...Modern Portfolio Theory in the Modern Economy: MPT During the Credit Crisis 0f 2008 Abstract There are various theories of risk and return as it pertains to measuring and predicting investment return in a portfolio- one of the oldest and most prominent being Modern Portfolio Theory .An example of a hypothetical portfolio utilizing the principles of MPT invested during the credit crisis of late 2008/early 2009 will be utilized in part. In direct application, does Modern Portfolio theory hold strong during a major financial crisis? Past research will be compared to present the mechanics and applications of MPT order to answer the questions poised and to create hypothetical portfolios based on past fund performance during the time period of 2007 -2010. It is expected that a portfolio using MPT would not have performed significantly better than any other less diversified investment. Contents Introduction……………………………………..........................................................................4-7 Credit Crisis Thesis Statement Modern Portfolio Defined Prior Research Prediction Method…………………………………………………….........................................................8-9 Parameters/ Source of Portfolios Results……………………………………………………......................................................10-19 A. Application/ graphs Conclusion…………………………………………...............………………………............19-20 Restatement of Thesis Discussion of Results Limitations Recommendation References……………………………………………………………………...
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...Assignment on “Relevance of Keynesian Theory to underdeveloped Economies” Submitted to : Dr. A.K Monaw-war Uddin Ahmed Course instractor Macroeconomics MBA-510 Submitted By: Chowdhury Omar Hasan Munna ID-1130657 Date of submission: 22nd November,2011 Independent University ,Bangladesh Keynesian theory and underdeveloped countries: Lord John Maynard Keynes wrote the General Theory of Employment, Interest and Money as a solution to the problem of periodic unemployment faced by developed industrial nations of the West during the great depression of the thirties. Keynesian theory singles out deficiency of effective demand as the major cause of unemployment and low level of income in industrial economy operations under a laissez faire system. Deficiency of effective demand is a prominent feature of economies undergoing depression and in order to improve the level of effective demand in an economy. Keynes suggested policy measures like cheap money policy, government’s compensatory investment spending, deficit financing and other fiscal methods. In essence, therefore, Keynesian economics turn out to be economics of depression applicable to developed countries. Its applicability in underdeveloped countries is very limited. To quote Joan Robinson: “ Keynes’s theory has little to say directly, to the underdeveloped countries, for it was framed entirely in the context of an advanced industrial economy, with highly developed financial institutions and a sophisticated business...
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...much of the Euro zone, use economic theory to explain (I) why countries experience different growth rates, and (II) why we might expect poor countries to grow more quickly than rich countries. There is a huge diversity of how economies expand. Some countries manage to grow at a remarkably fast pace, while others suffer failures almost every time they attempt to improve. In order to explain why countries experience different growth rates and also why poor countries experience growth at a faster rate than rich countries one will have to take a look at the economic theories for this aspect. Firstly, economic growth can be defined as the increase of goods and services, which an economy produces over time. The first theory to go through is the traditional growth theory, which concentrates on the accumulation of physical capital, which explains why some countries are much wealthier now than a century ago. That only scratches the surface, however, as modern economies differentiate from those a century ago, due to the advance in technology resulting in better infrastructure and machinery, producing better goods more efficiently. The neo-classical model of Solow was unable to explain this, treating it as exogenous. ( Sérgio Rebelo, “Why Do Growth Rates Differ?”) Thus the endogenous theory came in to shine light on the matter. It originated from the studies of Paul Romer, who sought to understand the circumstances which could result in the economy displaying sustainable growth, despite...
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...very much of current interest because the U.S. economy is having quite a hard time these days. In order to properly review the problem I believe it is important to look deeper into the economic crisis of the United States. The problem with the US economy is very complex. One of the key problems lies in the huge public debt that accounts for $ 14,710,435,135,562,26 as of September 19, 2011. The problem with an enormous public debt of the U.S. is accompanied by the expansion of government spending which takes place at an exponential rate. The federal spending is almost 18 times higher than it was back in 1970. The third outstanding aspect is the huge amount of unemployed labor in the United States. The unemployment rate as of September 19, 2011 exceeds the 10% mark. The other sides of the critical economic situation include high levels of inflation and household debt and the following decrease in purchasing power of the population. The governmental bodies usually exploit one of the two major approaches to Economic policy. These include the Classical and the Keynesian approaches. The Classical economics theory employed the idea of economic liberalism which included the notion that economic laws are similar to the laws of nature. The action of these laws results in the establishment of “natural harmony” within the society. The State does not need to interfere with the action of economic laws. The classical economic theory assumes that economic laws and competition act...
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...Dependency Theory: An Introduction 1. Vincent Ferraro, Mount Holyoke College South Hadley, MA July 1996 Background Dependency Theory developed in the late 1950s under the guidance of the Director of the United Nations Economic Commission for Latin America, Raul Prebisch. Prebisch and his colleagues were troubled by the fact that economic growth in the advanced industrialized countries did not necessarily lead to growth in the poorer countries. Indeed, their studies suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries. Such a possibility was not predicted by neoclassical theory, which had assumed that economic growth was beneficial to all (Pareto optimal) even if the benefits were not always equally shared. Prebisch's initial explanation for the phenomenon was very straightforward: poor countries exported primary commodities to the rich countries who then manufactured products out of those commodities and sold them back to the poorer countries. The "Value Added" by manufacturing a usable product always cost more than the primary products used to create those products. Therefore, poorer countries would never be earning enough from their export earnings to pay for their imports. Prebisch's solution was similarly straightforward: poorer countries should embark on programs of import substitution so that they need not purchase the manufactured products from the richer countries. The poorer countries would still sell...
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...305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS ECO 305 WK 4 Assignment 1 - International economics Part 1 Write a 4-6 page paper in which you: 1. Explain the concept of comparative advantage and the principle theories of why trade occurs. 2. Analyze and discuss the sources of comparative advantage in national economies. 3. Analyze the international movement of productive factors in order to identify business opportunities and/or threats. 4. Explain the economic effect of tariffs, nontariff barriers, and various forms of trade policies adopted by national governments. Activity mode aims to provide quality study notes and tutorials to the students of ECO 305 WK 4 Assignment 1 International economics in order to ace their studies. ECO 305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS To purchase this visit here: http://www.activitymode.com/product/eco-305-wk-4-assignment-1-international-economics/ Contact us at: SUPPORT@ACTIVITYMODE.COM ECO 305 WK 4 ASSIGNMENT 1 INTERNATIONAL ECONOMICS ECO 305 WK 4 Assignment 1 - International economics Part 1 Write a 4-6 page paper in which you: 1. Explain the concept of comparative advantage and the principle theories of why trade occurs. 2. Analyze and discuss the sources of comparative advantage in national economies. 3. Analyze the international movement of productive factors in order to identify business opportunities and/or threats. 4. Explain the economic effect of tariffs, nontariff barriers, and various forms of trade...
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...abroad as the main policies of the economic policy. If a country does not have a supply of the raw material they need to get the colony as a provider of the shortage. Further colonies not only as a provider of raw materials for a country but also as a market for finished goods. In contrast to the mercantilism, the Physiocrats assume that the source of wealth as real-fact is a natural resource. During the enlightment, French Physiocrats was first pioneered the economic theory stands. Character is Francois Quesnay (1694-1774), a diagram creation is the famous Table Economique. - These people called the physiocratism = physics (natural) and cratain or cratos (power). The Physiocrats believed that...
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...become a commonly held view of economic development, it does not always hold true for underdeveloped nations. When taking into account the recent economic development of a country in the Global South, such as Colombia, it becomes clear that Rostow’s theory is linear, geographical, and pro-capitalist model. The first flawed aspect of the model is the fact that it is linear – it assumes that “all regions go through the same stages in a particular order towards high mass consumption” (Knox et al, 313). In contrast to these assumptions, the economic development of Colombia has been anything but linear, given its position as an underdeveloped nation. Rostow’s theory suggests that “in order for a country to move from a traditional society to a society that is ‘taking off’, it must first establish the preconditions for takeoff” (Knox et al, 314). At this stage, a country should “begin to heavily invest in developing a manufacturing sector” (Knox et al, 314) as it moves away from an agricultural based economy. While this may prove to be true for countries such as the United States and Canada, the same cannot be said for Colombia. In fact, it can be argued that Colombia simply skipped this second stage of Rostow’s model. Columbia is an economy that “currently has 18% of its labour force in agriculture, which continues to be the chief economic activity in the country” (2014 Index of Economic Freedom). This industry is a main reason for its success in growing its famous commodity – coffee...
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...Home Page » * Historical Events Economic Development: a Comparison of Rostow and Gerschenkron In: Historical Events Economic Development: a Comparison of Rostow and Gerschenkron “Rostow’s pattern of thought of economic development is often compared and contrasted with that of Alexander Gerschenkron, though the two are more or less compatible and complementary.” Critically discuss this statement. The theory of economic development throughout history has been of significant discussion especially in regard to the works of Rostow and Gerschenkron. The differentiation between the pattern of thoughts and ideals is a hotly debated topic within economics. The ideals the two theorists create, each substantially creditable in their own right, entail degrees of correlation and variation. Leaving the conclusion, do the to patterns of economic thought complement one another or is there distinct disparity between the two. Applied examples will be used below to analyse the extent of segregation or association between the works of Rostow and Gerschenkron. The two theories of work are mainly discussed with Asian development as it is more relevant, timely and there is significantly more information available than previous developed countries such as Great Britain. Walt Whitman Rostow developed one of the major historical models of economic growth in 1960, The Stages of Economic Growth: A non-communist manifesto. This piece portrays the process of economic development in a previously...
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...11. Understanding Development Theory In the Context of Social and Community Change by Michel Adjibodou[1] I. INTRODUCTION If you are fortunate enough to have walked the land and worked with the people of South Central Los Angeles in California, the mountains of Chiapas in Mexico, the plains of Tanga in Tanzania, the hills of Save in Benin, the streets of Hartford, Dorchester and Roxbury, the hills of Funyula in Western Kenya, one common characteristic you probably noticed is the resolve and resilience of those communities. Despite the daily challenges and stresses on their health, income, environment, land, and physical security, the residents are determined to improve their communities and create greater opportunities for their children. Many of us who chose to work in “development”, or who accidently ended up doing this work, must learn how to work in communities which face horrendous challenges. Engaging people in improving their own communities and, perhaps, working on broader issues demands that we develop great skills and knowledge, not to mention a certain attitude, some character, plenty of courage, and listening skills. Most of us simply behave like backpackers on our way to solve the world’s problems and save humanity from itself. Mistakes are made along the way, success stories abound, lives are damaged and rebuilt, hopes restored, and life goes on. Many practitioners working in communities around the world, and people who want to become...
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...obtain loans for their own investment purposes. In Schaum's Outline of Theory and Problems of Principles of Economics, crowding out is defined as “when a fiscal stimulus pushes up the rate of interest, which in turn results in a lower level of investment spending (Salvatore and Diulio, 1996).” Recent economic turmoil has brought the concept of crowding out into focus as the government tries to stabilize this crisis by offering stimulus packages to encourage consumer spending as well as help prevent larger companies from failing. The heart of the issue of crowding out is control of loanable funds. When there is overabundance of loanable funds, interest rates are normally low. This relates to the concept of supply and demand where the supply is abundant and the demand is seemingly low. When the government demands these loanable funds, the supply of loanable funds is directly impacted sometimes driving interest rates up. Alvin H. Hanson writes, “according to the loanable-fund theory, the rate of interest is determined by the intersection of the demand-schedule for loanable funds with the supply-schedule (Hanson, 1951).” (See chart below) In recent years, our country has faced a significant economic down turn resulting in “the deepest recession in the United States since the Great Depression (Reuss, 2009).” As a result, President Barack Obama proposed significant government spending to stimulate the economy and create jobs while cutting taxes. This stimulus plan must be funded...
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...Section one: Critically examine the main assumptions of Rostow’s modernization theory and their relevance for the understanding the historical and contemporary “development” of low-income countries. Does Gerschenkron’s account of the different features and agents of industrialization in “backward countries” support or challenge (or both) Rostow’s stages of development? What are some of the main similarities and differences in these two accounts of modernization? What is development, what does it mean to be developed and how states can achieve it are the questions that those who involved in field of development studies are trying to answer. They are also concern about why some countries are more developed while not others. Rostow and Gerschenkron are answering all these questions by introducing their theory of development. I would like to start with Rostow’s theory of development; in the Stages of Economic Growth he argues that a state should follow some rule and should pass through some important stages in order to develop. According to Rostow these are the stages of economic growth ,Traditional society, Pre-conditions for take-off, Take off, Drive to maturity, Age of high mass consumption and beyond consumption. Traditional society is characterized by survival agriculture or hunting and gathering with a limited technology. At this stage people look at change negatively. Pre-conditions to "take-off" in this stage there is more demand for raw materials and technology and...
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...Accounting About 1000BC,financial accounting had been created . Accounting, as a way to record expenses and receipts,has exsited for a long time . In the ancient time, most of the people can support their own life by cultivating. In other words,there will be much less financial transaction emerging. Therefore, they will use simple way to record food, clothes or the other sources left, such as, using knotted strings of different length and colours or engraving on stones etc. This king of method is fit with economical situation which is called “Self Sufficient Natural Economy Although accounting in the early stage is briefly, it experience a long time trasition which is from simple to complex , elementary to senior . Contemporary Accounting 1.1The rise of Italy at the Middle Age The outbreak of the Renaissance advanced the rise of Italy sharply. Luca Pacioli first described the practice and theory that had developed in commercial cities in Italy. Pacioli explained the opening inventory and he wrote three things needed by one who wished to carry on business diligently. We think that the beginning of the symbol of the Contemporary accounting in his work. 1.2East India Company After that, the emergency of East India Company boost a new system accounting appearing. East India Company did not have enough cash to pay the dividend payment...
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...257670. Course Title: Economics of Developing Countries II. Course Code: 153400109/1. Marker’s Name: Dr. Sahar Taghdisi Rad. Degree: BSc Economics (Year 3). Essay Question: Is the rapid growth of manufacturing a necessary condition for successful economic development? Assignment: 2. Word Count: 2486. Introduction The consensus view amongst most economists is regarding the vitality of the manufacturing sector; with Nicholas Kaldor arguing that it is the ‘engine of growth’ for an economy. Kaldor discussed that in a poor country’s initial developmental stage, the agricultural sector will play a crucial role, mainly in providing a surplus for growth. But for the country to become developed and rich, there will be no substitution to the development of the manufacturing sector (Kaldor, 1967). “Since the industrial revolution in the eighteenth century manufacturing has been considered to be the main engine of economic growth and development. In development theory, structural change was associated specifically with a shift of resources from the primary sector to the manufacturing sector” (Szirmai, 2011; 5). Kaldor referred to this structural change in a similar way as a “characteristic of the transition from immaturity to maturity” (Kaldor, 1967; 7). Why is manufacturing considered to be so important for development? Why might a poor country want a large manufacturing sector? Majority of this essay will attempt to answer these questions using ‘Kaldor’s Growth...
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...Using economic theory explain why some countries are richer than others The wealth of a country can be measured by many different ways. People may judge it by the countries natural resources or by the countries welfare in an economical plan. To be simple the basic economy of a given country decides its slot in the positioning of poor or rich. There are three major categories of countries – first world, developing and third world countries. First world countries are with stable prospering economies and generally in a good state. Good examples for that China, Japan, The USA, The UK, Germany etc. In the category of developing states are included most of the countries in the world. Generally they are trying to take the example of first world countries and better themselves in their image. Examples for third world countries are most of the states in Central Africa. There is a huge gap in between first and third world countries in aspects of economics, life standard and even resources. Even though the already developed countries and the still developing countries are quite similar the difference in the economic pans is still enormous. There is a generally accepted theory that the most developed economy in the world acts as a main force pulling other smaller countries or states economies alongside or behind it. For the two centuries the main economic leaders were The UK and The USA respectively. The USA still continues to hold this position. When their economies bloomed many other...
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