...GLOBAL STOCK MARKETS: A CASE STUDY OF THE NIGERIAN STOCK MARKET RESEARCH BRIEF The history of stock trading and trading associations can be traced as far back as the 11th century when Jewish and Muslim merchants set up trade associations. After centuries of evolution, stock markets have become the symbol of commerce in the modern world. It operates in various countries and trades a range of securities. The world stock market capitalisation is estimated to be about $ 36.6 Trillion. The stock market has various functions such as capital mobilisation, investing opportunities, risk distribution etc. The major stock exchanges in the world today include New York Stock Exchange, London Stock Exchange, Frankfurt Stock Exchange, Italian Stock Exchange, Hong Kong Stock Exchange and Tokyo Stock Exchange. There have been various stock market crashes in the past such as the Wall Street crash of 1929, the crash of 1973/74, the 1987 crash; called black Monday, the dotcom bubble of 2000 and the more recent crash in 2008 caused by the subprime mortgage crisis in America. The economic crisis of 2008 which originated in America spread to various economies in the world and their stock markets were affected. It reduced the value of stocks around the world by as much as 41% and affected both major and emerging stock markets. The Nigerian stock market is an emerging market in Africa. After attaining the position of one of the most profitable, efficient and fastest growing equity market in the...
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...Efficient Market Hypothesis: Examining the Case of South Asian Stock Markets Sharon Prakash Abstract This study examines the relevance of the Efficient Market Hypothesis among emerging stock markets belonging to the South Asian Association for Regional Cooperation (India, Pakistan, Sri Lanka and Bangladesh) and the Global economy. The study employs daily closing prices of eminent market indices from a time period 2004-2013.The stock returns have been subjected to unit root tests such as the Augmented Dickey Fuller test and a panel unit root test. Additionally the existence of random walk for these stock markets has also been examined through the Jarque-Bera statistic. The results indicate information inefficiency in the time period under study for all indices. Investors can therefore predict future prices on the basis of historical information, and receive excessive returns. The results have implications for developing economies wherein the government has to ensure that all asset related information be made public, to curb state interference. Introduction The concept of Efficient Market Hypothesis (EMH) holds special importance in the field of Finance, especially Capital markets. This hypothesis postulates that markets are informationally efficient. This asserts that the price of any security will fully reflect all the information that is available to the investors. That being said, one cannot consistently achieve returns that are excess of the average market returns on...
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...Program Capstone Student’s Name Institution Course Tutor Date Program Capstone Part 1 & 2 Performance evaluation is a term that is used to refer to the measure of the effectiveness of a worker as far as the dispensation of their duties is concerned. Performance evaluation seeks to apply the use of various aspects of the worker’s duties and responsibilities in order to assess the effectiveness of the worker at the workplace (Schwartz, 2001). Performance evaluation can either involve a manager appraising the performance of their employees or it can be the other way round where the employee is asked to assess the performance of their supervisor. In addition to assessing various aspects that are directly related to the employees’ duties and responsibilities, performance evaluation also seeks to assess other additional aspect that as much as they might not be directly related to the duties and responsibilities of the employee, they have a significant impact on the employee’s capacity to effectively dispense their duties and responsibilities (Smither & London, 2009). Some of these factors might include: the ability of the employee to make timely decisions, the interpersonal skills of the employee and the ability of the employee to work with minimal supervision (Harvard Business School, 2009). There are various benefits that are associated with performance evaluation with the most obvious benefit being the fact that such...
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...Investments Fall 2014 Case Discussion Questions Instructor: Professor Edward H. Chow 周行一 Case study: financial bubble Case: Trouble with a bubble (9-808-067) 1. Why did Irving Fisher believe that stock prices had reached a permanently high plateau? 2. Why did the stock market crash in 1929? 3. Why did influential individuals like Fisher, Keynes and Rockefeller believe that the downturn would only be temporary? Case study: investment banking business and global financial crisis Case: Investment banking in 2008 (A): Rise and fall of the Bear (KEL378) 1. What role did Bear’s culture play in its positioning vis-à-vis its competitors, and what role might that culture have played in its demise? 2. How did Bear’s potential collapse differ from that of LTCM in the eyes of the Federal Reserve? 3. What would Bear have done differently to avoid its fate? A. - In the early 2000s? B. - During the summer of 2007? C. - During the week of March 10, 2008? 4. Who stood to benefit from Bear’s implosion? 5. Is market perception of liquidity more important for an investment bank than it is for an traditional manufacturing or distribution business? If so, why? 6. How could Bear have addressed perceptions of its liquidity? Could it have stopped the run on the bank, and if so, how? 7. Did Bear’s failure undermine the viability of so called “pure-play” investment banks? 8. What role should the Fed play in maintaining order in world securities markets? Case: Investment banking...
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...Department of Finance Faculty of Business Studies University of Dhaka TITLE OF THE STUDY: BANGLADESH STOCK MARKET PROBLEMS AND PROSPECTS Course Title: Course Code: Submitted to Department of Finance University of Dhaka Submitted by Section “A” BBA 16th Batch Department of Finance University of Dhaka Date of Submission: ------------------------------------------------- about us… Sl No. | Name | Id | 1 | | | 2 | | | 3 | | | 4 | | | 5 | | | 6 | | | 7 | Md. Sanowar Hossain | 16-175 | 8 | | | 9 | Md. Mahbubur Rahman Khan | 16-263 | TABLE OF CONTENTS Topic Page No. Introduction 7 – 8 Stock & how it can be Traded 7 Stock Exchange 7 Broker 7 Listed and Unlisted Company 7 SEC 8 Important Definitions & Terminologies 8 – 10 Face Value, Market Value 8 Market Lot 8 EPS 8 Price Earning Ratio 9 Dividend, Stock Dividend 9 Right Issue 9 Dividend Yield 9 Circuit Breaker, LTP 10 Volume 10 High Price, Low Price 10 Trade 10 52 Weeks Range 10 IPO 10 Stock Placement & Market Analyses 10 – 11 Private Placement 10 Technical Analysis 11 Fundamental Analysis...
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...FIN 3103 FINANCIAL MARKETS AND INSTITUTIONS– SECTION 1A AN INTRODUCTION TO THE ASIAN EQUITY MARKET & ITS EXCHANGES SAMUEL TOW WEE YAP (A0102724U) LIEW KUANG CHEN JOEL (A0004624U) ANG CHUAN HWEN JEREMY (A0080928X) LIAW YIH HANG (A0091535E) WU GUIYAN (A0100395N) ZHAO CHUANYI (A0105563L) Contents 1. Introduction ..................................................................................................................................................................................................... 4 2. Objectives of the Stock Market ................................................................................................................................................................. 4 2.1 Capital Formation ......................................................................................................................................................................................... 4 2.2 Connecting Traders ...................................................................................................................................................................................... 4 2.3 Security............................................................................................................................................................................................................. 4 2.4 Economic Indicator ...................................................................................................
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...Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs Owen A. Lamont and Richard H. Thaler University of Chicago and National Bureau of Economic Research Recent equity carve-outs in U.S. technology stocks appear to violate a basic premise of financial theory: identical assets have identical prices. In our 1998–2000 sample, holders of a share of company A are expected to receive x shares of company B, but the price of A is less than x times the price of B. A prominent example involves 3Com and Palm. Arbitrage does not eliminate this blatant mispricing due to short-sale constraints, so that B is overpriced but expensive or impossible to sell short. Evidence from options prices shows that shorting costs are extremely high, eliminating exploitable arbitrage opportunities. I. Introduction There are two important implications of the efficient market hypothesis. The first is that it is not easy to earn excess returns. The second is that prices are “correct” in the sense that prices reflect fundamental value. This latter implication is, in many ways, more important than the first. Do asset markets offer rational signals to the economy about where to We thank John Cochrane, Douglas Diamond, Merle Erickson, Lou Harrison, J. B. Heaton, Ravi Jagannathan, Arvind Krishnamurthy, Mark Mitchell, Todd Pulvino, Tuomo Vuolteenaho, an anonymous referee, and seminar participants at the American Finance Association, Harvard Business School, the National Bureau of Economic...
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...of capital market in Bangladesh mainly started with the beginning of trading activities of Dhaka Stock Exchange. It first incorporated as East Pakistan Stock Exchange Association Ltd in 28 April 1954 and started formal trading in 1956. It was renamed as East Pakistan Stock Exchange Ltd in 23 June 1962. Again in 13 May 1964 it was renamed as Dacca Stock Exchange Ltd. After the liberation war in 1971 the trading was discontinued for five years. In 1976 trading restarted in Bangladesh. In 16 September 1986 was started. The formula for calculating DSE all share price index was changed according to IFC in 1 November 1993. The automated trading was initiated in 10 August 1998. In 1 January 2001 was started. Central Depository System was initiated in 24 January 2004. As of November 16, 2009, the benchmark index of the Dhaka Stock Exchange (DSE) crossed 4000 points for the first time, because of the debut of Grameen Phone in DSE. From the year 2007 the market capitalization is growing at a constant pace. The market is growing both in capitalization and trading volume. The growth is fueled by increased demand for financial assets and influx of liquid money. The growth is outpacing the growth of the national economy. Sudden rise of capitalization in DSE has raised the question, whether the growth has been healthy and market is functioning in a justifiable manner. [pic] Because economic development of a country is deeply related the development of country. If the market grows and...
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...Chapter II History & Evolution of Stock Exchanges in India 2.1 Introduction: Before we study the historic volatile days of the ten years, let us first know what are : a) Stock Markets, b) Stock exchanges. a) Stock Markets: Stock Market is a market where the trading of company stock, both listed securities and unlisted takes place. It is different from stock exchange because it includes all the national stock exchanges of the country. For example, we use the term, "the stock market was up today" or "the stock market bubble." b) Stock Exchanges: Stock Exchanges are an organized marketplace, either corporation or mutual organization, where members of the organization gather to trade company stocks or other securities. The members may act either as agents for their customers, or as principals for their own accounts. Stock exchanges also facilitates for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerized. The trade on an exchange is only by members and stock broker do have a seat on the exchange. 2.2 History of Indian Stock Market: Indian stock market marks to be one of the oldest stock market in Asia. It dates back to the close of 18th century when the East India Company used to transact loan securities. In the 1830s, trading on corporate stocks and shares in Bank and Cotton presses...
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...of Business Case Studies – November/December 2010 Volume 6, Number 6 Calculating The Beta Coefficient And Required Rate Of Return For Coca-Cola John C. Gardner, University of New Orleans, USA Carl B. McGowan, Jr., Norfolk State University, USA Susan E. Moeller, Eastern Michigan University, USA ABSTRACT In this paper, we demonstrate how to compute the required rate of return for Coca-Cola using modern portfolio theory with data downloaded from the internet. We demonstrate how to calculate monthly returns for the index and Coca-Cola and how to use the returns to compute the beta coefficient and the required rate of return using the downloaded data. We show how to validate the data for the market index and the company and how to compute the returns using the dividend and stock split adjusted prices. We demonstrate how to graph the characteristic line for Coca-Cola and use the graph to check that the regression was run correctly. We use Coca-Cola and the S&P 500 Index in this paper, but any company listed on Yahoo! Finance can be used as the example. This paper can be used as the basis of a lecture on intermediate corporate finance or investments to demonstrate the process using a real company. Keywords: beta; characteristic line; required rate of return; Coca-Cola; teaching note INTRODUCTION M arkowitz1 (1952) began modern portfolio theory (MPT) which can be used to explain the relationship between risk and return for assets, particularly stocks. Stock of companies...
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...foreign exchange and stock markets for India, Samanta and Nath (2003) employed the Granger causality test on daily data during the period March 1993 to December 2002. The empirical findings of the study suggest that these two markets did not have any causal relationship. When the study extended its analysis to verily if liberalization in both the markets brought them together, it found no significant causal relationship between the exchange rate and stock price movements, except for the years l993, 2001 and 2002 during when a unidirectional causal influence from stock index return to return in forex market is detected and a very mild causal influence in the reverse direction is...
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...THE ROLE OF DIVIDEND POLICY IN STOCK PRICE DETERMINATION IN TELECOMMUNICATION INDUSTRY: THE CASE OF PLDT AND GLOBE FATIMA KAYE A. DE CHAVEZ, LORELLA A. ESPELETA and LESLIE JOY A. PATIO College of Business and Accountancy University of Batangas ABSTRACT The issue of how much a company should pay its stockholders, as dividend is one that has been of concern to managers for a long time. The optimal dividend policy of a firm may be defined as the best dividend payout ratio the firm can adopt. But, what does "best" mean in this concept? This paper is an attempt to explain the effect of Dividend Policy on the Stock Prices by taking the top two Telecommunications Company namely Philippine Long Distance Telephone Company and Globe Telecom. Other various websites were reviewed to see the significance of these dividend policies on the determination of stock prices. Charts, tables and other significant information of these two telecommunication companies which have been evaluated served as the methodology used by the researchers. The study identified that these top two telecommunication companies have different dividend policies being implemented. This difference among the two companies does not have a significant impact as long as stock price determination is concerned. The study also showed that an increase or a positive change in the company's dividend ratio gives a higher dividend among stockholders, yet several minor reductions to dividends have occurred due to capital acquisition...
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...Questions: 1. Why do companies use stock options to compensate employees? What are the advantages of stock options relative to cash compensation? What, if any, are their disadvantages? 2. What, if any, risks do Dell’s shareholders face from Dell’s stock option program? Draw terminal payoff diagrams to illustrate the risk. Is this risk something that shareholders of Dell expect to bear when investing in Dell? 3. How does Dell remove, or hedge, the perceived risk of the stock options program for shareholders? Draw terminal payoff diagrams to illustrate. 4. Why does Dell transact in both call and put options? Use put-call parity to reformulate the put and call positions that Dell takes in terms of Dell’s stock and borrowing. What effectively does Dell’s call and put positions accomplish? Is risk management the primary motivation for Dell’s actions? A stock option is an offer by a company that gives employees the right to buy a specified number of shares in the company at an agreed upon price (usually lower than market) by a specific date. The benefit of granting options to employees is viewed as a good thing because it (theoretically) aligned the interests of the employees (normally the key executives) with those of the common shareholders. If a material portion of a CEO's salary were in the form of options, she or he would be incited to manage the company well, resulting in a higher stock price over the long term. The higher stock price would benefit both the executives...
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...this case in detail. The Crime & How it was Committed The securities industry is governed by the Securities Exchange Commission, which exists in part to ensure that the capital markets are trustworthy. When investor trust in the markets is compromised, this makes it more difficult for firms to raise capital. Thus, it is imperative for any country to have securities regulators that ensure a fair and honest capital market system, including the stock market. There are many ways to commit fraud in the stock market, one of which is the pump and dump scheme that Stratton Oakmont committed. The principle is fairly simple. The company buys a large quantity of penny stocks. They then use their brokers to cold call people and convince them to invest. These people, who are usually fairly wealthy but not sophisticated investors, are convinced to put their money into this worthless penny stock. The influx of capital starts to push the stock price upward, so the investors are convinced that this is a good investment – that they are seeing the gains they were promised materializing. Then, when a large enough amount of capital has been gathered, the investment house begins to sell its shares. It does this quietly, so that it is difficult to detect. It sells these shares at a premium, because of the influx of the buyers. After it sells its stake, there are still many buyers left holding shares, which are no worthless. The brokerage has artificially inflated the stock price...
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...investing in foreign stock exchange markets. It is important for organizations to conduct due diligence of this decision. This decision might mean the generation of substantial profits, especially where a corporation gets enlisted in a stock exchange market of a foreign country. Huge profits are realized when the company invites the members of the public to subscribe its stake through (IPO) initial public offer. On the other hand, a company might accrue massive losses perhaps due to shares volatility (Maskell & Baggaley, 2003). It is of the essence that a Company evaluates the proposed investment decision of getting enlisted in foreign countries stock exchange market they choose to invest. Due diligence will enable the Company access all information relating to the movement of stock and share prices. This information will allow a company to avoid investing in equity markets that are highly volatile (Maskell & Baggaley, 2003. (Maskell & Baggaley, 2003), defines foreign-exchange risk fluctuations in the prices or value of an investment due to changes in foreign exchange rates or exchange rates. This risk is also known as exchange rate risk or merely currency risk; it is simply the loss an investor accrues during a long or a short position due to unfavourable movements in the exchange rates. Currency risk mostly affects international businesses that are more into imports and exports. The Case Study “Does the Devil Really Wear Prada?” In the case study, as presented...
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