...Journal of Financial Economics 33 (1993) 3-56. North-Holland Common risk factors in the returns stocks and bonds* Eugene F. Fama and Kenneth R. French 1992 Unirrrsit.v 01 Chicayo. Chiccup. I .L 60637, C;S;L Received July 1992. final version received September on This paper identities five common risk factors in the returns on stocks and bonds. There are three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity. There are two bond-market factors. related to maturity and default risks. Stock returns have shared variation due to the stock-market factors, and they are linked to bond returns through shared variation in the bond-market factors. Except for low-grade corporates. the bond-market factors capture the common variation in bond returns. Most important. the five factors seem to explain average returns on stocks and bonds. 1. Introduction The cross-section of average returns on U.S. common stocks shows little relation to either the market /Is of the Sharpe (1964tLintner (1965) assetpricing model or the consumption ps of the intertemporal asset-pricing model of Breeden (1979) and others. [See, for example, Reinganum (198 1) and Breeden, Gibbons, and Litzenberger (1989).] On the other hand, variables that have no special standing in asset-pricing theory show reliable power to explain the cross-section of average returns. The list of empirically determined averagereturn variables includes size (ME, stock...
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...Journal of Financial Economics 33 (1993) 3-56. North-Holland Common risk factors in the returns stocks and bonds* Eugene F. Fama and Kenneth R. French 1992 Unirrrsit.v 01 Chicayo. Chiccup. I .L 60637, C;S;L Received July 1992. final version received September on This paper identities five common risk factors in the returns on stocks and bonds. There are three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity. There are two bond-market factors. related to maturity and default risks. Stock returns have shared variation due to the stock-market factors, and they are linked to bond returns through shared variation in the bond-market factors. Except for low-grade corporates. the bond-market factors capture the common variation in bond returns. Most important. the five factors seem to explain average returns on stocks and bonds. 1. Introduction The cross-section of average returns on U.S. common stocks shows little relation to either the market /Is of the Sharpe (1964tLintner (1965) assetpricing model or the consumption ps of the intertemporal asset-pricing model of Breeden (1979) and others. [See, for example, Reinganum (198 1) and Breeden, Gibbons, and Litzenberger (1989).] On the other hand, variables that have no special standing in asset-pricing theory show reliable power to explain the cross-section of average returns. The list of empirically determined averagereturn variables includes size (ME, stock...
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...The Fama and French 3-Factor Model (Fama and French 1993) is used in asset pricing and portfolio management to describe stock returns. Unlike the CAPM, which uses only the market risk factor, in the Fama and French Model, two more factors are identified that cause stocks to do better than the market as a whole – the size factor and the value factor. This paper will first describe the methodology behind the size and value factor calculations. We will then discuss possible explanations as to why the two factors explain stock returns. Finally, we determine on the basis of academic evidence whether the two factors capture systematic risk. The three-factor model is mathematically expressed as follows: Where: ------------------------------------------------- r = portfolio expected return ------------------------------------------------- Β3 = “three factor” beta (conceptually analogous to the CAPM beta but not equal to it due to the presence of the two other coefficients in the regression) ------------------------------------------------- (Km- Rf) = market risk premium ------------------------------------------------- bs = sensitivity of expected return to size factor ------------------------------------------------- SMB = Small (market capitalisation) minus big ------------------------------------------------- bv = sensitivity of expected return to value factor HML = high (book to market ratio) minus low Fama and French (1992a) found that the historical-average...
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...EXECUTIVE SUMMARY This report analyse the case of Dimensional Fund Advisors (DFA) which is an investment firm in Santa Monica, California. In 2002, David Booth is in dilemma considering how should he lead DFA in the future considering current success condition DFA could achieved. The aim of this report is to assess the condition and situation of DFA and help David Booth in making decision as to what to do to excel DFA performance. This report is divided into 5 parts starting from the company background and its business strategy followed by Fama-French Three Factors Model that highly influence the strategy formulation and action taken by DFA. Third part will be DFA’s trading strategy and continued by brief analysis of its new product namely Tax-Managed Funds. Finally, it will be concluded by recommendation given to David Booth considering the content in main body of this report. Overall, it can be said that the main issue is whether DFA should continue its current operational strategy or it should develop new strategy in order to increase its performance among competitors. As in conclusion, it is suggested that DFA should follow current strategy since it has been proven to work well and it brought DFA to be among top 100 companies. COMPANY BACKGROUND AND BUSINESS STRATEGY Dimensional Fund Advisors (DFA), an investment firm founded in 1981 by David Booth and Rex Sinquefield, is strong believer of Efficient Market Hypothesis (EMH). DFA has adopted EMH In both its strategic operational...
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...McDonald’s (McD) has been one of the big giants of fast food since 1950s. With the other competitors start to take off, such as Five Guys, Subway, the competition in fast food industry is becoming more and more intensive. This part will examine some behavior issues in McD food supply chain management with possible solutions given based on the theories of Management Accounting. McD’s core business is food, especially its diversified hamburgers (Michael, 2013). However, as time goes by, customers’ preference towards food is not just limited to the taste, which the current hamburgers cannot meet. One issue to be addressed here is McD cannot satisfy the customers’ wants for freshness (David, 2013), which has been criticized for a long time. In management accounting, constraints are defined as anything that prevent the company from getting more of what it wants. Due to the constraint of lacking of freshness, McD may lose some customers to its competitors like Subway, which has been proved to be quite fresh. To solve this problem, we may use the improvement process applied in the theory of constraints to strengthen the weakness. The first step is to identify the weakest link. In McD, raw materials and semi-finished good to be produced is frozen and pre-formed that need further processing once an order is placed. Considering McD is using the Just-In-Time (JIT) system so that completing finished food will be just in time to ship customers. Freezing food will be convenient during...
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...What Are Economies Of Scale? September 06 2009| Filed Under » Adam Smith, Alfred Marshall, Economies of Scale, When more units of a good or a service can be produced on a larger scale, yet with (on average) less input costs, economies of scale (ES) are said to be achieved. Alternatively, this means that as a company grows and production units increase, a company will have a better chance to decrease its costs. According to theory, economic growth may be achieved when economies of scale are realized. Adam Smith identified the division of labor and specialization as the two key means to achieve a larger return on production. Through these two techniques, employees would not only be able to concentrate on a specific task, but with time, improve the skills necessary to perform their jobs. The tasks could then be performed better and faster. Hence, through such efficiency, time and money could be saved while production levels increased. Just like there are economies of scale, diseconomies of scale (DS) also exist. This occurs when production is less than in proportion to inputs. What this means is that there are inefficiencies within the firm or industry resulting in rising average costs. Internal and External Economies of Scale Alfred Marshall made a distinction between internal and external economies of scale. When a company reduces costs and increases production, internal economies of scale have been achieved. External economies of scale occur outside of a firm...
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...Comparing “The charge of The Light Brigade” to “Dulce Et Decorum Est” The Charge Of the Light Brigade starts off saying “Half a league, half a league, Half a league onward!” This imagery makes me imagine soliders running of to war excited ready for blood and vengeance. Where on the other hand, Dulce Et Decorum Est, begins with “Bent double, like old beggars under sacks, knock-kneed, coughing like hags..” This imagery makes me imagine solidiers barely making it through the battlefield. The author Wilfred Owen and Alfred, Lord Tennyson, seem to have two different motives about describing war! The tone of “The Charge Of The Light Brigade” is like one of a heroic movie that’s hides the real work of things, and paints false pictures into people’s minds, instead of telling the real literally “Bloody” truth. The tone is as if someone could perhaps be performing infront of an audience trying to get an applause. This also takes away the rawness of the story by the figures of speech he gives such as “Cannon to right of them, Cannon to left of them…”. Yes, this does show some type of imagery, but it doesn’t really seat you right at the front row seat of war. On the other hand Wilfred Owen, Author of the Dulce Et Decorum Est. His imagery is very blunt force. He uses words such as “Sludge, Limped , Blood-Shod, fire, lime, guttering, choking, and drowning to help infasize the rawness and realistic nature of war....
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...French Revolution The French Revolution last from 1789 to 1799. This war had many causes that began the revolution. Its causes ranged from the American Revolution, the economic crisis in France, social injustices to the immediate causes like the fall of Bastille, the Convening of he Estate-General, and the Great Fear. As a result of this revolution there many effects , immediate and long term. The immediate effects were the declaration of rights of man, abolishing of olds reign, execution of king and queen, the reign of terror, and war and forming of the citizen-army. The long term effects were the rise of Napoleon, spread of revolutionary ideas, growth of nationalism, and the conservative reaction. The contributing factors to the French Revolution was the economic crisis in France. The French government had undergone economic crises, resulting from the long wars waged during the reign of Louis XIV, the losses incurred in the French and Indian War, and increased indebtedness arising from loans to the American colonies during the American Revolution. The American Revolution showed that they got economical and political freedom from Britain. This liberalism sparked many revolutions in Europe ,but in France the ideas of the Enlightenment and liberalism were put to their fullest test. The French people wanted rights and would later get these. Another reason was that the old regime was ineffective and it abused its power. The immediate causes of the French Revolution were that the...
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...Five Guys Ingredients to Success Danielle Rush Dr. Etta Steed BUS 508/ Contemporary Business October 24, 2013 Five Guys How it Started In 1968 Jerry and Janie Murrell gave their four sons a proposition; the four Murrell brothers had to either start up a business or go to college (Five Guys Holdings LLC, 2012). The boys decided that the restaurant business was the journey to embark upon. With the guidance of Jerry and Janie the first carryout only burger joint was opened in Arlington, Virginia in 1986 (Five Guys Holdings LLC, 2012). It cost the Murrell family $70,000 to open up the first Five Guys with the company being ran by Jerry, and his three sons: Matt, Jim, & Chad, while his wife Janie did the books (Burke, 2012). The Murrell family had one mission and that was to ensure the customers would be getting top quality burgers and fresh cut fries. The Murrell family knew that with good quality food and great customers the burgers and fries would speak for themselves and start to attract a crowd. Over the course of a few years the family found the recipe for success and what it takes to make a consistently great tasting burgers and fries time after time. Throughout the course of this paper the five guys philosophy, values, success, and the ethical and social practices of five guys culture will be discussed. Five Guys Philosophy Jerry Murrell and his sons maintain a focus on the freshest and high quality burgers and fries the customers can buy. Through taste...
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...Probably it will be placed at Lappentie street near by the city square. There is a pedestrian street and huge variety of shops nearby so it makes my restaurant notable and available not only for citizens but for tourists also. When I will find a proper place I will think about restaurant content. International Restaurants and Cuisines course helped me to create an idea of different cuisines all over the world. We were cooking Mediterranean, French, Scandinavian, Russian, Indian, Asian, North American and Australian food. It gave me a chance to try those different dishes and have a picture. For example Indian and Asian food is very unusual. It includes different spices mixed in a crazy way and I think that those cuisines are not everybody’s cup of tea: especially not mine. French, Italian, North American are the most popular ones. Even in a small city like Imatra there are 2 Italian restaurant and some fast food restaurant. Mediterranean and Russian seems quite basic for me. I think I will stop on French cuisines restaurant. There is no French restaurant here in Imatra and cuisine there it delicious and loved by everyone. The chosen cuisine plays a huge role in design of the restaurant. It will be strange if for example Italian restaurant looks like a snack-bar or North American restaurant...
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...Five Guys Burgers and Fries: “Ingredients for Success” Dr. B. Iannucci Contemporary Business October 17, 2013 Entrepreneurial Leadership Everyone wants to see their children grow up and go to college and possibly become millionaires. Well that was the dream of the Jerry Murrell, but unfortunately two of the oldest sons said they were not going to college. So instead of paying for college he found himself paying for a mortgage to open a business where the boys can work and learn responsibility. The rest is history. Dave Kurtz’s (2012) wrote, “Five Guys and a Burger grew to 570 franchises in the United States and Canada.” Determine how Five Guys’ philosophy sets it apart from other fast-food chains. The philosophy that set Five Guys apart from other fast-food chains was that Jerry Murrell’s strong focus on the quality of the food and type of food served, and the customer satisfaction. Jerry Murrell once stated “Treat the person right, sell walk out the door and sell for you.” (Weise, 2011) Analyze the original values for the start-up, and how it still remains today. The original value of the company for the start-up was to have value and perfection within the company. This is still the case today. Five Guys insist on making the quality of food served (fresh hamburgers, hotdogs, and only Idaho potatoes for the fries) and customer serve a first priority. All the restaurants feature the same simple, red and white tile décor and no paid advertisement, which is done...
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...Five Guys The Five Guys mission statement, as simple as its menu, is aligned with the philosophy that if you're going to sell hamburgers and fries in a restaurant industry that has a lot of hamburger-french-fries business, you'd better do hamburgers and fries well than the competitors. Five Guy’s focus is not to add more items to the menu, but to serve top quality burgers and fries to keep their business booming. According to Boonze and Kutrz (2012) Murrell states “We figure our best salesman is our customer”, “treat that person right, he’ll walk out the door and sell for you” (pg. 78). This philosophy is one of the key factors that keep Five Guy’s apart from other fast-food chains. Five Guys philosophy has shown significant strength; today Five Guys has more than 1,000 stores nationwide. Five Guys is so successful because though it only sells burgers, it does that extremely well. That's why Five Guys doesn't comparison shop, says Murrell, to ensure the quality of their products is top-notch. They have many of the same vendors they did in 1986. Their fresh, made-to-order burgers and fries have been the recipe to their success. Five Guy’s does not plan on changing a formula that's worked for more than two decades, even if they could find products cheaper. The fact that Five Guy’s want to keep its originality and not venture into other markets such as chicken and fish is another method that keeps them apart from other fast-food chains. The support the Murrell’s has given...
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...Christian Salinas Mrs. Urquhart English 11 May 14, 2012 Should English be the official language in America? A very intense discussion now a day is if we should make English the official language of America. Most American’s say yes, but there are also American with a foreign back round that say no. There are really good arguments for making English the official language, but there are also really strong reasons to why English should not be made the official language in America. I will give my reasons on why I don’t think it matters if it is made the official language or not. If English was made the “official” language of America it would make more sense to many foreign people. It would get them to realize that they should know how to speak English along with their native language. It won’t mean that they’ll forget about their culture, but they will have to learn many new things if they plan to stay in America. Many American complain about foreigners talking in their native language because they think we’re talking about them. There are many small reasons on why it should be made the official language, but there is one big reason that I had never thought about until I talked to Mrs. Thompson. When you go off into a huge business the most common language we use in America is English! Even when we are making business overseas we still use it as the official language. When we go to the stores, pharmacies, schools, and even big events like charities or special events we speak...
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...Experiences as a writer. I have many experiences in writing throughout my twenty five years of life. These experiences were more like stepping stones within my life’s journey. There are three experiences in particular that stand out to me more than any other of the thousands of experiences I have had in a whole. These stepping stones range from my childhood, my time served during deployments, and my time of service in the army. One of my very first distinct experiences in writing started in my childhood. Being born and raised in a Hispanic country it was very challenging to learn the English language. My mother pushed me very hard and taught me English through writing. Thinking in Spanish and writing in English not only helped my writing but also helped me adopt my new language. As years went by my writing matured and I became proficient in the English language. My proficiencies in writing English became detrimental in reference to my childhood studies. My studies as a child were not the typical studies of an average student. I was raised in a Christian curriculum home school setting. My parents used to host bible studies in our home and sometimes my dad would make me write the study for the class he was going to give. That time of my life was very challenging but my dad always pointed me in the right direction. Once I became fluent in writing in English, It became my main source of communication when corresponding to my loved ones from Iraq during my deployment. Never thought...
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...[pic] Before the revolution, there is absolute monarch of France, French inhabitants were divided into three levels, they are the Pope of catholic, nobles, and framers. [pic] [pic] When the Reign of Louis XVI (23 August 1754 – 21 January 1793), because the people are extremely dissatisfied of the king's rule, so this becomes the Enlightenment. There are many open-minded characters who believe the natural rights, separation of powers and other thoughts at that time. [pic] [pic] King Louis XVI and his queen Marie Antoinette spend a lot of money for play, King Louis XVI had an enormous responsibility, as the government was deeply in debt, and resentment towards 'despotic' monarchy was on the rise. Louis also felt woefully unqualified for the job. [pic] [pic] Louis XVI attempted to mobilize the army for dissolve parliament, but this has been stirred the people's armed uprising in Paris, and King Louis XVI and his family escape, at last the King Louis XVI was executed by guillotine on 21 January 1793. On 21 September, the National Assembly declared France to be a Republic and abolished the Monarchy. [pic][pic] In May 5, 1789 Louis XVI convened meetings in the Palace of Versailles. Attempt to raise taxes on the third level, in order to save the Government's financial crisis. Its decision is implementing to third level people only. This decision makes third level people’s life so hard, after they pay the high tax, people don’t have money to buy food, and a...
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