...management in financial markets has sky-rocketed over the past two decades worldwide. As of September 2008, more than 69,000 mutual funds existed worldwide, which corresponds to $19 trillion of total net assets under management. As a result of this trend, performance of portfolio managers has become an increasingly important issue among financial analysts in order to determine whether professional managers add value to the portfolios they manage or merely create excessive transaction costs through active management. Stock selection and market timing are the two basic abilities that drive manager performance. The focus of this report is on market timing as it examines if an investment strategy that changes allocations in response to economic conditions is better than a traditional buy and hold strategy. The analysis utilizes daily return data covering the period from January 1990 to March 2010 with the test portfolio consisting of two risky assets (the total return on the S&P500 and NASDAQ) and a risk-free asset (the return on the 10-year government bond). The predictive instruments include changes in the level and shape of the term structure of interest rates and the market’s implied volatility, given current short-term rates as suggested by the level of 1-year government bond rates. A one-factor regression model is employed to test the hypothesis; the factor being the excess return of the portfolio on the market – a measure of of the portfolio manager’s timing ability. The underlying...
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...Title: The Myth of Emotionless Trading Sub-title: It may be impossible to shut emotion out of your trading decisions, but you can master the emotions that hinder profits. Frank Kollar looks at the emotions that accompany the decisions that must be made in trading. The winning market timer is cold, calculating and unemotional. Sound a bit unreal? Maybe it is, but the reality is that it is important to control your emotions, rather than let them interfere with your trading decisions. We have written many times about fear and greed and how they are the true motives behind market behavior. Fear and greed may control the masses, but if they are allowed to control you, you become one of the millions who cannot understand why they cannot make a profit when, supposedly, everyone else is. There are also other emotions, such as anger and disappointment that can influence your decisions. Emotions may interfere with discipline and sound decision making. But, they are not “all-powerful.” You can master and control them. Fight Or Flight It is reasonable to be fearful when real money is on the line. That is why winning market timers protect themselves by trading with a detailed market-timing strategy. Timing strategies are not affected by the emotions of the masses, and they are also designed to manage risk. When you know your strategy works over time and is designed to minimize risk, you can execute the buy and sell signals effortlessly and with less fear. You do not fret over the...
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...GM, L&D, let me present the article “Market Timing and Capital Structure” which was published in “The Journal of Finance” by MALCOLM BAKER and JEFFREY WURGLER in 2002. The authors believe that the idea from their work “has not been articulated before”. In this paper, the authors ask how equity market timing affects capital structure. The basic question is whether market timing has a short-run or a long-run impact. One expects at least a mechanical, short-run impact. However, if firms s’ubsequently reb’alance away the influence of market timing financing decisions, as normative capital structure theory recommends, then market timing would have no persistent impact on capital structure. The significance of market timing for capital structure is therefore an empirical issue. The results are consistent with the hypothesis that market timing has large, persistent effects on capital structure. The main finding is that low leverage firms are those that raised funds when their market valuations were high, while high leverage firms are those that raised funds when their market valuations were low. The authors document this in traditional capital structure regression, where leverage is the dependent variable and the market-to-book ratio is the independent variable. The basic regression result is that leverage is strongly negatively related to the historical market valuations. So, the influence of past market valuations on capital structure is economically significant and statistically...
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...empirical literature as well as in practice both market pioneering and later entrant strategy are outlined to lead to superior product performance. This literature review analyzes which strategy leads to superior product performance under which circumstances. Therefore, a conceptual framework is developed which illustrates the complex relationships of the integrated parameters. A detailed literature review is conducted to analyze theoretical as well as empirical approaches of strategy superiority. A holistic framework is introduced which depicts the superiority of a market strategy under given circumstances. Results suggest that being a pioneer or later entrant is not only a strategic decision on the company’s side but depends on various factors. The superiority of a market entry strategy needs to be evaluated individually for a new product. Finally, recommendations for future research are given. 1. Introduction Nokia’s communicator phones were the first smartphones on the market, including all essential characteristics: online access, navigation as well as apps to facilitate usage. However, being first on the market does not lead to a long-term success of Nokia smartphones. In 2007 Nokia had a market share of 49.4 % of the worldwide smartphone market, in 2012 the market share only adds up to 4.9 %. In April 2014, Nokia’s devices and services business was acquired by Microsoft. However, there are also first mover on the market who are still very profitable. Procter, Gamble...
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...Creditors, Employee • Govt. Restrictions • Low Asset Salvage Value • Lack of Better Opportunities • High Degree of Vertical Integration Mobility Barrier • Barrier when Firm Tries to go Upward, Enter More Attractive Segments ( AirAsia & Vistara; Permission to operate internationally) Cost Structure • Which Component is the major Cost Centre -Manufacturing - Distribution -Advertising -Licensing and any other Degree of Vertical Integration • Flexibility in Operating in a Highly Integrated Chain and its Disadvanatges. Degree of Globalization • How Local/Global the Firm is ? Analyzing Competitors • Strategic Groups Strengths and Weaknesses of Competitors • The three Variables to be Considered Share of Market Share of Mind Share of Heart Industry attractiveness analysis Debasis Pradhan, XLRI, India Porter’s Five Force...
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...CFA Institute Equity Style Timing Author(s): Duen-Li Kao and Robert D. Shumaker Reviewed work(s): Source: Financial Analysts Journal, Vol. 55, No. 1 (Jan. - Feb., 1999), pp. 37-48 Published by: CFA Institute Stable URL: http://www.jstor.org/stable/4480137 . Accessed: 28/02/2012 13:47 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. CFA Institute is collaborating with JSTOR to digitize, preserve and extend access to Financial Analysts Journal. http://www.jstor.org Equity Style Timing Duen-Li Kao and Robert D. Shumaker h Thestudies reported erehad two purposes:(1) to reviewthe opportunities in short-termtiming strategiesin the U.S. marketand (2) to explorevalue versus growth investing in theoryand in practice. Wefound that timing strategiesin the U.S. marketbasedon asset class and size have historically provided more opportunityfor outperformancethan a timing strategy basedon value (versus growth), albeit with similar informationratios. A multivariate macroeconomic analysis shows that return differences ...
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...strategy is actually? . There isn’t really a definitive answer to what strategy is because everyone has his or her own opinion. However, the best way to look at it is to, what do we need to do to win the market. Strategy is not a set goal or a tactic to win the victory. They are mere strategic threats. A good strategy helps to demonstrate the clear road mapping for the business. Strategy is broader topic it self but if we able the answer these four question it not only helps to plan the good strategy but also make aware by setting boundaries, what shouldn’t do. QUESTIONS WHEERE DO WE COMPETE: we all want to be success in business for which we set a kind of goal. But we should also plan how we going to achieve that goal. There fore it is essential to understand the business market closely. What type market we are going to involve. Industries, product or a geographic market. Understanding of market gives clear answer that allows you to understand the market area and to understand the competitors. WHAT UNIQUE VALUE DO WE BRING: after understanding proper market, every business should involve in creating the unique value in their products so the customer preferred their product rather than competitors. Business exists in competition we can found many substitute of the product in market therefore it is essential to create value in product which is unique than the competitors which may be -cost or differentiation which consists image, styling, customization, reliability etc. WHAT...
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...obligation adjusted for valuation assumptions (e.g., market risk premium and/or profit margin) that reflect the amount a market participant would require to assume the obligation at the measurement date. In valuing a lease under the cease-use date approach, the fair value of the obligation should be determined based on the remaining lease rentals, adjusted for the effects of any prepaid or deferred items recognized, reduced by estimated sublease rentals that could be reasonably obtained, even if the entity does not intend to sublease (so long as it is contractually permitted). While ―remaining lease rentals‖ as discussed in ASC 420-10-30-8 is not defined in existing literature, ASC 420-10-30-9 states ―A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity shall be measured at its fair value at the cease-use date.‖ Therefore, if executory costs (e.g., common area maintenance costs, real estate taxes) are required to be paid by the lessee as part of the lease contract, those costs will continue to be incurred by the lessee and should be included in any calculation of contract termination costs. The measurement of any net liability would be a discounted amount that includes the nonperformance risk associated with the liability and an appropriate market risk premium. The effect, if any, of the market risk premium, will be relative to the uncertainty in the timing and amount of the future cash flows. Although...
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...identify the following: a) The Value Proposition of the market offering (product/service/experience) b) The Target market for the market offering (product/service/experience) c) How is the company building customer relationship with the current customers and consumers of the market offering? d) How is the company making efforts to increase customer loyalty and customer retention level? e) Which of the three companies is clearly following Marketing ethics and social responsibility? Q2. Choose a particular television channel and list 5 Brands that advertise on this channel. Then for each brand/company answer the following questions: a) Exact length of the ad in minutes and seconds. b) Name of the Parent company behind the brand. c) The time of the day when the ad runs very frequently and what is the reason for its screening at that time? d) The tag line of the ad e) Describe the target audience of the ad in terms of demographics, psychographics, and behavioral characteristics. f) Write the Value Proposition that is communicated to the target audience. NONE OF THE GROUPS CAN CHOOSE THE SAME BRANDS/PRODUCTS FOR QUESTION 1, OR QUESTION 2. MAKE GROUPS OF TWO MEMBERS EACH. DEADLINE: FOURTH SESSION, Sept. 1st 2012 Answers 1) Silk Bank Value proposition: Being a conscientious and responsible corporate citizen with a commitment to the development of Pakistan. Target market: Corporate and trade sector, SMEs and Consumer financing. ...
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...might use the insider trading data as a signal infers future view of the firms and adjust their portfolios and strategies to make some profits. Even though, there are many evidences supporting that insider trading is informative such as Aboody and Lev (2000) suggest that insiders make profit from their ability to acknowledge changed plan in the researcher and development budgets. Likewise, the paper from Jaffe (1974), Finnerty (1976) and Seyhun, (1986) support that insiders can make profit from their trading. However, many early literatures argue that there are market movement limitation when insiders trade in SEC, Lakonishok and Lee (2001). Their study is consistent with Eckbo and Smith (1998) which showing evidence that insiders lose their control in their benefits of trading. In order to review timing ability of insiders, I examine the insider trading in Thailand because most prior literatures are studied in U.S. Market which is different characteristics from Thailand...
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...the real option approach, what are the characteristics of the optimal decision. Case 2: The Optimal Timing for Merging I Firm C is facing the chance to acquire Firm D. Consider the following information about this operation: Expected value after the acquisition e67M Value of company C (stand alone) e31M Value of company D (stand alone) e24M Volatility of the synergies 25% ”Dividend-yield” 5% Risk-free rate 3% Expected merging costs (consultancy, legal costs, integration costs, ...) Case questions: 1 e2.5M 1. Assuming the price paid for company D corresponds to its market value, what’s the optimal trigger for merging? 2. Assuming the shareholders of company D demand a premium of 20% for the operation, what should the managers of company C do? 3. Determine the terms that turn the shareholders of company C indifferent about an immediate acquisition. 4. Assume that there are no other companies interested to buy company D, and D is always a target (and never a bidder). Regarding the situation presented in 2) what is the market value of company C. Case 3: The Optimal Timing for Merging II The management teams of SSSONAECOM and ZZZON want to merge creating a bigger Telecom Company. The synergies they will have arise mainly from a better market position and lower fixed and variable costs. The managers of both companies believe the synergies can achieve 15% of the market value of both companies. However, they know that the...
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...Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones) Chapter 2 Financial Institutions, Financial Intermediaries, and Asset Management Firms Multiple Choice Questions 1 Financial Institutions 1) Financial enterprises, more popularly referred to as financial institutions, provide a variety of services. Which of the below is NOT one of these? A) Transform financial assets acquired through the market and constituting them into a different, and more widely preferable, type of asset–which becomes their liability. B) Exchange financial assets on behalf of customers but not for their own accounts. C) Manage the portfolios of other market participants. D) Assist in the creation of financial assets for their customers, and then sell those financial assets to other market participants. Answer: B Comment: Financial enterprises exchange financial assets both on behalf of customers and for their own accounts. Diff: 2 Topic: 2.1 Financial Institutions Objective: 2.1 the business of financial institutions 2) Financial intermediaries include ________ that acquire the bulk of their funds by offering their liabilities to the public mostly in the form of deposits; insurance companies, pension funds, and finance companies. A) depository institutions B) utilities C) initial public offerings D) preferred equity instrument. Answer: A Diff: 1 Topic: 2.1 Financial Institutions Objective: 2.1 the business of financial institutions 3)...
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...Foundations of Financial Markets and Institutions, 4e (Fabozzi/Modigliani/Jones) Chapter 2 Financial Institutions, Financial Intermediaries, and Asset Management Firms Multiple Choice Questions 1 Financial Institutions 1) Financial enterprises, more popularly referred to as financial institutions, provide a variety of services. Which of the below is NOT one of these? A) Transform financial assets acquired through the market and constituting them into a different, and more widely preferable, type of asset–which becomes their liability. B) Exchange financial assets on behalf of customers but not for their own accounts. C) Manage the portfolios of other market participants. D) Assist in the creation of financial assets for their customers, and then sell those financial assets to other market participants. Answer: B Comment: Financial enterprises exchange financial assets both on behalf of customers and for their own accounts. Diff: 2 Topic: 2.1 Financial Institutions Objective: 2.1 the business of financial institutions 2) Financial intermediaries include ________ that acquire the bulk of their funds by offering their liabilities to the public mostly in the form of deposits; insurance companies, pension funds, and finance companies. A) depository institutions B) utilities C) initial public offerings D) preferred equity instrument. Answer: A Diff: 1 Topic: 2.1 Financial Institutions Objective: 2.1 the business of financial institutions 3)...
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...When we operate a business, maximizing company’s wealth is more suitable than maximizing its profit as a goal of the business, it is because maximizing profits relates to profits only, and it assumes away the problems such as uncertainty of returns and the timing of returns, while maximization of the market value of the owners’ equity has take into all the considerations of all the financial decisions, such as wealth for the long term; risk or uncertainty; the timing of returns; and the stockholders’ return. Maximization of profits is regarded as the most commonly cited goal, always concern with the operational plans, but it is not a suitable objective at all, because there are many alternatives inside this outlined goal, For example, does that mean a short term or long term maximization target? Or what kind of profit is the target focuses on? It is not a fully appropriate objective, partly because it does not specify the timing or duration of expected returns. Is the investment project that will produce $100,000 return 5 years from now more valuable than the project that will produce annual returns of $15,000 in each of the next 5 years? An answer to this question depends upon the time value of money to the firm and to investors at their interest. Another shortcoming of aiming at maximizing profit is that it does not consider the risk or uncertainty in the process of making profits. Some investment projects are more risky but the profit cannot reflect this situation. As...
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...makes decisions using financial statements Assumptions: 1. As financial manager 2. Working in a publicly held corporation 3. Efficient market 1. As financial manager • We should think and solve problems like financial managers. • First, we need to understand their goal: maximize shareholder’s wealth • What represents shareholder’s wealth? Stock Prize (prize of the shares of the firm) Difference between profit maximization and shareholder’s wealth maximization Shareholder’s wealth maximization: considers timing, cash, and risk. Cash Profit is not equivalent to cash. If the net income of the firm increases, it does not mean that the money of the owner increases as well. However, if the stock price increases, shareholder’s wealth also increases. If you own 100 shares and each share costs P1,000, it is equivalent to P100,000 worth of shares. If the stock price increases from P1,000 to P1,100, the wealth increases to P110,000 worth of shares. Risk Profit maximization fails to account for risk. SWM considers risk as one of the factors in determining stock price. The higher the risk, the lower the stock price is.In addition, the greater the risk associated with receiving a future benefit, the lower the value investors place on that benefit. Stock prices, the measure of shareholder wealth, reflect the magnitude, timing, and risk associated with future benefits expected to be received by stockholders. Some investment projects...
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