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
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MARKETS / MODELS / CRISIS … WHO IS THE WINNER? Walid BEHAR Founder of TBS Finance Entrepreneur, Investment Analyst, Accelero Capital a.walidbehar@gmail.com Since the Great Depression*, History has shown us how important it is to understand the rationale behind those 3 key elements that will rule the future of Financial markets. Understanding the synergy and link between them is like trying to know who has been engendered first, the egg or the chicken. Every story has its beginning
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from http://www.investopedia.com/terms/t/timevalueofmoney.asp | Efficient market | “The degree to which stock prices reflect all available, relevant information. Market efficiency was developed in 1970 by Economist Eugene Fama who's theory efficient market hypothesis (EMH), stated that it is not possible for an investor to outperform the market because all available information is already built into all stock prices.” | Market Efficiency Definition | Investopedia. (2004, January 4). Retrieved May 5
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Investors Exchange or IEX) and Bill O’Brien (president of BATS Global Markets, Inc.), to talk about high frequency trading (HFT). The ensuing debate was explosive. O’Brien opened the interview with the following charge, “Michael and Brad, shame on both of you for falsely accusing literally thousands of people, and possibly scaring millions of investors, in an effort to promote a business model.” Katsuyama responded, “I believe the markets are rigged. And I also think that you’re a part of the rigging
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The Outcome Assuming the Merger is Completed Per Share Market Value of BT at Merger Completion 60.00 50.50 45.00 Gain / (Loss) on Long Position: Value of each BT share received 60.00 50.50 45.00 x Number of BT shares received 1.30 1.30 1.30 Value of consideration received 78.00 65.65 58.50 - Basis in MCI stock (62.00) (62.00) (62.00) Gain / (Loss) on Long Position 16.00 3.65 (3.50) Gain / (Loss) on Short Position:
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The Post-Earnings Announcement Drift (PEAD) was discovered by Ball and Brown in 1968 and it is still one of the most robust discoveries in the financial markets. The phenomenon was discovered when testing for market efficiency. Ball and Brown (1968) were estimating how fast a financial market incorporates new earnings information into the stock prices. They found an upward drift much longer than expected in stock prices after a ”good news” earnings announcement and a similar downward drift for a
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• Importance of Stock Markets and Connection to the Countries’ Economies “Financial markets perform the essential economic function of channeling funds from households, firms, and governments that have saved d surplus funds” (Mishkin, 2009, p.25).The primary economic functions of financial markets are; price discovery, liquidity, and reduced transactional costs (Drake & Fabozzi, 2010). Stock markets are vital for business as they directly impact on decision making in that price discovery of shares
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On Accounting Flows and Systematic Risk Abstract The body of work that relates accounting numbers to market measures of systematic equity risk was largely undertaken in the 1970s and early 1980s. More recent proposals on changes in accounting disclosure of risk mean that a rigorous theoretical model of the relationship between accounting measures and market measures of risk is timely. In this paper such a model is developed. In addition, the assumptions required to develop the
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Capital Market Of Bangladesh In: Business and Management Capital Market Of Bangladesh UNIVERSITY OF INFORMATION TECHNOLOGY & SCIENCES Department of School of Business Term Paper On Topic: Bond Market In Bangladesh . Course Code :FIN-361. Course Title :Corporate Finance . Submitted To : MD.Nazmul Hasan. Faculty, School of Business, University of Information Technology & Sciences Submitted By : NAME ID Nazibur Rahman : 08410105 Abdullah- al Zihad : 08510061 Qazi Ismat Ahmed Rushe’d
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suggest the securities market inefficiency. First we discuss how we define the securities market efficiency. According to the efficient-market hypothesis (EMH), the financial markets are “informationally efficient”. That is, no one can consistently achieve returns in excess of average market returns by using any information that market already knows. That means when the investment is made, the information is publicly available. One important characteristic of the efficient market is we assume the prices
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