In this presentation we tested the effect of optimism on stock returns. To draw our conclusions on the research question we used two methodologies: the first one based on sorted portfolios and the second one based on regressions. We concluded that both monthly and annual returns of firms with optimistic expectations are consistently lower than firms with pessimistic expectations. The effect of optimism seems more strong during turbulent periods, varying depending on the magnitude of the forecast error and there are some key variables that allow us to explain part of the investor’s behavior facing the same miss in earnings.
The document discusses analyzing company performance through financial ratios. It defines various types of ratios that measure performance, position, and potential. Performance ratios like return on capital employed (ROCE) and operating profit margin measure profitability. Position ratios like current ratio and quick ratio measure liquidity. Potential ratios like earnings per share measure what investors are looking at. The document provides formulas for important ratios and explains how to interpret ratios by comparing them over time, to competitors, and industry averages. It also discusses limitations of ratio analysis.
Competition and Bias by Harrison Hong and Marcin KacperczykMichael-Paul James
Competition and Bias
Paper by Harrison Hong and Marcin Kacperczyk
Presentation by Michael-Paul James
Treatment effect: a decrease in analyst covering increases optimism bias one year after the merger relative to control.
-Evidence for competition reduction bias
-Larger bias impact for stocks with less coverage
The document provides information on investment analysis, including definitions, methods, and concepts. It discusses two main types of analysis: fundamental analysis and technical analysis. Fundamental analysis examines basic company data like earnings, sales, and financial statements to determine a stock's intrinsic value. Technical analysis uses historical market data like prices and trading volumes to identify patterns that can predict future price movements. The document also covers the efficient market hypothesis, which proposes that stock prices reflect all publicly available information.
The document discusses various ways to estimate growth rates for earnings, revenues, and operating income. It explores using historical growth rates, analyst estimates, and fundamentals-based approaches. The fundamentals-based approaches estimate growth based on reinvestment rates and returns on capital/equity. They note growth rates depend upon changing returns over time and how negative earnings, changing margins, and size effects are incorporated into the estimates.
This document discusses several key economic and market analysis ratios and indicators. It defines dividend yield as annual dividend per share divided by market price per share. It also explains that price-earnings ratio is calculated as market price per share divided by earnings per share. The document notes that composite economic indexes like leading, coincident, and lagging indicators are used to determine turning points in the business cycle. It also discusses the relationship between stock markets and the overall business cycle.
The document discusses ratio analysis and various types of financial ratios used to analyze the financial performance and position of a company. It defines key liquidity ratios like current ratio and quick ratio. It also explains leverage ratios such as debt-equity ratio and total debt ratio that measure the use of debt financing. Further, it covers activity ratios including inventory turnover ratio and debtors' turnover ratio that assess efficiency of inventory and receivables management. The document emphasizes the importance of ratio analysis and interpretation of ratios with industry benchmarks.
The document discusses analyzing common stocks through security analysis. It covers the goals of analysis including fundamental analysis and economic analysis. It describes the top-down approach of first analyzing the economy, then industry, then individual companies. Key factors for analysis include financial ratios, statements, cash flows and interpreting trends. The purpose is to estimate a stock's intrinsic value and identify undervalued opportunities.
This document discusses how to analyze common stocks through fundamental and technical analysis. It provides details on four methods of fundamental analysis: earnings per share, price to earnings ratio, dividend yield, and revenue per employee. These metrics use a company's financial data to evaluate its stock and predict future market performance. The document also briefly mentions technical analysis, which analyzes stock price trends, patterns, and market indices to predict future stock performance.
The document discusses analyzing company performance through financial ratios. It defines various types of ratios that measure performance, position, and potential. Performance ratios like return on capital employed (ROCE) and operating profit margin measure profitability. Position ratios like current ratio and quick ratio measure liquidity. Potential ratios like earnings per share measure what investors are looking at. The document provides formulas for important ratios and explains how to interpret ratios by comparing them over time, to competitors, and industry averages. It also discusses limitations of ratio analysis.
Competition and Bias by Harrison Hong and Marcin KacperczykMichael-Paul James
Competition and Bias
Paper by Harrison Hong and Marcin Kacperczyk
Presentation by Michael-Paul James
Treatment effect: a decrease in analyst covering increases optimism bias one year after the merger relative to control.
-Evidence for competition reduction bias
-Larger bias impact for stocks with less coverage
The document provides information on investment analysis, including definitions, methods, and concepts. It discusses two main types of analysis: fundamental analysis and technical analysis. Fundamental analysis examines basic company data like earnings, sales, and financial statements to determine a stock's intrinsic value. Technical analysis uses historical market data like prices and trading volumes to identify patterns that can predict future price movements. The document also covers the efficient market hypothesis, which proposes that stock prices reflect all publicly available information.
The document discusses various ways to estimate growth rates for earnings, revenues, and operating income. It explores using historical growth rates, analyst estimates, and fundamentals-based approaches. The fundamentals-based approaches estimate growth based on reinvestment rates and returns on capital/equity. They note growth rates depend upon changing returns over time and how negative earnings, changing margins, and size effects are incorporated into the estimates.
This document discusses several key economic and market analysis ratios and indicators. It defines dividend yield as annual dividend per share divided by market price per share. It also explains that price-earnings ratio is calculated as market price per share divided by earnings per share. The document notes that composite economic indexes like leading, coincident, and lagging indicators are used to determine turning points in the business cycle. It also discusses the relationship between stock markets and the overall business cycle.
The document discusses ratio analysis and various types of financial ratios used to analyze the financial performance and position of a company. It defines key liquidity ratios like current ratio and quick ratio. It also explains leverage ratios such as debt-equity ratio and total debt ratio that measure the use of debt financing. Further, it covers activity ratios including inventory turnover ratio and debtors' turnover ratio that assess efficiency of inventory and receivables management. The document emphasizes the importance of ratio analysis and interpretation of ratios with industry benchmarks.
The document discusses analyzing common stocks through security analysis. It covers the goals of analysis including fundamental analysis and economic analysis. It describes the top-down approach of first analyzing the economy, then industry, then individual companies. Key factors for analysis include financial ratios, statements, cash flows and interpreting trends. The purpose is to estimate a stock's intrinsic value and identify undervalued opportunities.
This document discusses how to analyze common stocks through fundamental and technical analysis. It provides details on four methods of fundamental analysis: earnings per share, price to earnings ratio, dividend yield, and revenue per employee. These metrics use a company's financial data to evaluate its stock and predict future market performance. The document also briefly mentions technical analysis, which analyzes stock price trends, patterns, and market indices to predict future stock performance.
The document proposes a long position in emerging market equities and a short position in US equities based on the valuation gap between the two. Emerging market equities are significantly undervalued on an absolute basis and relative to the US market according to their cyclically adjusted price-to-earnings ratios. This valuation gap is the widest it has been in over a decade. The document also notes that emerging market earnings are below trend while US earnings are above trend and that investor positioning surveys show emerging markets are heavily underowned while the US is overowned, presenting an opportunity for mean reversion. The risks include a potential hard landing in China or full emerging market crisis pushing out returns.
The document discusses various techniques for financial forecasting and planning, including pro forma financial statements, percentage of sales forecasting, and cash flow forecasting. It provides an example of building a pro forma for a company called R&E Supplies to forecast their financial statements and determine their external funding requirements for the following year. Sensitivity analysis on the assumptions is recommended to determine the forecast's range of outcomes and induce prioritization of assumptions.
Discounted cash flow techniques are used to evaluate investment projects by estimating relevant cash flows over time and discounting them to calculate net present value (NPV). NPV is the primary criterion for accepting or rejecting projects and considers the timing of all cash flows. When capital is limited, mutually exclusive projects must be ranked according to NPV to allocate funds to the most valuable opportunities. Accurately determining relevant cash flows requires understanding how items like depreciation, working capital, taxes, and capacity utilization affect cash flows over time.
The document discusses sustainable growth rates and how companies can manage growth. It provides definitions of a company's sustainable growth rate and explains how it is calculated. It also discusses phases of company growth, factors that influence sustainable growth rates, and strategies companies can employ when their actual growth differs from their sustainable rate, such as increasing leverage, reducing dividends, or making acquisitions. Examples and calculations are provided for companies like Genentech and Scotts Miracle-Gro to illustrate the concepts.
The document provides an overview of the stock market and how it works. It discusses what stocks are, how they are traded, and some key stock market indexes like the BSE SENSEX and Nifty 50. It also covers important concepts like fundamental analysis, technical analysis, and factors that influence stock prices. The document concludes with tips for making money in the stock market through diversification, patience, and avoiding overtrading.
The document discusses various types of financial instruments and markets. It begins by explaining how companies raise money through financial markets and the packaging of future cash flows. It then defines different financial markets and instruments such as money markets, capital markets, bonds, stocks, and preferred shares. It also discusses how private companies obtain financing and the process for companies going public.
Keynes argued that if demand falls, both supply and employment will fall as prices are sticky in the short-run. Real GDP is determined by consumer spending, private investment, government spending, and net exports. If actual expenditures are less than planned expenditures, inventory will rise and layoffs will occur, reducing output and employment. Fiscal policy like tax cuts can increase aggregate demand and output.
Commercial banks create money through fractional-reserve banking by lending out deposits, multiplied by the reserve ratio. Monetary policy works by changing interest rates, affecting investment and aggregate demand. Both fiscal and monetary policies have implementation lags.
This document provides an overview of key concepts in financial statement analysis and accounting. It discusses the cash flow cycle, balance sheet components, and how the income statement, balance sheet, and statement of cash flows are interconnected. It also covers topics like depreciation, the difference between cash flow and net income, and the limitations of historical cost accounting versus fair value accounting.
This document discusses factors that influence stock prices of industrial companies listed on the Indonesia Stock Exchange. It presents a literature review on debt ratio, price-earnings ratio, earnings per share, company size, and company value as independent variables that may predict stock price as the dependent variable. The document then describes the research methodology, which uses a quantitative multiple linear regression analysis of secondary data from 114 industrial companies to determine the relationship between the independent and dependent variables. The results of the analysis show that all four independent variables (debt ratio, price-earnings ratio, earnings per share, size) have a significant influence on stock price both simultaneously and partially, with earnings per share having the strongest influence. Conclusions are that companies should manage these
Details the advantages volatility risk premium creates for put writing versus covered calls. Focused on passive long only investors. Basic option characteristics explained first.
This document provides an overview of key financial performance metrics such as return on equity (ROE), return on assets (ROA), profit margin, asset turnover, and financial leverage. It discusses how these metrics can be used to evaluate and compare the financial performance of different companies. Tables of example data on multiple companies are presented to illustrate the concepts.
The document discusses different forms of market efficiency according to the Efficient Market Hypothesis (EMH). It defines weak, semi-strong, and strong forms of efficiency based on what information is reflected in market prices. Weak-form tests whether past prices predict future prices, semi-strong tests whether public information is reflected, and strong tests whether insider information provides advantages. The document also discusses methods for testing each form of efficiency through analyses like event studies and anomalies. Overall, evidence supports weak and semi-strong forms but not strong form efficiency.
The document discusses different types of risks that can be associated with holding securities in a portfolio. It defines systematic and unsystematic risks, with unsystematic risks being unique to a specific firm or industry and systematic risks affecting the entire market. It also discusses beta and how it is a measure of the volatility or systematic risk of a security compared to the market as a whole. Beta is used in the capital asset pricing model to calculate expected returns based on risk.
Factor models are used to analyze the risk of portfolios. The Fama-French three factor model uses three factors - excess market returns, firm size, and book-to-market value - to explain 95% of a portfolio's returns. It is an advancement on the Capital Asset Pricing Model. The Fama-French model incorporates factors that provide higher long-term returns and allows users to earn higher returns by tilting their portfolio toward small cap value stocks.
My investment planning lecture at Griffiths Universityklublok
The document discusses different types of market efficiencies as defined by the Efficient Market Hypothesis (EMH). EMH suggests that share prices reflect all available public information and that it is impossible to consistently outperform the market. There are varying degrees of market efficiency including weak form, semi-strong form, and strong form. Weak form suggests historical prices cannot predict future performance, semi-strong form suggests prices adjust rapidly to new public information, and strong form suggests prices reflect all public and private information. Evidence both supports and contradicts EMH. Behavioral finance also examines how investor psychology can cause market inefficiencies.
Pillar Capital provides investment management services focused on dimensions of returns, diversification, and investor discipline. Dimensions of returns refers to systematic differences in expected returns based on factors like company size, relative price, and profitability. Historical data shows that investing based on these dimensions has rewarded long-term investors. Portfolios can be structured to target dimensions shown to produce premiums, like favoring small cap, value, and high-profitability companies.
Munish Gupta discusses how the customer is now in control across B2B, B2B2C, and B2C environments. As customers have become more connected through technology, companies have undergone a cultural shift to focus on customer experience and data insights to drive their strategies. Gupta notes that both marketing tactics and operations need to change to keep customers as the focal point by personalizing experiences and sharing relevant information that provides value to customers. When customers see real value in return for sharing their data, they are more willing to share details without feeling intruded upon, as long as they have an opt-out option.
Encouraging Creative Connections in the Classroom with Skypekimberlybat
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
The document proposes a long position in emerging market equities and a short position in US equities based on the valuation gap between the two. Emerging market equities are significantly undervalued on an absolute basis and relative to the US market according to their cyclically adjusted price-to-earnings ratios. This valuation gap is the widest it has been in over a decade. The document also notes that emerging market earnings are below trend while US earnings are above trend and that investor positioning surveys show emerging markets are heavily underowned while the US is overowned, presenting an opportunity for mean reversion. The risks include a potential hard landing in China or full emerging market crisis pushing out returns.
The document discusses various techniques for financial forecasting and planning, including pro forma financial statements, percentage of sales forecasting, and cash flow forecasting. It provides an example of building a pro forma for a company called R&E Supplies to forecast their financial statements and determine their external funding requirements for the following year. Sensitivity analysis on the assumptions is recommended to determine the forecast's range of outcomes and induce prioritization of assumptions.
Discounted cash flow techniques are used to evaluate investment projects by estimating relevant cash flows over time and discounting them to calculate net present value (NPV). NPV is the primary criterion for accepting or rejecting projects and considers the timing of all cash flows. When capital is limited, mutually exclusive projects must be ranked according to NPV to allocate funds to the most valuable opportunities. Accurately determining relevant cash flows requires understanding how items like depreciation, working capital, taxes, and capacity utilization affect cash flows over time.
The document discusses sustainable growth rates and how companies can manage growth. It provides definitions of a company's sustainable growth rate and explains how it is calculated. It also discusses phases of company growth, factors that influence sustainable growth rates, and strategies companies can employ when their actual growth differs from their sustainable rate, such as increasing leverage, reducing dividends, or making acquisitions. Examples and calculations are provided for companies like Genentech and Scotts Miracle-Gro to illustrate the concepts.
The document provides an overview of the stock market and how it works. It discusses what stocks are, how they are traded, and some key stock market indexes like the BSE SENSEX and Nifty 50. It also covers important concepts like fundamental analysis, technical analysis, and factors that influence stock prices. The document concludes with tips for making money in the stock market through diversification, patience, and avoiding overtrading.
The document discusses various types of financial instruments and markets. It begins by explaining how companies raise money through financial markets and the packaging of future cash flows. It then defines different financial markets and instruments such as money markets, capital markets, bonds, stocks, and preferred shares. It also discusses how private companies obtain financing and the process for companies going public.
Keynes argued that if demand falls, both supply and employment will fall as prices are sticky in the short-run. Real GDP is determined by consumer spending, private investment, government spending, and net exports. If actual expenditures are less than planned expenditures, inventory will rise and layoffs will occur, reducing output and employment. Fiscal policy like tax cuts can increase aggregate demand and output.
Commercial banks create money through fractional-reserve banking by lending out deposits, multiplied by the reserve ratio. Monetary policy works by changing interest rates, affecting investment and aggregate demand. Both fiscal and monetary policies have implementation lags.
This document provides an overview of key concepts in financial statement analysis and accounting. It discusses the cash flow cycle, balance sheet components, and how the income statement, balance sheet, and statement of cash flows are interconnected. It also covers topics like depreciation, the difference between cash flow and net income, and the limitations of historical cost accounting versus fair value accounting.
This document discusses factors that influence stock prices of industrial companies listed on the Indonesia Stock Exchange. It presents a literature review on debt ratio, price-earnings ratio, earnings per share, company size, and company value as independent variables that may predict stock price as the dependent variable. The document then describes the research methodology, which uses a quantitative multiple linear regression analysis of secondary data from 114 industrial companies to determine the relationship between the independent and dependent variables. The results of the analysis show that all four independent variables (debt ratio, price-earnings ratio, earnings per share, size) have a significant influence on stock price both simultaneously and partially, with earnings per share having the strongest influence. Conclusions are that companies should manage these
Details the advantages volatility risk premium creates for put writing versus covered calls. Focused on passive long only investors. Basic option characteristics explained first.
This document provides an overview of key financial performance metrics such as return on equity (ROE), return on assets (ROA), profit margin, asset turnover, and financial leverage. It discusses how these metrics can be used to evaluate and compare the financial performance of different companies. Tables of example data on multiple companies are presented to illustrate the concepts.
The document discusses different forms of market efficiency according to the Efficient Market Hypothesis (EMH). It defines weak, semi-strong, and strong forms of efficiency based on what information is reflected in market prices. Weak-form tests whether past prices predict future prices, semi-strong tests whether public information is reflected, and strong tests whether insider information provides advantages. The document also discusses methods for testing each form of efficiency through analyses like event studies and anomalies. Overall, evidence supports weak and semi-strong forms but not strong form efficiency.
The document discusses different types of risks that can be associated with holding securities in a portfolio. It defines systematic and unsystematic risks, with unsystematic risks being unique to a specific firm or industry and systematic risks affecting the entire market. It also discusses beta and how it is a measure of the volatility or systematic risk of a security compared to the market as a whole. Beta is used in the capital asset pricing model to calculate expected returns based on risk.
Factor models are used to analyze the risk of portfolios. The Fama-French three factor model uses three factors - excess market returns, firm size, and book-to-market value - to explain 95% of a portfolio's returns. It is an advancement on the Capital Asset Pricing Model. The Fama-French model incorporates factors that provide higher long-term returns and allows users to earn higher returns by tilting their portfolio toward small cap value stocks.
My investment planning lecture at Griffiths Universityklublok
The document discusses different types of market efficiencies as defined by the Efficient Market Hypothesis (EMH). EMH suggests that share prices reflect all available public information and that it is impossible to consistently outperform the market. There are varying degrees of market efficiency including weak form, semi-strong form, and strong form. Weak form suggests historical prices cannot predict future performance, semi-strong form suggests prices adjust rapidly to new public information, and strong form suggests prices reflect all public and private information. Evidence both supports and contradicts EMH. Behavioral finance also examines how investor psychology can cause market inefficiencies.
Pillar Capital provides investment management services focused on dimensions of returns, diversification, and investor discipline. Dimensions of returns refers to systematic differences in expected returns based on factors like company size, relative price, and profitability. Historical data shows that investing based on these dimensions has rewarded long-term investors. Portfolios can be structured to target dimensions shown to produce premiums, like favoring small cap, value, and high-profitability companies.
Munish Gupta discusses how the customer is now in control across B2B, B2B2C, and B2C environments. As customers have become more connected through technology, companies have undergone a cultural shift to focus on customer experience and data insights to drive their strategies. Gupta notes that both marketing tactics and operations need to change to keep customers as the focal point by personalizing experiences and sharing relevant information that provides value to customers. When customers see real value in return for sharing their data, they are more willing to share details without feeling intruded upon, as long as they have an opt-out option.
Encouraging Creative Connections in the Classroom with Skypekimberlybat
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
Col update on seychelles, malawi and mozambiquedean dundas
The document provides updates on NotesMaster initiatives in Seychelles, Malawi, and Mozambique. In Seychelles, the initiative involves 17 teachers developing open educational resources aligned with the national curriculum across 8 subjects. In Malawi, the initiative supports the Malawi College of Distance Education to transition to more ICT-oriented approaches, involving 15 tutors covering 9 subjects. In Mozambique, the initiative aims to develop content in Portuguese to support the Instituto de Educação Aberta e à Distância, involving 10 teachers covering 5 subjects. The document also outlines the stages of each country's initiative.
This document discusses the current regulatory landscape for unmanned aerial systems (UAS) in the United States following the Pirker case. It summarizes the Pirker case, which established that model aircraft are subject to FAA regulations. It then outlines current FAA policies for public, civil, and hobby UAS operations, which include requirements for certificates of authorization, exemptions, and adherence to safety guidelines. The document analyzes the gap between FAA policies and federal laws regarding UAS integration and regulation.
The document outlines a campaign plan for the Costa Rica Tourism Board, including an overview of the tourism industry and trends, analysis of competitors like Mexico and Hawaii, definition of their target market as adventurous Americans over 30 with high incomes, and descriptions of qualitative research to understand the target audience. It also lists the team working on the campaign and includes sections for objectives, concepts, creative executions, and evaluation.
Informe entrevista al docente Gestión de Calidadthefuckingmen21
El presente informe es sobre una entrevista realizada a la coordinadora Patricia Etayo de la Institución educativa República de Israel sobre el proceso de Gestión de Calidad
O documento lista vários conjuntos e peças de máquinas agrícolas, organizados em seções numeradas de 8.1 a 8.44, com códigos e descrições de cada item.
Este documento describe las nuevas funciones de PowerPoint 2013, incluyendo temas y diseños personalizables, herramientas de alineación mejoradas, nuevas funciones como Combinar formas y un cuentagotas de coincidencia de colores, vistas de presentador mejoradas con zoom de diapositiva y explorador de diapositivas, edición y comentarios compartidos en línea, y la capacidad de presentar en línea sin PowerPoint.
El documento describe la forma pasiva en inglés. Se forma con el verbo to be más el participio del verbo principal. Al transformar una oración activa a pasiva, el objeto de la activa se convierte en el sujeto de la pasiva y el verbo pasa al mismo tiempo, mientras que el sujeto de la activa se vuelve complemento agente precedido por "by" en la pasiva.
The document outlines an overview of the Stock Analyst Program for winter 2010. It includes the schedule of upcoming meetings and topics to be covered, such as valuation, stock screening, risk management, and technical analysis. Evaluation criteria for research reports are also mentioned, focusing on choice of industry and identification of growth potential and catalysts. Various resources for company and industry analysis are listed, including screening tools, industry reports, and the Bloomberg terminal.
The document provides an overview of the Stock Analyst Program for 2010, including upcoming meeting dates and topics. It discusses components of a research report, evaluation criteria, sources for where to trade stocks, different stock screening strategies, and concepts related to risk management. Key topics covered include industry and company analysis, valuation methods, investment styles like value investing and growth investing, and sayings from famous investors about diversification and market trends.
This document discusses stock valuation using the Gordon Growth Model. It begins by introducing the Gordon Growth Model, which values a stock based on discounting the dividends that are distributed to shareholders. It then provides assumptions of the model, such as the business being stable and experiencing steady growth. The document also discusses estimating free cash flow to equity and financial leverage. It provides an example analysis of stock valuation for Consolidated Edison using the Gordon Growth Model.
PE ratio is a metric that compares a company's stock price to its earnings per share. It indicates how much an investor pays for each dollar of earnings. A PE ratio is calculated by dividing the current stock price by the earnings per share. PE ratios help investors compare similar companies and determine if a stock is undervalued, appropriately priced, or overvalued. Factors like growth rates, profit margins, returns, macroeconomic conditions, and intangible assets can impact a company's PE ratio. Comparing a company's PE ratio to its industry peers provides useful insight into how the market values that company.
The use of risk management products has grown tremendously in recent years and companies now employ large numbers of risk managers. A fundamental notion underlying these risk management practices is that cash flow and earnings volatility are harmful to shareholders—that is, these measures of volatility have a direct impact on the company’s stock price. If so, risk management tools that lower this volatility will benefit shareholders by raising the company’s stock price. In designing risk management programs, therefore, it is essential that managers have an understanding of the degree to which the market rewards the company’s stock price when cash flow and earnings volatility are lower. That is, CFOs need a market-
based measure of the benefits of reducing volatility through risk management practices.
In this paper, we provide evidence on whether companies with lower volatility are more highly valued than those with greater volatility. Our main findings are as follows:
Valuation multiple is substantially higher for companies with lower earnings per share (EPS) volatility. For example, a movement from the 75th percentile of EPS volatility to the 25th percentile increases the observed market-to-book (M-B) ratio from 1.15 to 1.32 (i.e., an increase of 15%).
Similarly, valuation multiple is significantly higher for companies with lower cash flow volatility. For example, a movement from the 75th percentile of cash flow volatility to the 25th percentile increases the observed market-to-book (M-B) ratio from 1.21 to 1.23.
Once we control for other determinants of the M-B ratio in a multivariate regression framework, we continue to find that cash flow volatility and earnings volatility have an economically meaningful impact on company value. All else equal, 10% reductions in EPS volatility and cash flow volatility are associated with increases in M-B ratios of 1.6% and 0.6%, respectively. Reductions in EPS volatility and cash flow volatility of 50% are associated with increases in M-B ratios of 11.2% and 4.0% respectively.
IB Business and Management (Standard Level)
All material taken from the IB Business and Management Textbook:
"Business and Management", Paul Hoang, IBID Press, Victoria, 2007
Ratio Analysis and financial performanceYaarbailee1
This document discusses various financial performance metrics and financial ratios that can be used to analyze a company's financial statements. It defines financial ratios as a systematic use of quantitative relations between financial values that can help determine a company's existing strengths and weaknesses as well as its historical performance and current financial condition. The document then discusses different types of financial ratios, including profitability ratios, assets utilization ratios, short-term solvency/liquidity ratios, long-term solvency/debt utilization ratios, and other important ratios like earnings per share and price-earnings ratio. Specific ratios are defined within each category with explanations of what they measure and how they are interpreted.
The Master in Corporate Finance is a 100 % finance-focused program in English, designed to provide the most sophisticated techniques and tools of Financial Management
Fundamental Analysis by Vivek SrivastavaAxis Direct
Fundamental Analysis is a study of factors (company specific and external environment) that affect the value of stock. This program will help you to understand the impact of factors on the valuation of the stock, analysis of the environment and interpretation of financial statement.
For more information visit : https://simplehai.axisdirect.in/learn/eclasses
This document provides an introduction and overview of a project report on the fundamental analysis of the banking industry in India, with special reference to public sector banks. The report analyzes macroeconomic factors, assesses the performance of the banking industry, and uses financial analysis tools to evaluate and select high-performing banking companies over a five-year period from 2009-2013. The analysis focuses on metrics like net interest margin, credit-to-deposit ratio, non-performing asset ratio, earnings per share, and intrinsic value to compare company performance and make investment decisions.
Expectation for non_finance_xbrl_from_analysts_6Chie Mitsui
1) The speaker discusses challenges in extracting and analyzing non-financial information from corporate disclosure documents using XBRL tagging.
2) Case studies show issues like comparing forecasts over time, distinguishing disclosed vs undisclosed information, and representing non-standard data like product or geographic categories.
3) The speaker argues that designing XBRL taxonomies with user input could make non-financial analysis more efficient, and that further discussion is needed on describing non-financial data before widespread adoption.
The document discusses international financial statement analysis and the need to analyze non-domestic financial statements due to increasing globalization and cross-border business activities. It covers the importance of understanding different countries' business environments and financial reporting standards when performing international financial analysis. The document also provides an overview of the key components of financial statement analysis, including business strategy analysis, accounting analysis, ratio analysis, and audit reports. It discusses the role of auditors in providing an independent assessment of financial statement reliability across different country reporting requirements.
Financial interpretations with models & formats (unit 2)finance1rkh
The document discusses analyzing financial performance through ratios. It defines ratios as comparing two figures and outlines their uses, including comparing results over time, against competitors, and industry averages. Ratios are grouped into performance (profitability), position (liquidity), and potential (future outlook). Key ratios discussed for each category include ROCE, current ratio, quick ratio, trade payable/receivable days. The document emphasizes interpreting ratios by examining changes, interactions between ratios, and limitations of the analysis.
Financial interpretations with models & formats (unit 2)Sas_Bala
The document discusses analyzing financial performance through ratios. It defines ratios as comparing two figures and outlines their uses, including comparing results over time, against competitors, and industry averages. Ratios are grouped into performance (profitability), position (liquidity), and potential (future outlook). Key ratios discussed for each category include ROCE, current ratio, quick ratio, trade payable/receivable days. Calculating and interpreting ratios, considering changes over time and interacting factors, is presented as the approach for analyzing financial performance from statements.
The document discusses analyzing financial performance through the use of ratios. It identifies key ratios used to measure performance, position, and potential. Ratios are calculated using figures from the financial statements and compared over time, against competitors, or industry averages to analyze how well a business is performing. The document provides examples of important ratios like return on capital employed, operating profit margin, current ratio, quick ratio, and receivable/payable days and how they are interpreted.
Using Financial Forecasts to Advise Business - Method of Forecasting - RevisedIrma Miller
This document discusses various methods for forecasting future financial needs, including qualitative and quantitative approaches. It outlines steps in the forecasting process such as projecting sales, expenses, investment needs, and determining financing requirements. Specific forecasting techniques are described, such as naive forecasts, moving averages, regression analysis, and more. The document also covers financial analysis methods like ratio analysis, variance analysis, benchmarking, and break-even analysis. Finally, it discusses top-down vs. bottom-up forecasting and different approaches to building budgets such as incremental, zero-based, and activity-based budgeting.
Okay, let's break this down step-by-step:
* Offer price per share is $48
* Mix is 20% cash, 80% stock
* To calculate the exchange ratio, we take the stock portion as a percentage of the total consideration
* Stock portion is 80% of $48, which is 0.8 * $48 = $38.40
* Cash portion is 20% of $48, which is 0.2 * $48 = $9.60
* Total consideration is $38.40 stock + $9.60 cash = $48
* To get the exchange ratio, we take the stock portion ($38.40) and divide it by the acquirer's stock price.
This document discusses ratio analysis and its applications. Ratio analysis involves comparing financial metrics and ratios to evaluate a company's performance over time, against its peers, and relative to industry benchmarks. The key types of ratios covered are liquidity ratios, solvency ratios, profitability ratios, efficiency ratios, coverage ratios, and market prospect ratios. Specific ratios discussed include the current ratio, debt-to-equity ratio, return on assets, inventory turnover, and dividend yield. The document emphasizes that ratio analysis is most insightful when trends are analyzed over time and when comparisons are made to competitors in the same industry.
Analysis and Interpretation of Financial Statement.pptxmarvinrosel4
The document discusses various techniques for analyzing financial statements, including horizontal analysis, vertical analysis, ratio analysis, and calculations. It defines each technique and provides examples of key financial ratios used to evaluate a company's profitability, liquidity, solvency, operational efficiency, and financial health. These ratios include gross profit margin, return on assets, current ratio, debt-to-equity ratio, inventory turnover, and accounts receivable turnover. The document aims to teach learners how to interpret financial statement data using these analytical methods.
Indian Stock Market Using Machine Learning(Volume1, oct 2017)sk joshi
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1. Does optimism distort stock prices?
Recent
studies
have
suggested
that
stock
with
op3mis3c
expecta3on
obtain
lower
returns.
Authors:
Farei
Gabriele
Buchard
Francois
Kybourg
Philippe
Dessimoz
Benoît
Robyr
Steven
Yana
Yuan
01
December
2012
"The most common cause of low prices is pessimism, sometimes
pervasive, sometimes specific to a company or industry. We want to do
business in such an environment, not because we like pessimism but
because we like the prices it produces. It’s optimism that is the enemy of
the rational buyer." Warren Buffett
2. Table of contents
-‐
Reminder
of
our
research
topic
-‐
Database
-‐
Model
-‐
Results
-‐
InterpretaIons
-‐
Open
issues
-‐
Conclusions
Introduction
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
2
3. Market
prices
seem
to
react
differently
to
the
earnings
announcement
depending
on
the
forecasts
provided
by
analysts.
• Analysts
are
professional
market
watchers
followed
closely
by
investors
In
our
model
the
posiIve
difference
between
the
forecasted
earnings
and
the
actual
earnings
is
called
op#mism.
This
is
the
result
of
individual
irraIonality:
• Analysts
are
not
completely
raIonal
individuals:
overly
opImisIc
forecasts
• Investors
are
not
completely
raIonal
individuals:
overly
opImisIc
reacIons
We
were
inspired
by
Stephen
Ciccone
–
«
Does
Analyst
Op3mism
About
Future
Earnings
Distort
Stock
Prices?
»
With
our
research
we
want
to
:
Understand
the
rela#on
between
op#mis#c
expecta#ons
and
stock
returns
and
the
factors
that
may
amplify
this
rela#onship.
• Does
the
opImism
distort
stock
prices?
• Is
the
effect
Ime
varying
or
constant?
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
3
Research topic
Introduction
4. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
4
Database construction: Raw data
Database
Source:
Center
for
Research
in
Security
Prices
(CRSP)
COMPUSTAT
The
InsItuIonal
Brokers
EsImate
System
(I/B/E/S)
Data:
• All
traded
companies
in
US
markets
Constraints:
• Traded
in
US
dollars
• SIll
acIve
• 20
years
of
historical
data
• Fiscal
year
end
month
=
December
Size
(~7400)
Issues:
By
selecIng
only
firms
with
December
fiscal
year-‐end
we
consciously
ignore
certain
sectors
where
tradiIonally
the
fiscal
year
differ.
A
representaIve
check
has
been
done
to
ensure
that
this
is
just
a
minority.
5. Representativiness of the database
Database
Whole
Sample
Sample
of
companies
reporIng
in
December
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
5
• Fairly
good
representaIon
0
500
1000
1500
2000
2500
3000
3500
6. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
6
Database construction: Raw data
Introduction
Raw
data
imported:
• Earning
Per
Share
[Annual]
Reported
Earning
per
share
at
the
end
of
the
fiscal
year
• Prices
[Monthly]
• Number
of
Shares
[Monthly]
• Book
Value
[Annual]
• EPS
Forecast
Mean
[Monthly]
Each
months
the
consensus
over
the
EPS
of
the
fiscal
year
change,
since
analyst
update
their
views
• EPS
Forecast
Standard
deviaIon
[Monthly]
Time
series
standard
deviaIon
of
the
EPS
Forecast
Mean
• EPS
Forecast
Number
of
EsImaIons
[Monthly]
Number
of
analysts
per
esImate
mean
7. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
7
Database construction: variables
Model
Forecast
Proper#es:
Transparency
measures
• Dispersion
Measured
every
fiscal
year
for
each
sample
using
annual
earnings
forecasts,
used
as
proxy
of
the
opacity/transparency
of
the
firm.
Measured
at
December
31,
t-‐1.
• Forecast
error
Measured
as
the
absolute
normalized
difference
between
the
mean
of
the
forecasts
and
the
actual
EPS.
Used
as
a
proxy
of
the
opacity/transparency
of
the
firm.
Measured
at
December
31,
t-‐1.
Firms
with
high
dispersion/error
are
called
opaque.
Firms
with
low
dispersion/error
are
called
transparent.
Analyst
forecasts
Op#mism
component
Investors
Investors
percepIons
permanent
transitory
Transparent
Opaque
StarIng
from
the
previous
data
several
variables
has
been
constructed:
Op#mism
dummies:
OpImism
is
measured
as
being
the
posiIve
difference
between
forecast
mean
and
the
actual
EPS
,
if
it
is
negaIve
it
is
called
pessimism.
3
dummies
has
been
created
based
on
the
magnitude
of
opImism,
computed
as
being
the
raIo
between
the
forecast
error
and
the
actual
EPS.
RaIo
FE/EPS
0
0,15
0,55
1,00
Dummy
1
Dummy
2
Dummy
3
8. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
8
Database construction: variables
Model
To
control
for
other
known
relaIonships:
• Book-‐to-‐Market
raIo
For
each
firm
in
the
database
we
computed
the
B2M
raIo
in
December
31,t-‐1.
We
couldn’t
measure
it
just
before
the
return
period
because
of
the
annual
nature
of
the
stockholders’
equity
book
value.
• Size
For
each
firm
in
the
database
we
computed
the
size
in
May
30,
t
:
Just
before
the
return
period.
The
previous
factors
are
added
to
control
the
relaIon
among
size
B2M
and
stock
returns
founded
by
Fama
and
French
in
1992.
• Prior
Loss
dummy
Some
recent
literature
indicate
that
prior
period
loss
affect
future
stock
returns
in
mulIple
ways
(increased
vola3lity
and
mean
return)
9. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
9
Timeline
Model
June
1
Y
=
t
December
Y
=
t-‐1
Measurement
of
Op/mism/Pessimism
Prior
losses
B2M
Transparency
Measures
Size
Return
period
December
Y
=
t
30
May
Y
=
t
+1
Under
efficient
markets,
we
suppose
that
for
June
1,
the
prior
year
earnings
informaIon
should
be
fully
incorporated
into
the
stock
price
“RevelaIon”
window
“OpImism
rise”
window
• Our
tesIng
includes
only
companies
with
December
Fiscal
year-‐end.
• Two
disInct
return
period
called
:
“OpImism
rise”
window
and
“RevelaIon”
window
That
is
in
the
first
window
we
should
observe
opImism
entering
in
the
stock
price
and
in
the
second
window
we
should
observe
it
reveal
itself
by
a
decreasing
in
the
return.
OpImism
Return
decrease
Pricet
Pricet+1
10. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
10
Database Management
Model
In
order
to
work
with
a
complete
database,
we
need
to
previously
perform
these
following
checkings:
1. ActualEPS&ForecastMean
are
valid
observaIons
at
the
same
Ime.
2. ForecastMean
implies
others
forecast
properIes.
3. Prices
have
to
be
valid
observaIons
6
months
before
and
aper
fiscal
year
end
to
capture
ingoing
and
outgoing
effects.
4. Previous
year
EPS
must
be
a
valid
observaIon
to
capture
previous
losses
effect.
Past
year
ForecastMean
and
STD
must
be
valid
observaIons
in
order
to
construct
a
transparency
measure.
5. Previous
year
Book
value
has
to
be
a
valid
observaIon.
We
assign
a
binary
to
each
of
the
previous
condiIons,
which
allows
us
to
take
the
firms
that
are
candidates
for
use
in
a
specific
context
(
specific
constraints
at
the
same
Ime)
.
Each
year
we
remove
the
companies
that
do
not
saIsfy
the
criterias
at
that
specific
Ime.
This
methodology
allowed
us
to
perform
dynamic
regressions
by
dynamicallay
changing
the
number
of
companies
as
we
progress
in
Ime,
increasing
the
number
of
firm
per
year
drasIcally.
11. Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
11
1st Approach: Portfolios
Model
• We
divided
in
two
different
porqolios,
the
opImist
companies
and
the
pessimist
companies,
and
we
observe
them
during
all
the
return
periods
of
the
past
20
years.
Then
we
take
the
difference:
Pessimist
returns
–
OpImisIc
returns.
• Firms
taken
in
consideraIons:
Binary1*Binary2
from
our
iniIal
database
[Valid
forecast
Mean,
EPS,
and
the
12
months
of
returns
used
in
the
return
period]
Here’s
our
dynamic
database
over
the
years,
the
total
firms-‐years
are
29’101.
t-1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
559
588
652
811
872
999
1160
1314
1354
1440
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
1437
1444
1517
1690
1854
2055
2236
2309
2304
2506
12. 1st Approach: Mean monthly return
Results
• PessimisIc
stocks
consistently
outperform
opImisIc
ones
• Between
June
to
December,
before
earnings
are
released
and
before
opImism
is
revealed,
the
return
is
greater.
• During
the
next
period,
where
the
opImism
is
gradually
revealed,
we
note
that
the
spread
between
both
is
reduced,
or
even
negaIve
in
May
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
12
Month&
Mean&difference&(%):&
Pessimistic&Less&Optimistic&
June&t& 1.51%%
July&t& 1.87%%
August&t& 1.05%%
September&t& 1.62%%
October&t& 2.03%%
November&t& 0.96%%
December&t& 1.02%%
January&t+1& 1.20%%
February&t+1& 1.74%%
March&t+1& 0.58%%
April&t+1& 0.16%%
May&t+1& .0.11%%
%
EPS
announcement
13. 1st Approach: Annual Buy-and-Hold Returns
Results
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
13
Annual
Buy-‐and-‐Hold
Returns,
July
Year
t
Through
June,
Year
t+1
Year
t
Pessimis#c
Op#mis#c
Difference
1992
0.28
0.101
0.179
1993
0.299
0.153
0.146
1994
0.146
0.021
0.125
1995
0.203
0.077
0.126
1996
0.473
0.248
0.225
1997
0.243
0.019
0.224
1998
0.385
0.243
0.142
1999
0.069
-‐0.089
0.158
2000
0.321
0.1
0.221
2001
0.323
0.029
0.294
2002
0.2
0.111
0.089
2003
0.177
0.015
0.161
2004
0.433
0.368
0.065
2005
0.17
0.068
0.102
2006
0.325
0.123
0.202
2007
0.227
0.111
0.116
2008
-‐0.043
-‐0.244
0.201
2009
-‐0.058
-‐0.264
0.206
2010
0.372
0.29
0.082
2011
0.313
0.229
0.084
Mean
0.243
0.085
0.157
• As
we
expected
the
difference
is
consistently
posiIve
in
every
year
• InteresIng
to
noIce
that
the
spread
seems
to
increase
during
turbulent
periods
(dot-‐com
bubble
and
financial
crisis)
14. 1st Approach: Optimise rise vs Revelation window
Results
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
14
• As
we
intuiIvely
saw
in
the
monthly
average,
there
is
a
difference
between
the
first
window
and
the
revelaIon
window.
• As
opImism
reveal
itself,
the
return
of
opImist
firms
is
slightly
reduced
-0.400
-0.200
0.000
0.200
0.400
0.600
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
June-December
Pessimistic Optimistic
-0.600
-0.400
-0.200
0.000
0.200
0.400
0.600
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
January-May
Pessimistic Optimistic
15. 2nd approach: Enhanced Fama&MacBeth model
Model
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
15
We
run
a
regression
using
the
previously
defined
variables
as
independent
variables
and
the
monthly
return
per
firm
as
dependent
variable.
We
did
it
for
each
company
candidate
for
a
regression
at
that
Ime,
for
each
month
of
each
return
period,
for
the
past
19
years.
!!
!"#$!!"
= ! + !. !!"#! + !. !2!! + !. !"#$%$&%!!"##$1! + !. !"#$%$&%!!"##$2! + !. !"#$%$&%!!"##$3!
+ !. !"#$%&#"'$()*'#%+"'! + !. !"#$"%$&&!!"##$! + !!!"!!!!"#!!!
!"#"$"%&!!"#$ =! !"#$%"&'!
!
!!!
!
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Dynamic database
• Tot
firms-‐year
=
21’989
16. 2nd approach: Enhanced Fama&MacBeth model
Model
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
16
T-‐1
T
Return
period:
12
regressions
12
*
K
coefficients
=
K
AVG
coefficients
1991
2011
19
years
19*K
AVG
Coefficients
=
K
Final
Coefficients
K=
number
of
dependent
variables
+
constant
Intui#on
of
the
methodology:
Aper
we
have
run
the
regressions
for
each
month
and
each
year,
we
averaged
the
coefficients
in
order
to
interpret
on
average
how
our
model
behaves.
17. 2nd approach: Enhanced Fama&MacBeth model
Results
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
17
Regression
1:
Op#mism
only
Constant
Dummy
Small
Error
Dummy
Medium
Error
Dummy
Large
Error
Coeff
1.8367
-‐0.9881
-‐0.8144
-‐1.2708
Tstat
2.7416
-‐0.9716
-‐0.9321
-‐1.2925
Pvalue
0.0763
0.3294
0.3328
0.2423
Regression
2
:
Using
Previous
Standard
Devi#ons
of
forecasts
as
transparency
measure
Constant
Dummy
Small
Error
Dummy
Medium
Error
Dummy
Large
Error
Book
to
Market
Size
Dummy
Prior
Loss
Previous
Forecast
STD
Coeff
1.6503
-‐0.9446
-‐0.8275
-‐1.3208
0.1619
0.0000
0.1949
0.0074
Tstat
2.2791
-‐0.9379
-‐0.8609
-‐0.9737
0.7602
-‐0.2741
-‐0.4647
0.1087
Pvalue
0.0880
0.3336
0.3718
0.2840
0.3493
0.3998
0.1650
0.4002
Regression
2
:
Using
Forecast
error
as
Transparency
measure
Constant
Dummy
Small
Error
Dummy
Medium
Error
Dummy
Large
Error
Book
to
Market
Size
Dummy
Prior
Loss
Previous
Forecast
Error
Coeff
1.2545
-‐0.6504
-‐0.8326
-‐0.9967
0.3433
0.0000
0.2732
0.0420
Tstat
1.5169
-‐0.6405
-‐0.6239
-‐0.6516
0.6621
-‐0.2822
0.0804
0.2287
Pvalue
0.1292
0.4199
0.3901
0.3423
0.3577
0.4220
0.2770
0.4294
18. Conclusions
Results
Behavioral
Finance
2012
–
Does
opImism
distort
stock
prices?
18
PorZolios
conclusion:
• Investor
opImism
is
reflected
in
stock
prices.
• The
disappointment
caused
by
the
missing
in
earnings
seem
to
reduce
the
stock
return
with
respect
to
firms
without
such
expectaIons
• We
can
idenIfy
pauern
of
opImisIc
firms
in
the
revelaIon
window
• Market
efficiency
seem
to
hold
since
opImisIc
return
is
fully
revealed
by
June
à
Investor
behavior
play
an
important
role
in
the
stock
market.
Regressions
conclusions:
• Lack
of
staIsIcal
significance,
model
issue
or
data
issue?
• Even
so,
the
signs
suggest
the
same
interpretaIon
given
in
the
porqolios
approach.
• The
raIonale
behind
this
negaIve
coefficients
could
be
that
investors
overesImate
growth
prospects
which
arIficially
increase
stock
prices.
As
the
opImisIc
expectaIons
are
not
fulfilled,
the
returns
of
these
stocks
are
low.
• The
relaIon
between
the
opImism
and
stock
return
seem
to
be
slightly
affected
by
the
change
of
measures
of
transparency:
the
opImism
component
seems
to
reduce
the
return
(negaIve
relaIon)