This document provides an overview of the efficient market hypothesis and various anomalies or deviations from expected results according to finance theory. It defines key terms like alpha, the capital markets hypothesis, and different forms of market efficiency. It also examines several anomalies that have been observed, such as the low P/E effect, small firm effect, market overreaction, and the January effect. The document suggests these anomalies conflict with theories like the capital asset pricing model and efficient market hypothesis.
Efficient Market Hypothesis (EMH) and Insider TradingPrashant Shrestha
The document discusses the Efficient Market Hypothesis (EMH) and different forms of market efficiency as it relates to insider trading. It provides an overview of the EMH, including its historical development and Fama's definitions of weak, semi-strong, and strong forms of market efficiency. Weak-form refers to efficiency based on past prices or returns. Semi-strong incorporates all public information. Strong-form suggests all private information is also reflected in prices. Evidence against full market efficiency is also presented.
The document discusses tests and results related to the efficient market hypothesis (EMH). It covers the weak-form, semi-strong form, and strong-form EMH. For the weak-form, tests show mixed results that generally support the hypothesis. For the semi-strong form, event studies and tests of anomalies like the size effect, P/E ratios, and book-to-market ratios show some market inefficiencies. The strong-form is difficult to test directly. Overall, while some market anomalies exist, most results still provide general support for the EMH.
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 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 efficiency means prices reflect all historical price information, semi-strong means they reflect all public information, and strong form means they reflect all public and private information. The document summarizes various studies and evidence related to testing each form of efficiency through analyses of market anomalies, event studies, and performance of professional investors.
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 the future, semi-strong tests if public information is reflected, and strong tests if insider information provides advantages. The document also summarizes various empirical studies that have tested different forms of market efficiency through approaches like event studies and analyzing returns.
The document discusses market efficiency and government policies. It defines market efficiency as prices reflecting all available information about the true value of investments. It also discusses Eugene Fama, the father of market efficiency, and the different forms of market efficiency. Government policies aim to achieve specific goals and can impact businesses and the economy through fiscal, monetary, regulatory and other microeconomic and macroeconomic policies.
Chapter 6 Financial markets and institutions.pdfasde13
This document provides an overview of the efficient market hypothesis. It discusses key concepts like expectations being reflected in asset prices and the rationale that all unexploited profit opportunities are eliminated in an efficient market. Evidence for and against the hypothesis is presented, such as investment analysts not consistently beating the market or anomalies like the small firm effect. The implications of the efficient market hypothesis for investors are explored, such as being skeptical of hot tips and pursuing a buy-and-hold strategy.
Efficient Market Hypothesis (EMH) and Insider TradingPrashant Shrestha
The document discusses the Efficient Market Hypothesis (EMH) and different forms of market efficiency as it relates to insider trading. It provides an overview of the EMH, including its historical development and Fama's definitions of weak, semi-strong, and strong forms of market efficiency. Weak-form refers to efficiency based on past prices or returns. Semi-strong incorporates all public information. Strong-form suggests all private information is also reflected in prices. Evidence against full market efficiency is also presented.
The document discusses tests and results related to the efficient market hypothesis (EMH). It covers the weak-form, semi-strong form, and strong-form EMH. For the weak-form, tests show mixed results that generally support the hypothesis. For the semi-strong form, event studies and tests of anomalies like the size effect, P/E ratios, and book-to-market ratios show some market inefficiencies. The strong-form is difficult to test directly. Overall, while some market anomalies exist, most results still provide general support for the EMH.
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 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 efficiency means prices reflect all historical price information, semi-strong means they reflect all public information, and strong form means they reflect all public and private information. The document summarizes various studies and evidence related to testing each form of efficiency through analyses of market anomalies, event studies, and performance of professional investors.
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 the future, semi-strong tests if public information is reflected, and strong tests if insider information provides advantages. The document also summarizes various empirical studies that have tested different forms of market efficiency through approaches like event studies and analyzing returns.
The document discusses market efficiency and government policies. It defines market efficiency as prices reflecting all available information about the true value of investments. It also discusses Eugene Fama, the father of market efficiency, and the different forms of market efficiency. Government policies aim to achieve specific goals and can impact businesses and the economy through fiscal, monetary, regulatory and other microeconomic and macroeconomic policies.
Chapter 6 Financial markets and institutions.pdfasde13
This document provides an overview of the efficient market hypothesis. It discusses key concepts like expectations being reflected in asset prices and the rationale that all unexploited profit opportunities are eliminated in an efficient market. Evidence for and against the hypothesis is presented, such as investment analysts not consistently beating the market or anomalies like the small firm effect. The implications of the efficient market hypothesis for investors are explored, such as being skeptical of hot tips and pursuing a buy-and-hold strategy.
The document discusses the efficient market hypothesis which states that financial markets are efficient and security prices reflect all available information. It provides evidence that markets are at least semi-strong form efficient in that publicly available information does not allow consistently beating the market. The hypothesis implies that no investments are better than others and security prices accurately reflect risk and return. While markets quickly react to new information, predicting short-term movements is very difficult. Overall, the evidence supports some level of market efficiency.
The document discusses the efficient market hypothesis and random walk theory of stock prices. Some key points:
- Random walk theory states that stock price movements cannot be predicted from past prices and follow a random pattern. This implies markets are efficient.
- The efficient market hypothesis suggests that stock prices instantly reflect all available public information, making it impossible for investors to earn above-average returns.
- Empirical evidence provides mixed support for these theories. Studies of event periods find prices adjust rapidly to new information, but other anomalies like the size effect have been found, contradicting full market efficiency.
The document discusses the random walk theory and efficient market hypothesis. It defines the random walk theory as the idea that stock prices follow unpredictable and random paths, making it impossible to consistently outperform the market. The efficient market hypothesis suggests that stock prices instantly change to reflect all available public information, such that no investors can use information to earn above-average returns once transaction costs are considered. The document outlines different forms of the efficient market hypothesis based on the type of information reflected in stock prices and provides mixed evidence from empirical tests of the hypotheses.
1) Market efficiency refers to how quickly market prices reflect all available information. There are three levels - weak, semi-strong, and strong - referring to how quickly prices adjust to historical, public, and private information respectively.
2) The efficient market hypothesis (EMH) states that prices instantly reflect all available information, making it impossible to consistently outperform the market. Markets are rarely considered strongly efficient due to private information.
3) Market efficiency is tested by examining returns before and after events releasing public information, and whether strategies based on historical patterns generate abnormal returns. Most evidence supports weak to semi-strong forms of efficiency in developed markets.
The document discusses different approaches to investing, including passive vs active investing, fundamental vs technical analysis, and top-down vs bottom-up strategies. It provides beliefs, methods, advantages and disadvantages for each approach. The key points are that a top-down, technically-focused approach analyzing broad market and sector trends first may provide an edge over focusing solely on individual companies. The "Tortoise strategy" described uses ETFs in a weekly top-down analysis of global markets to identify relatively strong performing regions.
Technical analysis, market efficiency, and behavioral financeBabasab Patil
Technical analysis uses patterns in stock prices and trading volume to predict future market movements and identify trading opportunities. The efficient market hypothesis states that stock prices instantly reflect all available information, making technical analysis ineffective. However, behavioral finance suggests psychological factors influence investor decisions and market anomalies exist, challenging the notion of complete market efficiency.
This document summarizes a chapter on corporate financing and market efficiency. It discusses five main topics:
1) Whether financing decisions can create value by examining an example of a provincial loan guarantee.
2) How capital markets are described as efficient when stock prices quickly reflect all available information.
3) The different types of market efficiency: weak form reflects past prices/volume, semi-strong reflects public info, strong reflects all info.
4) Evidence for different forms of efficiency from studies on mutual funds, reaction to announcements, and insider trading regulations.
5) Implications of an efficient market that firm financing cannot affect stock prices through accounting and that issues cannot be timed.
Efficient market Hypothesis that explains the Capital asset pricing modelDr Yogita Wagh
The efficient market hypothesis (EMH) states that stock prices already reflect all known information and that it is impossible for investors to outperform the market over time. There are three forms of the EMH - weak, semi-strong, and strong - with each incorporating more types of information. Most evidence supports the weak and semi-strong forms, indicating that technical and fundamental analysis do not reliably beat the market. If markets are efficient, the optimal investment strategy is a passive, diversified approach rather than trying to pick individual stocks.
- Market forces of supply and demand determine an equilibrium price where the two curves intersect. At this price, the market is in a balanced state.
- Changes in non-price factors can shift the supply or demand curves, disrupting the equilibrium. However, market forces will bring supply and demand back into balance at a new equilibrium price.
- The interaction of supply, demand, and price is a fundamental concept for investors and traders to understand, as it underlies identifying profitable trades and investments. Price movements reflect changes in supply and demand.
The document discusses the efficient market hypothesis and different levels of market efficiency. It describes the weak, semi-strong, and strong forms of market efficiency and provides evidence supporting each form. Specifically, it states that there is considerable empirical research supporting the semi-strong form, which posits that stock prices quickly reflect all publicly available information. The document also discusses implications of market efficiency and some anomalies that appear contrary to the efficient market hypothesis.
Business Finance Chapter 11 Risk and returnTinku Kumar
This chapter discusses predicting stock market returns and measuring risk. It introduces expected returns and standard deviation as measures of average return and risk. It then discusses how new, unexpected information can impact stock prices and returns. It also introduces beta as a measure of a stock's systematic, market risk. The chapter concludes by discussing the security market line and capital asset pricing model, which relate expected return and risk by establishing the market risk premium.
The document discusses the efficient market hypothesis (EMH), which states that stock prices already reflect all available public information, making it impossible for investors to outperform the market through strategies based on historical prices, economic news, or other public data. There are three forms of the EMH - weak, semi-strong, and strong - differing in the type of information believed to be reflected in prices. While several studies have found evidence supporting the EMH, others have found anomalies like value and small firm effects that appear to allow above-market returns. The validity of the EMH remains controversial.
Summary:
- Momentum is a measurement of how much a stock has moved in a given period of time
- Stocks that are oversold tend to rally. Stocks that are overbought tend to sell-off
- There are many ways to measure momentum
- There is no proof that complex momentum indicators give better signals than simple ones
- Momentum oscillators and indicators can be optimized for a particular stock or market. Try to use settings other than the defaults. Profits will follow
- Combining indicators with different timeframes can give low-risk signals for profitable trades
This document discusses fundamental analysis and technical analysis approaches to investment. It covers the following key points:
Fundamental analysis involves studying a stock's intrinsic value based on its financials and business fundamentals. Technical analysis focuses on analyzing stock price movements and trends over time through indicators and charts. The efficient market hypothesis suggests that stock prices already reflect all public information, making it difficult to outperform the market. The document outlines the different forms of the efficient market hypothesis from weak to semi-strong to strong form.
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.
Andrew Palashewsky developed the Advance IQ Capital model beginning in 2011 to create an algorithmic trading strategy based on his decades of experience. The model uses proprietary momentum measurements to determine buy and sell signals across different market conditions. Backtesting of the model on futures, currencies, and ETFs from 2008-2014 shows annual returns ranging from 9.4% to 30% compared to benchmarks. However, past performance is not indicative of future results.
Andrew Palashewsky developed the Advance IQ Capital Model beginning in 2011 to systematically trade futures, currencies, and ETFs using proprietary momentum indicators. Backtesting shows the model achieved strong risk-adjusted returns across various assets during bull and bear markets from 2008-2014, outperforming benchmarks. The model adapts rules based on defined market phases and suppresses signals in choppy conditions to limit losses.
Why do Active Funds that Trade Infrequently Make a Market more Efficient? -- ...Takanobu Mizuta
Why do Active Funds that Trade Infrequently Make a Market more Efficient? -- Investigation using Agent-Based Model
Takanobu Mizuta (SPARX Asset Management Co., Ltd.)
Sadayuki Horie (Nomura Research Institute, Ltd.)
2017 IEEE Symposium on Computational Intelligence for Financial Engineering & Economics (IEEE CIFEr'17)
The document discusses the efficient market hypothesis (EMH) which argues that stock prices reflect all available information. It defines three forms of market efficiency - weak, semi-strong, and strong - based on the types of information reflected in stock prices. The weak form states that prices reflect all historical price data, while the semi-strong form argues that prices immediately incorporate publicly available information. Empirical tests provide mixed support for the different forms of the EMH. The document also discusses potential market inefficiencies and anomalies that appear to contradict the EMH, such as the size effect and January effect.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
Delve into the world of STREETONOMICS, where a team of 7 enthusiasts embarks on a journey to understand unorganized markets. By engaging with a coffee street vendor and crafting questionnaires, this project uncovers valuable insights into consumer behavior and market dynamics in informal settings."
The document discusses the efficient market hypothesis which states that financial markets are efficient and security prices reflect all available information. It provides evidence that markets are at least semi-strong form efficient in that publicly available information does not allow consistently beating the market. The hypothesis implies that no investments are better than others and security prices accurately reflect risk and return. While markets quickly react to new information, predicting short-term movements is very difficult. Overall, the evidence supports some level of market efficiency.
The document discusses the efficient market hypothesis and random walk theory of stock prices. Some key points:
- Random walk theory states that stock price movements cannot be predicted from past prices and follow a random pattern. This implies markets are efficient.
- The efficient market hypothesis suggests that stock prices instantly reflect all available public information, making it impossible for investors to earn above-average returns.
- Empirical evidence provides mixed support for these theories. Studies of event periods find prices adjust rapidly to new information, but other anomalies like the size effect have been found, contradicting full market efficiency.
The document discusses the random walk theory and efficient market hypothesis. It defines the random walk theory as the idea that stock prices follow unpredictable and random paths, making it impossible to consistently outperform the market. The efficient market hypothesis suggests that stock prices instantly change to reflect all available public information, such that no investors can use information to earn above-average returns once transaction costs are considered. The document outlines different forms of the efficient market hypothesis based on the type of information reflected in stock prices and provides mixed evidence from empirical tests of the hypotheses.
1) Market efficiency refers to how quickly market prices reflect all available information. There are three levels - weak, semi-strong, and strong - referring to how quickly prices adjust to historical, public, and private information respectively.
2) The efficient market hypothesis (EMH) states that prices instantly reflect all available information, making it impossible to consistently outperform the market. Markets are rarely considered strongly efficient due to private information.
3) Market efficiency is tested by examining returns before and after events releasing public information, and whether strategies based on historical patterns generate abnormal returns. Most evidence supports weak to semi-strong forms of efficiency in developed markets.
The document discusses different approaches to investing, including passive vs active investing, fundamental vs technical analysis, and top-down vs bottom-up strategies. It provides beliefs, methods, advantages and disadvantages for each approach. The key points are that a top-down, technically-focused approach analyzing broad market and sector trends first may provide an edge over focusing solely on individual companies. The "Tortoise strategy" described uses ETFs in a weekly top-down analysis of global markets to identify relatively strong performing regions.
Technical analysis, market efficiency, and behavioral financeBabasab Patil
Technical analysis uses patterns in stock prices and trading volume to predict future market movements and identify trading opportunities. The efficient market hypothesis states that stock prices instantly reflect all available information, making technical analysis ineffective. However, behavioral finance suggests psychological factors influence investor decisions and market anomalies exist, challenging the notion of complete market efficiency.
This document summarizes a chapter on corporate financing and market efficiency. It discusses five main topics:
1) Whether financing decisions can create value by examining an example of a provincial loan guarantee.
2) How capital markets are described as efficient when stock prices quickly reflect all available information.
3) The different types of market efficiency: weak form reflects past prices/volume, semi-strong reflects public info, strong reflects all info.
4) Evidence for different forms of efficiency from studies on mutual funds, reaction to announcements, and insider trading regulations.
5) Implications of an efficient market that firm financing cannot affect stock prices through accounting and that issues cannot be timed.
Efficient market Hypothesis that explains the Capital asset pricing modelDr Yogita Wagh
The efficient market hypothesis (EMH) states that stock prices already reflect all known information and that it is impossible for investors to outperform the market over time. There are three forms of the EMH - weak, semi-strong, and strong - with each incorporating more types of information. Most evidence supports the weak and semi-strong forms, indicating that technical and fundamental analysis do not reliably beat the market. If markets are efficient, the optimal investment strategy is a passive, diversified approach rather than trying to pick individual stocks.
- Market forces of supply and demand determine an equilibrium price where the two curves intersect. At this price, the market is in a balanced state.
- Changes in non-price factors can shift the supply or demand curves, disrupting the equilibrium. However, market forces will bring supply and demand back into balance at a new equilibrium price.
- The interaction of supply, demand, and price is a fundamental concept for investors and traders to understand, as it underlies identifying profitable trades and investments. Price movements reflect changes in supply and demand.
The document discusses the efficient market hypothesis and different levels of market efficiency. It describes the weak, semi-strong, and strong forms of market efficiency and provides evidence supporting each form. Specifically, it states that there is considerable empirical research supporting the semi-strong form, which posits that stock prices quickly reflect all publicly available information. The document also discusses implications of market efficiency and some anomalies that appear contrary to the efficient market hypothesis.
Business Finance Chapter 11 Risk and returnTinku Kumar
This chapter discusses predicting stock market returns and measuring risk. It introduces expected returns and standard deviation as measures of average return and risk. It then discusses how new, unexpected information can impact stock prices and returns. It also introduces beta as a measure of a stock's systematic, market risk. The chapter concludes by discussing the security market line and capital asset pricing model, which relate expected return and risk by establishing the market risk premium.
The document discusses the efficient market hypothesis (EMH), which states that stock prices already reflect all available public information, making it impossible for investors to outperform the market through strategies based on historical prices, economic news, or other public data. There are three forms of the EMH - weak, semi-strong, and strong - differing in the type of information believed to be reflected in prices. While several studies have found evidence supporting the EMH, others have found anomalies like value and small firm effects that appear to allow above-market returns. The validity of the EMH remains controversial.
Summary:
- Momentum is a measurement of how much a stock has moved in a given period of time
- Stocks that are oversold tend to rally. Stocks that are overbought tend to sell-off
- There are many ways to measure momentum
- There is no proof that complex momentum indicators give better signals than simple ones
- Momentum oscillators and indicators can be optimized for a particular stock or market. Try to use settings other than the defaults. Profits will follow
- Combining indicators with different timeframes can give low-risk signals for profitable trades
This document discusses fundamental analysis and technical analysis approaches to investment. It covers the following key points:
Fundamental analysis involves studying a stock's intrinsic value based on its financials and business fundamentals. Technical analysis focuses on analyzing stock price movements and trends over time through indicators and charts. The efficient market hypothesis suggests that stock prices already reflect all public information, making it difficult to outperform the market. The document outlines the different forms of the efficient market hypothesis from weak to semi-strong to strong form.
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.
Andrew Palashewsky developed the Advance IQ Capital model beginning in 2011 to create an algorithmic trading strategy based on his decades of experience. The model uses proprietary momentum measurements to determine buy and sell signals across different market conditions. Backtesting of the model on futures, currencies, and ETFs from 2008-2014 shows annual returns ranging from 9.4% to 30% compared to benchmarks. However, past performance is not indicative of future results.
Andrew Palashewsky developed the Advance IQ Capital Model beginning in 2011 to systematically trade futures, currencies, and ETFs using proprietary momentum indicators. Backtesting shows the model achieved strong risk-adjusted returns across various assets during bull and bear markets from 2008-2014, outperforming benchmarks. The model adapts rules based on defined market phases and suppresses signals in choppy conditions to limit losses.
Why do Active Funds that Trade Infrequently Make a Market more Efficient? -- ...Takanobu Mizuta
Why do Active Funds that Trade Infrequently Make a Market more Efficient? -- Investigation using Agent-Based Model
Takanobu Mizuta (SPARX Asset Management Co., Ltd.)
Sadayuki Horie (Nomura Research Institute, Ltd.)
2017 IEEE Symposium on Computational Intelligence for Financial Engineering & Economics (IEEE CIFEr'17)
The document discusses the efficient market hypothesis (EMH) which argues that stock prices reflect all available information. It defines three forms of market efficiency - weak, semi-strong, and strong - based on the types of information reflected in stock prices. The weak form states that prices reflect all historical price data, while the semi-strong form argues that prices immediately incorporate publicly available information. Empirical tests provide mixed support for the different forms of the EMH. The document also discusses potential market inefficiencies and anomalies that appear to contradict the EMH, such as the size effect and January effect.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
Delve into the world of STREETONOMICS, where a team of 7 enthusiasts embarks on a journey to understand unorganized markets. By engaging with a coffee street vendor and crafting questionnaires, this project uncovers valuable insights into consumer behavior and market dynamics in informal settings."
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
Discover the Future of Dogecoin with Our Comprehensive Guidance36 Crypto
Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
The Universal Account Number (UAN) by EPFO centralizes multiple PF accounts, simplifying management for Indian employees. It streamlines PF transfers, withdrawals, and KYC updates, providing transparency and reducing employer dependency. Despite challenges like digital literacy and internet access, UAN is vital for financial empowerment and efficient provident fund management in today's digital age.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
Suzanne Spiteri’s recent report on improving the quality and accessibility of job postings to reduce employment barriers for neurodivergent people.
Decoding job postings: Improving accessibility for neurodivergent job seekers
Improving the quality and accessibility of job postings is one way to reduce employment barriers for neurodivergent people.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
2. 2
No matter how many winners you’ve got, if you
either leverage too much or do anything that
gives you the chance of having a zero in
there, it’ll all turn into pumpkins and mice.
Warren Buffett
3. 3
Outline
Introduction
Alpha and Portfolio Management
Role of the Capital Markets
Efficient Market Hypothesis
Anomalies
4. 4
What is “alpha”?
Alpha = the amount by which the market is beaten, after
adjusting for risk
What is alpha for the market as a whole?
Alpha for market as a whole is zero
– So, on average, portfolios are ON the SML
Provides conceptual value of CAPM
– Regardless of whether market is efficient, it is still a zero-sum
game
Burden of active manager
– In order to win (i.e., beat the market), someone else has to lose
Key question = what is special about you (and about
your knowledge) that will allow you to be the one that
wins?
5. 5
Generating alpha
Are there ways to consistently generate
alpha?
See portfolio manager performance
example:
6. 6
Portfolio Manager’s Performance:
Past Three Years
Previous Three Years: S&P 500
Fund
Manager
Compound Annual Return -4.98% -22.01%
Total Return -14.20% -52.56%
9. 9
Portfolio Manager’s Performance:
Past Six Years
Previous Six Years: S&P 500
Fund
Manager
No. of Down Years 2 of 6 4 of 6
Compound Annual Return 3.29% -1.66%
Total Return 21.47% -9.58%
10. 10
Generating alpha
Would you have invested with this manager?
Who is this manager with this horrible record?
Warren Buffett, of course!!!
Portfolio = investment in Berkshire-Hathaway, over
the period of 1970 – 1975
Note: while stock price lagged market
substantially, book value per share grew faster
than market each year except 1975; this is a
metric with which Buffett is more concerned
11. 11
Generating alpha
As we have seen previously in discussing the EMH, value
stocks tend to outperform growth stocks
Concomitantly, Warren Buffett has the best investment
record in history, becoming the 2nd richest man in the world
in the process
However, as we have just now seen, although value wins
on average, over the long run, it does not win perfectly
consistently!
Instead, the markets tend to cycle, with different styles of
investment performing well at different times
12. 12
Book to Market as a Predictor of Return:
Value (positive a) tends to outperform Growth (negative a)
Value
0%
5%
10%
15%
20%
25%
Annualized
Rate
of
Return
10
9
8
7
6
5
4
3
2
1
High Book/Market Low Book/Market
13. 13
Rolling Annualized Average 5-year Difference
Between the Returns to Value and Growth Composites:
The Market cycles between Value and Growth,
But Value Wins on Average
-20%
-10%
0%
10%
20%
30%
40%
50%
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Year
Relative
Difference
14. 14
Empirical Regularities:
Sources of alpha
Three categories that tend to outperform over the long run:
– Value stocks vs. Growth stocks
– Size: Small caps tend to outperform large caps
– Momentum: stocks with momentum (earnings or price) tend to beat
stocks without momentum
However, the payoffs to all of these tend to cycle!
– A typical portfolio manager, being judged on a quarter-by-quarter
basis, would have been fired long before if he had the same record
as Buffett for 1970 – 1975!
– (In fact, he fired himself during this period!)
None of these beats the market perfectly consistently
– A typical portfolio manager would need to try to cycle along with the
market, in order to keep from ever lagging too far behind it
15. 15
Empirical Regularities:
Sources of alpha
Beating the market consistently would require some sort of
rotation strategy in order to profit from the type of securities
that are performing well in the given type of market
But - combination of “fat tails” and “volatility clustering”
(discussed previously) can cause problems!
– Best performance for a given style is likely to follow closely on the
heels of its worst performance, and much of the movement for the
style is likely to come in a relatively short burst (thus, if you miss it,
it’s gone)
– E.g.: 40% of the stock market gains for the entire decade of the
1980’s occurred during a mere 10 trading days !
– So efforts to cycle with the market and keep from falling too far
behind it also make it much more difficult to beat the market!
16. 16
Capital Market Theory
Capital market theory springs from the
notion that:
– People like return
– People do not like risk
– Dispersion around expected return is a
reasonable measure of risk
17. 17
Role of the Capital Markets
Definition
Economic Function
Continuous Pricing Function
Fair Price Function
18. 18
Definition
Capital markets trade securities with lives of
more than one year
Examples of capital markets
– New York Stock Exchange (NYSE)
– American Stock Exchange (AMEX)
– Chicago Board of Trade
– Chicago Board Options Exchange (CBOE)
19. 19
Economic Function
The economic function of capital markets
facilitates the transfer of money from savers
to borrowers
– e.g., mortgages, Treasury bonds, corporate
stocks and bonds
20. 20
Continuous Pricing Function
The continuous pricing function of capital
markets means prices are available moment
by moment
– Continuous prices are an advantage to
investors
– Investors are less confident in their ability to get
a quick quotation for securities that do not trade
often
21. 21
Fair Price Function
The fair price function of capital markets
means that an investor can trust the
financial system
– The function removes the fear of buying or
selling at an unreasonable price
– The more participants and the more formal the
marketplace, the greater the likelihood that the
buyer is getting a fair price
22. 22
Efficient Market Hypothesis
Definition
Types of Efficiency
Forms of Efficiency
– Weak Form
– Semi-Strong Form
– Strong Form
Semi-Efficient Market Hypothesis
Security Prices and Random Walks
23. 23
Definition
The efficient market hypothesis (EMH) is the
theory supporting the notion that market prices are
in fact fair
– Under the EMH, security prices fully and fairly (i.e.,
without bias) reflect all available information about the
security
– Since the 1960’s, the EMH has been perhaps the most
important paradigm in finance
– Whether markets are efficient has been extensively
researched and remains controversial
24. 24
Types of Efficiency
Operational efficiency measures how well
things function in terms of speed of
execution and accuracy
– It is a function of the number of orders that are
lost or filled incorrectly
– It is a function of the elapsed time between the
receipt of an order and its execution
25. 25
Types of Efficiency (cont’d)
Informational efficiency is a measure of
how quickly and accurately the market
reacts to new information
– This is the type of efficiency with which the EMH
is concerned
– The market is informationally very efficient
Security prices adjust rapidly and fairly accurately to
new information
However, as we’ve already seen, the market is still
not completely efficient
26. 26
Forms of Market Efficiency
Eugene Fama’s original formulation of the Efficient
Market Hypothesis established three forms of market
efficiency, based on the level of information reflected in
security prices:
1. Weak form = prices reflect all past market level (price
and volume) information
2. Semi-strong form = prices also reflect all publicly
available fundamental company and economic
information
3. Strong form = prices also reflect all privately held
information that would affect the value of the company
and its securities
28. 28
Definition
The weak form of the EMH states that it is
impossible to predict future stock prices by
analyzing prices from the past
– The current price is a fair one that considers
any information contained in the past price data
– Charting techniques are of no use in predicting
stock prices
31. 31
Charting
People who study charts are technical
analysts or chartists
– Chartists look for patterns in a sequence of
stock prices
– Many chartists have a behavioral element
32. 32
Runs Test
A runs test is a nonparametric statistical
technique to test the likelihood that a series of
price movements occurred by chance
– A run is an uninterrupted sequence of the same
observation
– A runs test calculates the number of ways an observed
number of runs could occur given the relative number of
different observations and the probability of this number
– These tests have provided evidence in favor of weak
form efficiency
33. 33
Conducting A Runs Test
1 2
1 2
1 2 1 2 1 2
2
1 2 1 2
1 2
where number of runs
2
1
2 (2 )
( 1)
, number of observations in each category
standard normal variable
R x
Z
R
n n
x
n n
n n n n n n
n n n n
n n
Z
34. 34
Semi-Strong Form
The semi-strong form of the EMH states that
security prices fully reflect all publicly
available information
– e.g., past stock prices, economic reports,
brokerage firm recommendations, investment
advisory letters, etc.
35. 35
Semi-Strong Form (cont’d)
Academic research supports the semi-
strong form of the EMH by investigating
various corporate announcements, such as:
– Stock splits
– Cash dividends
– Stock dividends
– Examined through “event studies”
This means investors are seldom going to
beat the market by analyzing public news
36. 36
Market seems to do a relatively good job at adjusting a
stock’s valuation for certain types of new information
• Determining how much the new info. will change the stock’s value
and then adjusting the price by an equivalent amount
This is what event studies examine
• But it does seem to have problems developing an overall
valuation for a stock in the first place
• E.g., What is the correct value for IBM as a whole is a very difficult
question to answer, but how much IBM’s value should change if it is
awarded a specific new contract is much easier to determine
Semi-Strong Form (cont’d)
37. 37
Semi-Strong Form (cont’d)
Burton Malkiel points out that two-thirds of
professionally managed portfolios are consistently
beaten by a low-cost index fund
– Suggests that securities are accurately priced and that
in the long run returns will be consistent with the level of
systematic risk taken
Supports semi-strong form of the EMH
– Also would suggest that portfolio managers do not
possess any private information that is not already
reflected in security prices
Supports the strong form of the EMH
38. 38
Strong Form
The strong form of the EMH states that
security prices fully reflect all relevant public
and private information
This would mean even corporate insiders
cannot make abnormal profits by using
inside information about their company
– Inside information is information not available
to the general public
39. 39
Semi-Efficient
Market Hypothesis
The semi-efficient market hypothesis (SEMH)
states that the market prices some stocks more
efficiently than others
– Less well-known companies are less efficiently priced
– The market may be tiered
– A security pecking order may exist
– Lynch prefers stocks that “the analysts don’t follow …
and the institutions don’t own …”
– See the Small Firm and Neglected Firm Effects
discussed later
40. 40
Security Prices and
Random Walks
The unexpected portion of news follows a
random walk
– News arrives randomly and security prices
adjust to the arrival of the news
We cannot forecast specifics of the news very
accurately
41. 41
Anomalies
Definition
Low PE Effect
Low-Priced Stocks
Small Firm and Neglected Firm Effect
Market Overreaction
Value Line Enigma
January Effect
42. 42
Anomalies (cont’d)
Day-of-the-Week Effect
Turn-of-the Calendar Effect
Persistence of Technical Analysis
Behavioral Finance
Joint Hypothesis Problem
Chaos Theory
43. 43
Definition
A financial anomaly refers to unexplained
results that deviate from those expected
under finance theory
– Especially those related to the efficient market
hypothesis
44. 44
Low PE Effect
Stocks with low PE ratios provide higher returns
than stocks with higher PEs
– And similarly for high P/B (hence lower Book/Market)
stocks
Supported by several academic studies
Conflicts directly with the CAPM, since study
returns were risk-adjusted (Basu)
Related to both semi-strong form and weak form
efficiency
45. 45
Low-Priced Stocks
Stocks with a “low” stock price earn higher
returns than stocks with a “high” stock price
There is an optimum trading range
46. 46
Small Firm and Neglected Firm
Effects
Small Firm Effect
Neglected Firm Effect
47. 47
Small Firm Effect
Investing in firms with low market
capitalization will provide superior risk-
adjusted returns
Supported by academic studies
Implies that portfolio managers should give
small firms particular attention
48. 48
Neglected Firm Effect
Security analysts do not pay as much
attention to firms that are unlikely portfolio
candidates
Implies that neglected firms may offer
superior risk-adjusted returns
49. 49
Market Overreaction
The tendency for the market to overreact to
extreme news
– Investors may be able to predict systematic
price reversals
Results because people often rely too
heavily on recent data at the expense of the
more extensive set of prior data
50. 50
The Value Line Enigma
Value Line (VL) publishes financial information on
about 1,700 stocks
The report includes a timing rank from 1 down to 5
Firms ranked 1 substantially outperform the
market
Firms ranked 5 substantially underperform the
market
Victor Niederhoffer refers to Value Line’s ratings as
“the periodic table of investing”
51. 51
The Value Line Enigma
Changes in rankings result in a fast price
adjustment
Some contend that the Value Line effect is merely
the unexpected earnings anomaly due to changes
in rankings from unexpected earnings
Nonetheless, Value Line’s successful record is
evidence in support of the existence of superior
analysts who apparently possess private
information
52. 52
January Effect
Stock returns are inexplicably high in
January
Small firms do better than large firms early
in the year
Especially pronounced for the first five
trading days in January
53. 53
January Effect (cont’d)
Possible explanations:
– Tax-loss trading late in December (Branch)
– The risk of small stocks is higher early in the
year (Rogalski and Tinic)
54. 54
January Returns by Type of Firm
7.71%
10.72%
11.32%
Neglected
Non-S&P 500
Companies
5.03%
6.87%
7.62%
Neglected
1.69%
4.19%
4.95%
Moderately
Researched
-1.44%
1.63%
2.48%
Highly
Researched
S&P 500
Companies
Average January
return after
adjusting for
systematic risk
Average January
return minus average
monthly return in rest
of year
Average
January
return
Source: Avner Arbel, “Generic Stocks: The Key to Market Anomalies,” Journal of Portfolio Management, Summer 1985, 4–13.
55. 55
Day-of-the-Week Effect
Mondays are historically bad days for the
stock market
Wednesday and Fridays are consistently
good
Tuesdays and Thursdays are a mixed bag
56. 56
Day-of-the-Week
Effect (cont’d)
Should not occur in an efficient market
– Once a profitable trading opportunity is
identified, it should disappear
The day-of-the-week effect continues to
persist
However – there are confounding effects
between the levels and the volatilities of
returns across different days
57. 57
Turn-of-the-Calendar Effect
The bulk of the return comes from the last
trading day of the month and the first few
days of the following month
For the rest of the month, the ups and
downs approximately cancel out
58. 58
Persistence of
Technical Analysis
Technical analysis refers to any technique in
which past security prices or other publicly
available information are employed to
predict future prices
Studies show the markets are efficient in the
weak form
Literature based on technical techniques
continues to appear but should be useless
59. 59
Behavioral Finance
Concerned with the analysis of various
psychological traits of individuals and how these
traits affect the manner in which they act as
investors, analysts, and portfolio managers
Growth companies will usually not be growth
stocks due to the overconfidence of analysts
regarding future growth rates and valuations
Notion of “herd mentality” of analysts in stock
recommendations or quarterly earnings estimates
is confirmed
60. 60
Chaos Theory
Chaos theory refers to instances in which
apparently random behavior is systematic or even
deterministic
– under Mauboussin’s theory of the market as a complex
adaptive system, then we would expect to see chaotic
dynamics
Econophysics refers to the application of physics
principles in the analysis of stock market behavior
– e.g., an investment strategy based on studies of
turbulence in wind tunnels
– Includes use of multifractal models
61. 61
Are Markets Rational?
This question always faces a joint hypothesis
problem:
– Tests of EMH are always dual tests of both market
efficiency and the specific asset-pricing model assumed
– Market efficiency
Is the stock’s price equal to its true value?
– Asset pricing model used (CAPM, APT, etc.)
What is the stock’s true value?
Never known for sure
“The question of value presupposes an answer to the question,
of value to whom, and for what?” – Ayn Rand
E.g., the value of Apple stock would be different to Steve Jobs
than to any other investor
62. 62
Are Markets Rational?
Related issue – what is information?
– “Information is that which causes changes” – Claude
Shannon (father of information theory)
– So, if something causes the markets to move, then by
definition, it must be information, and vice versa
– From this perspective, the market is neither efficient nor
inefficient, it just is
So, are the markets efficient or rational?
– Ultimately, difficult to answer categorically
– Key question is not whether or not the markets are efficient
– this is a side issue – but how investors should act, given
how the markets work