...Wall Street" There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book "A Random Walk Down Wall Street". What does a random walk mean? The random walk means in terms of the stock market that, "short term changes in stock prices cannot be predicted". So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of "purchasing assets to gain profit in the form of reasonably predictable income or appreciation over the long term". Speculating in a sense is predicting, but without sufficient data to support any kind of conclusion. What is investing? Investing in its simplest form is the expectation to receive greater value in the future than you have today by saving income rather than spending. For example a savings account will earn a particular interest rate as will a corporate bond. Investment returns therefore depend on the allocation of funds and future events. Traditionally there have been two approaches used by the investment community to determine asset valuation: "the firm-foundation theory" and the "castle in the air theory". The firm foundation theory argues that each investment instrument has something called intrinsic value, which...
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...million receivable. American Standard’s bank, Bank of America, suggests a 90 day forward contract. American Standard sells forward £1 million. American Standard is: a) Hedging. b) Speculating. c) Locking in an arbitrage profit. Answer: Part a) Hedging is the correct answer. ------------------------------------------------- 2) American Standard Co. has a 90 day £62,500 receivable. American Standard’s bank, Bank of America, suggests a put option contract that matures in 90 days. American Standard purchases one put option contract, where one contract corresponds to a quantity of £62,500. American Standard is: a) Hedging. b) Speculating. c) Locking in an arbitrage profit. Answer: Part a) Hedging is the correct answer. Because in this case, the American Standard Co is sure about the money to be received and wants to hedge against the exchange rate risk which is hedging. ------------------------------------------------- 3) American Standard Co. has a 90 day £62,500 receivable. American Standard’s bank, Bank of America, suggests a call option contract that matures in 90 days. American Standard purchases one call option contract, where one contract corresponds to a quantity of £62,500. American Standard is: a) Hedging. b) Speculating. c) Locking in an arbitrage profit. Answer: Part a) Hedging is the correct answer and not locking in an arbitrage profit, because in this case, the American Standard Co is sure about...
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...Burgundy Asset Management: The Wescast Investment Decision Case study 1 Pavel Chistol Raj Seelam Harshjot Chatha Question 1 Strengths: One of the strength of Burgundy's investment process is that it tends to invest in undervalued companies that are either temporarily out of favor or have been overlooked by investors, which means they are improperly priced. Another strength is that investment analysis thought like business people not like risk-taking speculators, with carefully selecting investment portfolios. Burgundy is focusing in valuation of individual company that gives an advantage when valuing the whole economy or many companies,because it is almost impossible to forecast the whole economy movement. But when focusing on one company it gives an opportunity to do almost exact valuation. The most important investment process consist of generating investment ideas, valuating them, financial analysis. Burgundy is collecting information from publications, subscriptions and industry conference which give an opportunity to closely track what is happening in company and in industry. Also, Burgundy is examining the historical performance of the company that give an idea on what what happening during many years and shows the attractiveness of particular company. In addition, it give the picture of whether this company is a safe investment or not. Another strength is that Burgundy is checking the legitimacy of company candidate and justify the future financial statements...
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...The chapter stock valuation from the sixties through the nineties is about how stocks were valued in the 1960’s-1990. This exceedingly long chapter deals with the how the stock growth was increasing rapidly. He starts off by talking about the institutions where during the 90s, ninety percent of the institutions were trading volume on the New York Stock Exchange. Then he goes on by talking about the soaring sixties where growth was the magic word. Growing companies sold at price earnings of more than 80. Next it was on the sour seventies, where the market as a whole began to decline. The roaring eighties started off with spectacular new-issue boom, where the total value of new issue was greater than the cumulative total of new issues for the entire decade. And lastly, the nervy nineties is when the Japanese real estate increased more than 75 times and Japanese stock market increased rapidly. Malkiel explains the extremely high price-earnings multiples that stocks were trading at with the expectations that someone else will come by and purchase the stock at a higher price. He goes on to explain the practices of underwriters for newly issued securities and how they mislead investors but followed the necessary SEC rules. This did not prevent investors from being caught up in another craze to purchase the next hot electronics company. Most companies did not have any assets or earnings. Companies even went so far to change the name of their company to make it sound more electronic...
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...Summary of “A random walk down Wall Street” Written by Burton G. Malkiel Chapter 1: Firm Foundations and Castles in the air A random walk means that future steps or directions cannot be predicted on the basis of past history. In the stock market, this concept means short-term changes of stock prices are unpredictable. Burton, writer of the book, distinguishes between “investing” and “speculating” and I agree this conceptual difference. Investing is purchasing assets to acquire profit in the form of reasonably predictable income such as dividend, interest, rentals over the long term. On the other hand, speculator buys stocks hoping for a short-term gain over the next days or weeks. Traditionally, investment experts have used one of two approaches for asset valuation. One is “the firm-foundation theory”, and the other is “the castle-in-the-air theory”. The interesting point is, two theories appear to be mutually exclusive. The firm-foundation theory insists that each investment instrument has a firm anchor of something called “intrinsic value”, which can be determined by careful analysis of present conditions and future prospects. Williams, writer of “The Theory of Investment Value”, went on to argue that the intrinsic value of stock was equal to the present value of its entire future dividend. The theory is reasonable, because the greater present dividends and increasing rate, the greater the value of the stock. The castle-in-the-air-theory focuses on psychic...
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...The two companies that I choose to discuss in this paper are Procter and Gamble, and Unilever both specialized in consumer goods and fierce foes for decades. Determine how each corporate culture differs from the other. As Ravasi and Schultz (2006) stated, organizational culture is a set of shared mental assumptions that guide interpretation and action in organizations by defining appropriate behavior for various situation. Procter and Gamble gives lots of importance to productivity and is constantly improving its productivity at all levels, to a point that it is part of the company culture. Their practices and values that have helped build that strong culture are: 1- Lead by example; the top executive team members personify the culture and consistently reinforce it through their actions. 2- Communicate regularly: Communication up, down and across the organization. 3- Transparency: Establish clear roles and responsibilities. 4- Promote for with in: human capital development to ensure consistency and well understood expectations. 5- Make data-drive decisions; Comprehensive financial, consumers and strategies rationales are all part of the decision making process. Meanwhile Unilever culture is more about what they believe in and how they act collectively. Unilever has an innovation culture. Some of the practices and values that helped Unilever achieve its goal as an innovative organization are: 1- Focus on company’s core competencies: listen to all employees’ ideas...
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...That will put upward pressure on the value of the currency. All else being equal, countries that run large trade surpluses – meaning that they export more than they import – should see their currencies rise over time. However, the value of the dollar is also driven by speculation as traders seek to profit from the underlying trends of the movement of one currency against another. A significant amount of activity in foreign exchange markets consists of borrowing in currencies where interest rates are low and investing in ones with higher rates. In periods of low volatility, such as from 2002 to 2006, this method can be very profitable. However, in recent years a higher-yielding currency is potentially seen as a sign that problems are building up in the economy. In periods of high volatility such as now, speculating directly on currency movements is usually considered too risky for private investors as it can easily lead to large losses. Buying overseas-listed shares or investing in funds that hold foreign assets is the most obvious way in which it is likely an investor will become exposed to foreign exchange risk. In the case of Billabong as a globally renowned company, this means that much of its overseas demand for its products can be unpredictable to a large degree and hence present challenges for the company in maintaining competitiveness in this environment. 2. What does a falling Australian...
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...The effects of the “Boom”- USA 1920s The 1920s was a time in America of extreme changes in society as well as in lifestyles and industries. New inventions were made. It was the time when the USA experienced its Boom, but what was the Boom, and did everyone gain of it? During the Boom USA underwent huge changes. It was experiencing a decade of a great business boom in almost every industry. New Jobs were created because things like radios, TVs Hoovers, washing machines, refrigerators were produced. Since the people were employed they could spent more money, and simply buying something had a major economic impact. It was all a circle. Someone had to produce what was bought meaning people were employed, he would then earn money for his work and usually spent some of it, buying goods produced by someone else introducing that someone into the cycle. Henry Ford also noticed that the demand for his cars rise, which lead to him producing more cars. As a consequence he introduced a whole new production way, called mass production. Mass production is the creation of many products in a short period of time, it’s a technique that aims for low unit costs and high output. Other industries took up his system and shopping habits changed as chain stores like Woolworth established. So people bought cars which caused an overflow in cars in the traffic system. Highways were built amongst them the famous Route 66. The Highway is also known as “the mother road” it runs through the USA, from Los...
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...Justin Goldberg 10/22/14 Case: Palm Towers Introduction: Basis of the case is… This case is used to solve the problem of determining how much this company (the National Tower Company) should bid for the Palm Tower, if anything at all. Contrary to many of the other cases, this case is not a case of make or break. Alternatively, this is clearly a situation of a want and not a need, as CATO is mentioned nowhere here. It becomes evident from the beginning of the case that this is definitely a tower that comes with an abundance of value. In fact, the majority of working on this case is basically a forecast showing how much profit this investment could potentially provide. We would recommend just by previewing the case a bit that a bid should be made that is near the likely competitive forecast value for there are a few other rival companies that are very successful at the moment and will likely bid as well. The industry for these towers right now is a very competitive one as previously mentioned, this is because across the globe there are 6 billion cellular users who most of are in the process of upgrading from either 2g to 3g or 3g to 4g/LTE. This is useful information to keep in mind for the case because we try to forecast growth for this tower, which is currently sitting at 17% for a year-by-year basis, which is quite high compared to most other industrial growth averages. Unfortunately, while these major cellular companies are bringing in a majority share of the rent, numerically...
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...limited group of investors and whose performance is measured in absolute return units’’ (Connor et al. 2003). This limited group of investors contain wealthy investors who would be able to cope with possible losses. Commonly hedge funds make use of arbitrages and price discrepancies, terms that are also known as inefficiencies within the market. By making small profits on a large scale by identifying these market inefficiencies and attempting to correct them these hedge funds claim to help the market become more efficient. Hedge Funds first made their appearance on to the global financial stage in 1949, when the first hedge fund was created by Alfred W. Jones. ‘’He raised $60,000 and invested $40,000 of his money to pursue a strategy of investing in common stocks and hedging the positions with short sales’’. This fund existed all throughout the 1950s, 60s and the early 1970s. In the following decades the hedge fund industry kept on developing in all kinds of ways. Especially the size of the industry increased dramatically over the years. In 1990 the amount that was invested in hedge funds was around $50 billion where in 2006 this number had grown till more than $1 trillion (Stulz, 2007). This...
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...Bangladesh stock market crisis: diagnosis, remedies, prospects Admin by Md Toufique Hossain Over the last few years, the capital market of Bangladesh has witnessed haughty growth, which has not been in line with development in the real economic sector. Although, the Securities and Exchange Commission (SEC) of Bangladesh has tried to correct the irregular behaviour observed in the market, very often it is argued that lack of proper decisions from the regulator’s side has contributed to make the market more unstable. But the important thing is ‘How to stand again after a complete slump?’ Historical scenario of Bangladesh stock market The Bangladesh capital market landscape showed a bubble and burst episode in 1996. The benchmark price barometer of DSE, General Price Index (DGEN), increased by 139.3 percent during 1991-1995 and stood at 834.7 at the end of 1995. It recorded a remarkable increase of 337 percent in 1996. From the beginning of 1996, stock prices moved to the pressure of the market bubble. From July 1996 DGENI grew at an accelerated rate reaching its peak at 3648.7 on 5 November 1996 – an increase of 280.5 percent from the index of 959.1, at the end of June. Later that day the bubble burst and market crashed, as share prices of companies slumped. During the next year the DGEN lost 2892 points. Form then to the end of 2003, the capital market price index was below 800. This year, on January 10, 2011, the DGEN nosedived 660 points within the first 50 minutes...
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...Best Buy enters India by Francisco Polo Professor Hamid Assar International Finance – FIN535 May 22, 2012 Summary Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Puerto Rico, Mexico, Canada and China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates under both the Best Buy and Future Shop label. Together these operate more than 1,150 stores domestically and internationally. In addition, the company operates over 100 Best Buy Express Automated Retail stores or "ZoomShops", operated by Zoom Systems, in airports and malls around the U.S. The company is headquartered in Richfield, Minnesota, United States. On March 9, 2009, Best Buy became the largest electronics retail store (online and bricks and mortar) in the eastern United States, after smaller rival Circuit City went out of business. Fry's Electronics remains a major competitor in the western United States, while Hhgregg remains competitive in the eastern United States. Many locations feature in-store pickup, which can be arranged through the company's website. As of December 28, 2008, the company operated 1,010 Best Buy Stores, 13 Magnolia Audio Video Stores (specializing in high-end electronics), 7 stand-alone Geek Squad stores, 3 Audio Visions Stores, 13 Best Buy Mobile Stores (standalone) and...
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...past decade. From a closed and heavily controlled setting of the 1970s and 1980s, it has moved to a more open and market-oriented regime during the 1990s. Turnover has increased in both the spot and forward segments of the market. A recent feature has been the growing trading of the Indian rupee in the non-deliverable forward (NDF) foreign exchange market. The NDF markets have generally evolved for currencies with foreign exchange convertibility restrictions, particularly in the emerging Asian economies, viz., Taiwan, Korea, Indonesia, India, China, Philippines, etc., With controls imposed by local financial regulators and consequently the non-existence of a natural forward market for nondomestic players, private companies and investors investing in these economies look for alternative avenues to hedge their exposure to such currencies. In this context, nondeliverable forwards have become popular derivative instruments catering to the offshore investors’ demand for hedging. NDFs are types of derivatives for trading in nonconvertible or restricted currencies without delivery of the underlying currency. Trading in the NDF market generally takes place in offshore centers. In this market, no exchange takes place of the two currencies’ principal sums; the only cash flow is the movement of the difference between the NDF rate and the prevailing spot market rate and this amount is settled on the settlement date in a convertible currency, generally in US dollars, in an offshore financial...
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...Competitive Strategies Student Name Professor Name BUS 508 Contemporary Business Date Differences of Apple and Microsoft corporate culture Scully (2011) gave a bird's eye view of Apple and Microsoft corporate culture. He said "In Steve's world, 'No compromises'.' In Bill's world, 'Hey, compromise is alright. We'll get it right the third time. We just want to have a land grab'." According to Scully, the two have entirely different approaches, both very, very successful. But in the era of consumer electronics, the Steve Jobs approach is a hands-down winner. Williams (2011) said that if there is one key difference between Microsoft and Apple, it is secrecy. Apple rarely shows its hand before a product is ready to ship. Microsoft usually offers sneak previews of products months, sometimes years, in advance. Sethi (2012) revealed the two corporate values that Apple implements - value and cost culture: When it comes to customers, Apple applies the notion of value. For example, Apple’s pricing strategy that is driven by its focus on the value. The customer is willing to pay a price that is equal to the product's perceived value to the customer. However, as long as the customers are satisfied, Apple is under no obligation to reduce its prices. When it comes to workers' wages and working conditions, Apple uses its dominant market position or buying power to acquire these services at the lowest possible price, thus keeping the largest share of the profit for itself and...
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...“IT Doesn’t Matter” Assignment Assunta P. Cuccia BUAD 867 February 19, 2010 In the national bestseller, Good to Great, Collins devotes a chapter to Technology Accelerators in which he posits provocatively “The real question is not, What is the role of technology? Rather, the real question is, How do good-to-great organizations think differently about technology?” The value of Information Technology (IT) is based on how it is aligned with a company’s business model, core competencies and strategies so that a competitive advantage can be sustained. Today’s commerce is heavily dependent on IT, and as stated in Chapter 1, page 47 of our textbook, “IT is a powerful tool for defining, organizing and building knowledge assets within a firm and a business network.” Although Nicholas Carr’s article has an inflammatory title, “IT Doesn’t Matter,” the main points suggest otherwise. IT does matter but it matters differently. This article was published in 2003, a few years following the dot-com bubble burst. During the Internet’s halcyon days from 1994 to 2000, the businesses created were the result of IT innovations, and this changed the way business interacted with the environment. This led to IT becoming more visible and pervasive in business and at the same time evolving towards commodity status. IT is an essential part and cost of doing business globally “but provide distinction to none.” There are several industries that managed IT in a manner conferring competitive...
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