regression analysis against a stock market index. Contents [hide] * 1 Definition o 1.1 Securities market line * 2 Beta volatility and correlation * 3 Choice of benchmark * 4 Investing * 5 Academic theory * 6 Multiple beta model * 7 Estimation of beta * 8 Extreme and interesting cases * 9 Criticism * 10 See also * 11 Notes * 12 External links [edit] Definition The formula for the beta of an asset within a portfolio is \beta_a = \frac {\mathrm{Cov}(r_a,r_p)}{\mathrm{Var}(r_p)} , where ra measures the rate of return of the asset, rp measures the...
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...Beta (finance) From Wikipedia, the free encyclopedia Jump to: navigation, search In finance, the Beta (β) of a stock or portfolio is a number describing the volatility of an asset in relation to the volatility of the benchmark that said asset is being compared to. This benchmark is generally the overall financial market and is often estimated via the use of representative indices, such as the S&P 500.[1] An asset has a Beta of zero if its returns change independently of changes in the market's returns. A positive beta means that the asset's returns generally follow the market's returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. A negative beta means that the asset's returns generally move opposite the market's returns: one will tend to be above its average when the other is below its average.[2] It measures the part of the asset's statistical variance that cannot be removed by the diversification provided by the portfolio of many risky assets, because of the correlation of its returns with the returns of the other assets that are in the portfolio. Beta can be estimated for individual companies using regression analysis against a stock market index. Contents[hide] * 1 Definition * 1.1 Security market line * 2 Choice of benchmark * 3 Investing * 4 Academic theory * 5 Multiple beta model * 6 Estimation of beta * 7 Extreme and interesting cases * 8 Criticism...
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...Sample Final Exam Name:___________________________________________ 1. Which of the following are advantages of owning bonds? I. diversification properties II. higher long-term returns than equity holdings III. current income IV. relatively low risk A. I and II only B. I, III and IV only C. I, II and III only D. I, II, III and IV 2. The bond market is considered bearish when A. market interest rates are low or falling. B. market interest rates are high or rising. C. the risk-free rate of return exceeds the required rate of return. D. more bonds are called than issued over a given period of time. 3. The Franklin Company issued a 6% bond three years ago at par value. The market interest rate on comparable bonds today is 5%. The Franklin Company bond currently pays ____ a year in interest and the bond sells at a _____. A. $60; discount B. $60; premium C. $50; discount D. $50; premium 4. At the time you purchase a bond, you know the exact holding period return you will earn if A. the bond is called at any time prior to maturity. B. you resell the bond in exactly one year from the date of purchase. C. the market rate of interest declines within the next year. D. you hold the bond to maturity. 5. Which one of the following combination of features causes bond prices to be the most volatile? A. low coupon, short maturity B. high coupon, short maturity C. low coupon, long maturity D. high coupon, long maturity 6. Which of the following...
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...Berkshire Hathaway AFIN250 Monday 5pm Christopher Lam 43820832 Savneet Kambo 44677987 Jason Weng 43885772 Table of Contents Executive Summary ............................................................................................................................2 Culture, a catalyst for Berkshire’s success ...........................................................................................2 Heir to Berkshire Hathaway ...............................................................................................................3 Graham & Dodd valuation model .......................................................................................................3 Bruner’s Disaster Framework, a risk assessment tool ..........................................................................4 Diversification of Berkshire Hathaway ................................................................................................5 Volatility timing .................................................................................................................................6 Conclusion .........................................................................................................................................7 Appendix ...........................................................................................................................................8 Reference ..........................................................................
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...T H E J O U R N A L THEORY & PRACTICE FOR FUND MANAGERS O F FALL 2013 Volume 22 Number 3 RISKBASED PORTFOLIOS special section The Voices of Influence | iijournals.com Pursuing the Low Volatility Equity Anomaly: Strategic Allocation or Active Decision? ERIK KNUTZEN ERIK K NUTZEN is the chief investment officer at NEPC LLC in Cambridge, MA. eknutzen@nepc.com FALL 2013 JOI-KNUTZEN.indd 75 I n the past several years, asset managers have built investment strategies based on historical evidence that lower volatility stocks earn superior risk-adjusted returns. These approaches are being called low volatility, managed volatility, minimum variance, or similar names. They seek to exploit what has been identified in studies by academics and practitioners alike as an equity pricing anomaly. This anomaly joins previously identified persistent stock market inefficiencies associated with low price-tobook and smaller company shares. This article evaluates the low volatility anomaly, its potential causes, whether it is likely to persist, and the role, if any, of low volatility equity investing in long-term investment programs. Based on historical information, we conclude that the low volatility equity anomaly appears to exist and can be explained by certain behavioral and structural biases of investors. But its continued existence into the future is less certain. We also observe that even well-documented anomalies experience multi-year...
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...Chapter Six EVASION OF SERVICE OF SENTENCE Art. 157. Evasion of service of sentence. — The penalty of prision correccional in its medium and maximum periods shall be imposed upon any convict who shall evade service of his sentence by escaping during the term of his imprisonment by reason of final judgment. However, if such evasion or escape shall have taken place by means of unlawful entry, by breaking doors, windows, gates, walls, roofs, or floors, or by using picklocks, false keys, deceit, violence or intimidation, or through connivance with other convicts or employees of the penal institution, the penalty shall be prision correccional in its maximum period. Art. 158. Evasion of service of sentence on the occasion of disorder, conflagrations, earthquakes, or other calamities. — A convict who shall evade the service of his sentence, by leaving the penal institution where he shall have been confined, on the occasion of disorder resulting from a conflagration, earthquake, explosion, or similar catastrophe, or during a mutiny in which he has not participated, shall suffer an increase of one-fifth of the time still remaining to be served under the original sentence, which in no case shall exceed six months, if he shall fail to give himself up to the authorities within forty-eight hours following the issuance of a proclamation by the Chief Executive announcing the passing away of such calamity.chanrobles virtual law library Convicts who, under the circumstances mentioned...
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...agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of riskaverse investors. The main function of derivatives is that they allow users to meet the demand for costeffective protection against risks associated with movements in the prices of the underlying. In other words, users of derivatives can hedge against fluctuations in exchange and interest rates, equity and commodity prices, as well as credit worthiness. Specifically, derivative transactions involve transferring those risks from entities less willing or able to manage them to those more willing or able to do so. Derivatives transactions are now common among a wide range of entities, including commercial banks, investment banks, central banks, fund mangers, insurance companies and other non-financial corporations. Participants in derivatives markets are often classified as either “hedgers” or “speculators”. Hedgers enter a derivative contract to protect against adverse changes in the values...
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...strategies for handling the excess cash balance with the firm: * 1. Do nothing : the financial manager simply allows surplus liquidity to accumulate in the current account. * This strategy enhances liquidity at the expense of profits that could be earned from investing in surplus funds. * 2. Make an adhoc investment: the FM makes investments in some what adhoc manner . * Such a strategy makes some contribution, though not optimal contribution to profitability with out impairing the liquidity of the firm. * It is followed by the firms which cannot devote enough time and resources to management of securities. * 3. Ride on yield curve: this is a strategy to increase the yield from a portfolio of marketable securities by betting on the interest rate changes. * If the financial manager expects that interest rates will fall in the near future, he would buy longer term securities as they appreciate more, compared to shorter term securities. * On the other hand , if the FM believes that the interest rates will rise in the near future, he would sell longer term securities. This strategy hinges on the assumption that the FM has superior interest rate forecasting ability. * Empherical evidence, however suggests that it may be futile to try to do better than average. The expected higher return is almost invariably accompanied by higher risk. * 4. Develop guidelines: a firm may develop a set of guidelines which may reflect the view of the management toward...
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...Strategy as Stretch and Leverage 06/05/2016 14:29 INNOVATION Strategy as Stretch and Leverage by Gary Hamel and C.K. Prahalad FROM THE MARCH–APRIL 1993 ISSUE G eneral Motors versus Toyota. CBS versus CNN. Pan Am versus British Airways. RCA versus Sony. Suppose you had been asked, 10 or 20 years ago, to choose the victor in each of these battles. Where would you have placed your bets? With hindsight, the choice is easy. But at the time, GM, CBS, Pan Am, and RCA all had stronger reputations, deeper pockets, greater technological riches, bigger market shares, and more powerful distribution channels. Only a dreamer could have predicted that each would be displaced by a competitor with far fewer resources—but far greater aspirations. Driven by the need to understand the dynamics of battles like these, we have turned competitiveness into a growth industry. Companies and industries have been analyzed in mind-numbing detail, autopsies performed, and verdicts rendered. Yet when it comes to understanding where competitiveness comes from and where it goes, we are like doctors who have diagnosed a problem—and have even found ways to treat some of its symptoms —but who still don’t know how to keep people from getting sick in the first place. We can analyze companies in mindnumbing detail, perform autopsies, and render verdicts, but we are still addressing https://hbr.org/1993/03/strategy-as-stretch-and-leverage Page 1 of 24 Strategy as Stretch...
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...Table of Contents 1. The Need for Pricing 2. Pricing Software Industry Products 3. Licensing 4. Pricing Discrimination 5. Bundling 6. Other Pricing Issues 7. Summary The Need for Pricing Pricing has far reaching effects beyond the cost of the product. Pricing is just as much a positioning statement as a definition of the cost to buy. Price defines the entry threshold: who your buyers are and their sensitivities, which competitors you will encounter, who you will be negotiating with and what the customers’ expectations will be. Good pricing will remove the price issue from being an obstacle to a sale. Pricing is also used as a weapon to fight the competition as well as gray markets. Pricing is unique from other marketing decisions for several reasons: • Price is the only marketing element that produces revenue. All other marketing decisions produce costs. • Pricing is the most flexible marketing decision. • Pricing reflects a product's strengths and weaknesses. It implies value as well as positioning. • Pricing has the most immediate impact on the bottom line. In the high tech industry, a 1% increase in prices can lead to a 10% (or more) increase in profit. This is twice the effect that the same change in volume, fixed or variable costs have on profits. Pricing Software Industry Products When it comes to Pricing Software, “Economics 101” is not applicable. There are many reasons for this: 1. Supply and Demand curves are based on the assumption...
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...agency frictions, investors make managers’ fees more sensitive to performance and benchmark performance against a market index. This makes managers unwilling to deviate from the index and exacerbates price distortions. Because trading against overvaluation exposes managers to greater risk of deviating from the index than trading against undervaluation, agency frictions bias the aggregate market upwards. They can also generate a negative relationship between risk and return because they raise the volatility of overvalued assets. Socially optimal contracts provide steeper performance incentives and cause larger pricing distortions than privately optimal contracts. buffa@bu.edu, d.vayanos@lse.ac.uk, p.k.woolley@lse.ac.uk. We thank Sergey Chernenko, Chris Darnell, Peter DeMarzo, Ken French, Jeremy Grantham, Zhiguo He, Ron Kaniel, seminar participants at Bocconi, Boston University, CEU, Cheung Kong, Dartmouth, LSE, Maryland, Stanford, and conference participants at AEA, BIS, CRETE, ESSFM Gerzenzee, FRIC, Jackson Hole, and LSE PWC for helpful comments. ∗ 1 Introduction Asset management is a large and growing industry. For example, individual investors held directly 47.9% of U.S. stocks in 1980 and 21.5% in 2007, with the remainder held by financial institutions of various types, run by professional managers (French (2008)). Asset managers’ risk and return is measured against benchmarks, and performance relative to the benchmarks determines the managers’ compensation and the...
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...Project Report On “DERIVATIVES – THE BEST TOOL IN INDIAN MARKET TO GET THE OPTIMUM RETURNS” ACKNOWLEDGEMENT We take this opportunity to place on record our grateful thanks & sincere gratitude to those who gave us valuable advice & inputs for our studies. Our study could not have been completed if we had not have been completed if we had not been able to get the reference material from the company. Whenever & whatever we present today has been made possible by true efforts & kind support of our project guide Mr. Akhilesh Rathi, Head, SNR Securities & Finance, Indore. We express our sincere regards & feel paucity of word to express our utmost gratitude toward him for providing us the necessary resources, worthwhile suggestions & constant guidance. We also like to express our thanks towards other staff members of SNR Securities & Finance who inspired us to put in our best efforts for the completion of the project. PREFACE Financial system is the mirror reflection of an economy. The performance of any economy to a large extent is dependent on the performance of the Financial Institution. Financial system plays an important role by mobilizing saving and allocating them to the most profitable activities, and enables society to make more productive use of its scarce resources. The Financial system consist of many institution, instruments, and markets. Financial Institution range from moneylender to banks, pension funds, insurance...
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...1 The Value of Synergy Aswath Damodaran Stern School of Business October 2005 2 The Value of Synergy Many acquisitions and some large strategic investments are often justified with the argument that they will create synergy. In this paper, we consider the various sources of synergy and categorize them into operating and financial synergies. We then examine how best to value synergy in any investment and how sensitive this value is to different assumptions. We also look at how this synergy value should be divided between the parties (or companies) involved in the investment. We conclude with an empirical examination of how much synergy is actually created in corporate mergers, and how much is paid. Synergy, we conclude, is so seldom delivered in acquisitions because it is incorrectly valued, inadequately planned for and much more difficult to create in practice than it is to compute on paper. 3 When Carly Fiorina argued for Hewlett-Packard’s acquisition of Compaq, she offered a number of of reasons the deal made sense. She noted that the combined company would be able to meet the demands of customers for “solutions capability on a truly global basis.” She also claimed that the firm would be able to lead with its products “from top to bottom, from low end to high end.” As her crowning argument, she claimed that the merger made sense because it would create “synergies that are compelling.” Synergy, the increase in value that is generated by combining two entities...
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...1. INTRODUCTION TO DERIVATIVES While, trading in derivatives products has grown tremendously in recent times, the earliest evidence of these types of instruments can be traced back to ancient Greece. Even though derivatives have been in existence in some form or the other since ancient times, the advent of modern day derivatives contracts is attributed to farmers’ need to protect themselves against a decline in crop prices due to various economic and environmental factors. Thus, derivatives contracts initially developed in commodities. The first “futures” contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. The origin of derivatives can be traced back to the need of farmers to protect themselves against fluctuations in the price of their crop. From the time it was sown to the time it was ready for harvest, farmers would face price uncertainty. Through the use of simple derivative products, it was possible for the farmer to partially or fully transfer price risks by locking-in asset prices. These were simple contracts developed to meet the needs of farmers and were basically a means of reducing risk. A farmer who sowed his crop in June faced uncertainty over the price he would receive for his harvest in September. In years of scarcity, he would probably obtain attractive prices. However, during times of oversupply, he would have to dispose off his harvest at a very low price. Clearly this meant that the farmer and his family were exposed...
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