memory theory on China's stock market return volatility analysis. The stock market is full of uncertainty. The stock market volatility is normal, moderate price wave motion is beneficial to improve market liquidity and activity, but the acuteness wave motion will destroy the market stability and investor confidence. China's stock market is an emerging market, the market fluctuation characteristic of high risk is particularly prominent. Therefore, to our country stock market fluctuation characteristic
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Trading Strategies 1. Based on the Dicky-Fuller stationary test the pair is not a promising pair. The statistic is 2.51, which is not promising 2. 3. Pairs Trading Strategy a. On the spread sheet columns E,F,G (PEP) and NOP(KO) are the various normalized N-day returns for the two stocks (N ranges from 5, 10, and 20 days). b. Column HIJ and QRS are c. Finally the differences between the z normalized returns are expressed in columns TUV (For example: T=zret5_pepsi
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Lecture 3 1. Assume you purchased 700 shares of XYZ common stock on margin at $50 per share from your broker. If the initial margin is 65%, how much did you borrow from the broker, what is the margin? 2. You purchase 100 shares at $60 per share and margin = 50%. Suppose stock rises to $80/sh (increase of 33%). What is your return? Suppose stock drops to $40/sh (decrease of 33%). What is your return? 3. Investor opens a brokerage account and purchases 300 shares of XYZ at $40 per share. She borrows
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Questionnaire Q1. Preference of investment, is cash market , derivatives market or both? • Only cash/capital market • Only derivative market • Both Q2. The time period for which they are investing? • Less than 1 year • 1-5 year • More than 5 year Q3. Proportion of income they invest in shares and securities? • Up to 5% • 5 to 10% • 10 to 25% • More than 25% Q4.Trading Frequency? • Daily • Monthly • Weekly • According to Market Q5.Trading advice? • On your own • Expert Opinion
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3-) In order to build a hedge portfolio by combining regular Treasuries and TIPS that has exposure to inflation risk but not to real interest risk, short position should be taken in regular Treasuries and long position should be taken in TIPS. Amount and durations of the positions should be equal. This combination will have no real interest risk. Infilation risk still exists since the nominal Treasuries have no protection on infilation. In inflation increased, positive returns will be gained. 3-)
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Neither the CAPM nor the multifactor APT E. None of the above is a true statement. The multifactor APT provides no guidance as to the determination of the risk premium on the various factors. The CAPM assumes that the excess market return over the risk-free rate is the market premium in the single factor CAPM. Difficulty: Moderate 7. An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit. A. positive B. negative C. zero
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up at least 50% of our best output. Our current, and established, local market sales would suffer dramatically with such a deal. No longer could we use these quality grapes to supply our current local market. We have spent a lot of time (and money) cultivating an image and gathering a local following. By agreeing to sell a minimum of half our top quality grapes to Hardy’s, our ability to continue serving our local market would be hampered. If we were going to be asked to jeopardize the groundwork
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(rwacc) is given by the formula Where, D is the market value of the net debt E is the market value of the total equity V is the total market value of debt and equity = D + E T is the corporate tax rate rd is the appropriately calculated discount rate for debt (cost of debt) re is the appropriately calculated discount rate for equity (cost of equity) The cost of capital (rwacc) for the company can be calculated from the observable market values of debt (D), equity (E), & corporate tax rate
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Lecture 3 1. Assume you purchased 700 shares of XYZ common stock on margin at $50 per share from your broker. If the initial margin is 65%, how much did you borrow from the broker, what is the margin? 2. You purchase 100 shares at $60 per share and margin = 50%. Suppose stock rises to $80/sh (increase of 33%). What is your return? Suppose stock drops to $40/sh (decrease of 33%). What is your return? 3. Investor opens a brokerage account and purchases 300 shares of XYZ at $40 per share. She borrows
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USE THE FOLLOWING INFORMATION FOR THE NEXT THREE PROBLEMS Jackie has a margin account with a balance of $150,000. If the initial margin deposit is 60 percent and Turtle Industries is currently selling at $50 per share: (a) 1 How many shares of Turtle can Jackie purchase? (b) 2 What is Jackie's profit/loss if Turtle’s price after one year is $40? (d) 3 If the maintenance margin is 25 percent, to what price can Turtle Industries fall before Jackie receives a margin call? USE THE
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