...Chapter 12 - Macroeconomic and Industry Analysis CHAPTER TWELVE MACROECONOMIC AND INDUSTRY ANALYSIS CHAPTER OVERVIEW This is the one of three chapters that covers fundamental security valuation. This chapter introduces a topdown approach to fundamental security analysis. It covers the first two components: macroeconomic and industry analysis. The textbook begins with a global analysis, particularly with respect to how the performance of domestic firms is influenced by international economic performance. The chapter’s main focus however is on aspects of the U. S. economy that affect security returns, including fiscal and monetary policy. In addition, a brief presentation of the determinants of interest rates is covered. The chapter concludes with a discussion of industry analysis that includes classifications of industries, information sources, the industrial life cycle and a Porter framework that can be used to analyze industry competition. LEARNING OBJECTIVES Upon reading this chapter, you should have a basic understanding of some of the macroeconomic factors that affect security prices. That is, how fiscal and monetary policy affect interest rates and security prices. And some industry groups are more affected by macroeconomic factors than others and the characteristics of an industry that affect its competitiveness. CHAPTER OUTLINE The top-down approach to fundamental analysis begins with analyzing the economy. Expected economic performance will influence...
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...WHAT IS FOREIGN DIRECT INVESTMENT (FDI) Foreign Direct Investment (FDI) is the process whereby residents of one country (the source/home country) acquire ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country) The International Monetary Fund (IMF) defines foreign direct investment (FDI) as a category of international investment where a resident in one economy (the direct investor) obtains a lasting interest in an enterprise resident in another economy (the direct investment enterprise). (IMF, 1993) * Two parts of this definition are important to note: 1. The “lasting interest” implies the existence of a long-term relationship between the direct investor and the direct investment enterprise, 2. The “direct investment” implies the acquisition of at least 10 percent of the ordinary shares or voting power of an enterprise abroad. * Foreign Direct Investor - an individual, an incorporated or unincorporated public or private enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which has a direct investment enterprise – that is, a subsidiary, associate or branch – operating in a country other than the country or countries of residence of the foreign direct investor(s). Common Misconceptions of FDI. * FDI does not necessarily imply control of the enterprise since only a 10 percent ownership...
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...market since March 2010 (Cain 2010). In volatile markets, it is common to feel uneasy about investing due to the risk involved. But, market volatility is completely normal and the current market conditions may actually be advantageous for some investors. For example, volatility is needed to some degree because if prices do not move sufficiently, it will be difficult to make money from trading them. Thus, the recent fluctuations in the share market have highlighted the fact that there are risks involved with investing money and that finding the right investment strategy is a crucial step in investing. Investors today have more investment options than were available to the average investor just a few decades ago. While having multiple options is usually a good thing, too many options can cause confusion and system overload and lead many people to avoid making decisions about their investment strategies. Most strategies used to invest in the share market fall into three general categories including technical analysis, fundamental analysis, or a buy-and-hold strategy. The fundamental analysis approach is primarily concerned with value; it examines factors that determine a company's expected future earnings and dividends as well as the continued dependability of those earnings and dividends (McDonald 2007, 100). The investor who uses technical analysis attempts to predict the future price of a stock or the future direction of the market based on past price and trading volume changes (Subramaniam...
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...answering the research question, researchers went through a deductive cross-sectional study by surveying companies in the Indonesia stock exchange to explain the effect of using both technical and fundamental analysis to analyze the price fluctuation of stocks. The data collection method is quantitative data collection by taking the sample of 5 companies from 5 different sector industries and then analyze the data gathered using the proposed analyzing technique: technical and fundamental analysis method. Keywords : Technical analysis, Fundamental analysis, Stock price I. Introduction Like any other countries around the world, Indonesia has a financial market that consists of several investment choices available for public, such as: Stocks, Bonds, Foreign Exchange, Futures, etc. Those investment choices have different level of liquidity, risk and return profile. Stocks are one of the basic types of investment based on the corporate venture. Moreover stocks are popular for Indonesian investors and traders because it gives more return compared to bank savings or corporate bonds. There are two ways to analyze the price movement of stocks in a certain amount of time which more known as technical and fundamental analysis. There are some traders who are just using one of them in trading the stocks, and some using both of them. In his book, Stock Investing Wisdom, Desmond Wira (2012) explained that fundamental...
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...Active Portfolio Management: Country vs. Sector Characteristics Executive Summary This project sets out to invest between 7bn and 9bn Euros for a large pension fund in European equities, chosen from the MSCI Europe Index, which also serves as the benchmark to measure performance against. Two portfolios need to be created, one to reflect asset allocation focussed on countries and the other on sectors, with the number of assets in each portfolio being no more than 150. Both portfolios must be actively managed, having at least an active risk of 3% when compared to the benchmark. To achieve this, I followed a three step top-down approach for our investment decision process. Firstly, I started with an analysis of the macroeconomic environment in Europe, followed by forming opinions on the relative strengths and weaknesses of the constituent countries and sectors, using the macro-analysis to determine which are most likely to perform well, given the long-run trends identified. Finally, I invested in all mid-cap companies within the selected countries and sectors, based on our judgement that middle sized firms are poised to prosper the most in this difficult economic environment, which I predict to remain tough for the foreseeable future. After finalising the initial portfolios in this way, I used BarraOne to optimise them. Following optimisation, I compared the risk profile of each portfolio to the benchmark. Our findings show that an actively managed portfolio, especially one constrained...
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...mainly large institutional investors hold the other 8.75 million non-voting shares. Despite the fact that stock exchange and analysts’ requests more frequent and more detailed financial reporting Porsche is not willing to meet these needs. Another questionable input is the management compensation that only depend on Porsches profitability from year to year and not the share prices. Porsche manufacturing is conducted in German but also in Finland which make them a global brand with a cost base mainly in euro. They want to keep it so despite the fact that 42% of its revenues come from sales in the US since they believe that the heart of the brand comes from its performance in manufacturing and engineering. Porsche is therefore, by far the most exposed company among other European-based auto manufactures to changes in exchange rates. While the other manufacturers increase their amount of natural hedging by conducting more manufacturing in their countries of large sales Porsche increase their put option hedging. According to their 2006 model year they are going to fully hedged all their sales. This is done even though Porsche has the largest US exposure among the manufactures. Their hedging strategy has been criticized for being more lucky than thoughtful. Porsche also differ with their extreme anti-debt attitude. Porsche have a strong competitive position and another aspect that is very specific for Porsche’s products is the exchange rate pass-through. They pass through the changes...
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...POLITECHNIKA ŚWIĘTOKRZYSKA WYDZIAŁ ZARZĄDZANIA I MODELOWANIA KOMPUTEROWEGO THE FIRM IN A COMPETITIVE MARKET PART ONE OPRACOWAŁ: dr hab. Jan L. Bednarczyk, prof. PŚK Kielce 2012 CONTENTS 1. Types of partnerships/companies................................................................................3 2. Objectives of a company.................................................................................................8 3. Relationships between companies and their financial management, and other links of the financial system.....................................................................................10 4. Financial statements (accounts) of companies and the information contained in them......................................................................................................................13 1. Balance sheet.................................................................................................14 2. Profit and loss account..................................................................................15 3. Cash flow statement......................................................................................16 5. Analysis of a company’s financial position/standing...............................................17 1. Analysis of financial statements...
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...56 Myers and Majluf 2 61 Myers & Mailuf (1984) 3 66 Myers & Majluf – 1984 4 68 Frank & Goyal (2007) ‘Trade-off and Pecking Order Theories of Debt 74 Frank, Murray and Goyal, Vidhan 2 75 Frank & Goyal (2007) 3 83 Trade-off and pecking order theories of debt Frank & Goyal – 2007 4 85 Lecture 4 92 Ross (1977) ‘The Determination of Financial Structure: the Incentive-Signaling Approach’ 92 ROSS (1977) 2 94 Ross (1977) 3 95 Ross – 1977 4 95 Riley (2001) ‘Silver Signals: Twenty-Five Years of Screening and Signaling’ 99 Riley – 2001 2 101 Harris & Raviv (1990) ‘Capital Structure and the Informational Role of Debt’ 106 Harris & Raviv (1990) 2 108 Harris & Raviv – 1990 3 109 Heinkel & Zechner (1990) ‘The Role of Debt and Preferred Stock as a Solution to Adverse Investment Incentives’...
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...CURRICULUM OF BUSINESS ADMINISTRATION FOR BBA, BBS, MBA & MS HIG HER EDUC ATIO N CO MM ISSION (2012) HIGHER EDUCATION COMMISSION ISLAMABAD 1 CURRICULUM DIVISION, HEC Prof. Dr. Syed Sohail H. Naqvi Mr. Muhammad Javed Khan Malik Arshad Mahmood Dr. M. Tahir Ali Shah Mr. Farrukh Raza Mr. Abdul Fatah Bhatti Executive Director Adviser (Academics) Director (Curri) Deputy Director (Curri) Asstt. Director (Curri) Asstt. Director (Curri) Composed by: Mr. Zulfiqar Ali, HEC, Islamabad 2 CONTENTS 1. Introduction……………………………………...........6 2. BBA Programme....................................................11 a. Structure of BBA Programme..……………....12 b. Layout for BBA Programme..........................13 c. Semester-wise Breakup for BBA…...............14 3. Bachelor of Business Studies (BBS)......................15 4. MBA Programme....................................................16 a. Structure of MBA Programme........................17 b. Semester-wise Breakup for MBA...................19 5. MS in Management Sciences................................20 a. Structure of MS Programme...........................20 b. Eligibility for Non-business Degree Holders...21 6. Roadmap for Business Education…………............24 7. BBA Course outlines...............................................25 a. Compulsory Courses for BBA...…….…..........25 b. Foundation Core Courses...........…....…....... 41 c. Major Core Courses........................................59 d. Major...
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...CONTENT PREFACE …………………………………………………………………….…..…3 CHAPTER 1 Theoretical basics of mergers and acquisitions processes………..........5 1.1. The economic substance of M&A ………………………………………………5 1.2. Financing M&A…………………………………………………………………9 1.3. Valuation matters……………………………………………………………….11 1.4. M&A failure……………………………………………………………………13 CHAPTER 2 International M&A experience..............................................................16 2.2. The M&A practice in European countries…………………………………….16 2.3. The M&A experience in USA…………………………………………………22 CHAPTER 3 Mergers and acquisitions in Ukraine.....................................................32 3.2. Legislature of Ukraine in the sphere of M&A………………………………...32 3.3. M&A of Ukrainian corporations…………………………………………........33 3.4. M&A of Ukrainian banks……………………………………………………..40 CONCLUSION...........................................................................................................46 REFERENCES...........................….………………………………………………...48 PREFACE Strategic factor in the success of companies on global markets and increasing international competitiveness is the growth their market value. Current global trends show an increasing relevance of financial management, which deals with the dynamics of cost and capital structure of companies, institutions of financial flows. Achieve business objectives may be able through...
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...I. Overview of the Hong Kong Capital Market Located in the heart of Asia, Hong Kong positioned itself to be a major international financial center of the continent. Its capital market is comprised of integrated network of institutions and markets which provide a wide range of products and services to local and international customers and investors. Hong Kong’s financial markets are characterized by a high degree of liquidity and operate under effective and transparent regulations, which meet international standards. The Government of the Hong Kong Special Administrative Region (HKSAR) abides by the principle of keeping intervention into the way in which the market operates to a minimum and has endeavoured to provide a favorable environment in which business operates. Its policy of low and simple taxation allows maximum room for business initiatives and innovation. There is a strong emphasis on the rule of law and fair market. There are no barriers of access to the market by foreign businesses and no restrictions on capital flows into and out of Hong Kong. Hong Kong’s privileged location in the Northeast Asia, on the other hand, makes it a gateway to China. Moreover, Hong Kong is situated at appropriate time zones that allow 24-hour continuous trading of foreign exchange and gold when the two markets in New York and London are closed. II. Financial Players and Intermediaries in Hong Kong Preview:A closer look at the financial markets As of July 2010, there were...
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...or credit union transfer funds each month from your checking account to your mutual fund account. •Have your government social security benefits check or your tax refund deposited directly into your checking account. •Buy groceries, gasoline and other purchases at the point-of-sale, using a check card rather than cash, credit or a personal check. •Use a smart card with a prepaid amount of money embedded in it for use instead of cash at a pay phone, expressway road toll, or on college campuses at the library's photocopy machine or bookstores. •Use your computer and personal finance software to coordinate your total personal financial management process, integrating data and activities related to your income, spending, saving, investing, recordkeeping, bill-paying and taxes, along with basic financial analysis and decision making. VARIOUS FORMS OF E-BANKING: INTERNET BANKING: Internet Banking lets you handle many banking transactions via your personal computer. For instance, you may use your computer to view your account balance, request transfers between accounts, and pay bills electronically. Internet banking system and method in which a personal computer is connected...
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...or credit union transfer funds each month from your checking account to your mutual fund account. •Have your government social security benefits check or your tax refund deposited directly into your checking account. •Buy groceries, gasoline and other purchases at the point-of-sale, using a check card rather than cash, credit or a personal check. •Use a smart card with a prepaid amount of money embedded in it for use instead of cash at a pay phone, expressway road toll, or on college campuses at the library's photocopy machine or bookstores. •Use your computer and personal finance software to coordinate your total personal financial management process, integrating data and activities related to your income, spending, saving, investing, recordkeeping, bill-paying and taxes, along with basic financial analysis and decision making. VARIOUS FORMS OF E-BANKING: INTERNET BANKING: Internet Banking lets you handle many banking transactions via your personal computer. For instance, you may use your computer to view your account balance, request transfers between accounts, and pay bills electronically. Internet banking system and method in which a personal computer is connected...
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...Preface Let me begin this preface with a confession of a few of my own biases. First, I believe that theory and the models that flow from it should provide the tools to understand, analyze, and solve problems. The test of a model or theory then should not be based on its elegance but on its usefulness in problem solving. Second, there is little in corporate financial theory that is new and revolutionary. The core principles of corporate finance are common sense and have changed little over time. That should not be surprising. Corporate finance is only a few decades old, and people have been running businesses for thousands of years; it would be exceedingly presumptuous of us to believe that they were in the dark until corporate finance theorists came along and told them what to do. To be fair, it is true that corporate financial theory has made advances in taking commonsense principles and providing structure, but these advances have been primarily on the details. The story line in corporate finance has remained remarkably consistent over time. Talking about story lines allows me to set the first theme of this book. This book tells a story, which essentially summarizes the corporate finance view of the world. It classifies all decisions made by any business into three groups—decisions on where to invest the resources or funds that the business has raised, either internally or externally (the investment decision), decisions on where and how to raise funds to finance...
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...FINANCE PORTFOLIO ANALYSIS FINAL WORK DESCRIPTIVE ANALYSIS AND APPLICATION OF THE PORTFOLIO THEORY Abstract The main objective of the work is to construct, through application of the Portfolio theory, an efficient frontier which represents a set of portfolios with optimum risk-return ratio for ten companies from Mexican IPC. The sample used in this work is composed of the most representative companies in this index. A descriptive analysis of the behavior of the stocks included in this study is carried out using the binomial risk-return, which significantly contributes in selecting the most suitable stocks to be included in the portfolio. The work is concluded with finding an optimal portfolio for a risk adverse investor. The main conclusions from study are the poor performance of the construction sector, which holds the lowest returns, the highest risk and negative performance ratios, and the usefulness of the theory of portfolios to get a set of portfolios with higher returns and lower risk than the general Mexican IPC index that represents the market. The importance of diversification of assets is also noted. Keywords: Portfolio theory, Efficient Frontier, Risk-Return, Minimum Variance, Portfolio Contents 1. Introduction 6 1.1 Introduction 6 1.2 Goals 7 1.3 Methodology 7 1.4 Structure 9 2. Theoretical Framework 11 2.1 Risk and Return 11 2.1.1 Portfolio’s Expected Return 12 2.1.2 Portfolio Risk (Standard Deviation) 13 2.2 Diversification...
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