...1.Introduction This essay is based on the financial crisis from 2007 to 2008, which discuss whether the time at that moment is different. Here, we focus on the financial crisis happened in USA around these two particular years, therefore we mainly talk about ‘U.S Sub-prime Crisis’. Section I is to summarize the ideas that Reinhart and Rogoff provide according the book ‘This Time is Different: Eight Centuries of Financial Folly’ (2011) and their working papers. Section II is to evaluate and counter critically toward their argument. Also, a conclusion will be drawn after these two sections. 2.Section I The basic idea that Carmen M. Reinhart and Kenneth S. Rogoff suggests is that what happened in 2007 and 2008 was nothing different from previous financial crisis. They consider financial crisis can be traced by past experience from different countries around the world as usual. Their book and working papers introduce massive historical database which have constructed to study the debt (both external and internal), banking crisis, inflation, currency crashes and so forth. There are sixty-six countries included in the data, such as Africa, Asia, Europe, Latin America, North America, and Oceania (Reinhart and Rogoff, 2008). They studied various types of financial crises, however, the book mainly includes sovereign defaults and banking crises as these two forms of crises are particularly relevant to modern society. They covered government debt defaults in eight centuries...
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...The EMH is in performance vital role in financial economics literature, EMH is recognized technique for calculating the future assessment of the stock price. Usually an asset market is mentioned to be an efficient if the asset price in inquiry must completely reflect on all obtainable information and if, it is correct information that cannot be likely for market to contributors to earn abnormal profit. For calculating the estimate is recognized technique is EMH are three variations: • All historical price information, which is reflected in stock prices in the weak form efficiency in managing information set. • Semi-strong form efficiency is all publicly available information (e.g. dividends, earnings and merger announcements shares is reflected...
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...This literature review discusses objectives of financial development and economic growth as well as existing relationship of this concept. Financial development is strongly connected with economic situation, but we do not know for sure if this always implies economic growth. There are many factors which influence relationship between financial development and economic growth and its effects such as financial liberalization, government ownership of the banks, monetary policy and rate of inflation, institutional and regulatory framework of financial markets in particular countries. Many researchers are trying to give the right questions and explanations on this field but still there are unresolved issues and implications which give open space for future investigations. Table of Contents 1. Introduction………………………………………………………….2 2. Literature Review……………………………………………………2 2.1. Relationship between Financial Development and Economic Growth………2 2.2. Empirical methodologies……………………………………………………..5 2.3. Effects of Merger and Acquisitions in Bank Industry on relationship between financial development and economic growth…………………………………7 3. Conclusion…………………………………………………………....8 4. Reference List………………………………………………………..9 1. Introduction Financial system is a basis of current economic trends and there is no possibility of doing businesses...
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...Table of Contents 1 Introduction 1 2 Literature review 1 1.2. Theoretical review of financial development and economic growth nexus 1 1.3 Review of the empirical literature 4 1.3.1 Time series 5 1.3.2 Cross-country studies 6 1.3.3 Panel data studies 7 3 Conclusions 8 4 References 9 1 Introduction “Finance is powerful. The financial system can be an engine of economic prosperity – or a destructive cause of economic decline and misery.” Levine, R. (2011) p.85 Obviously, financial system and economy are related. But what is the nature of this relationship? The objective of this paper is to critically evaluate the existing theoretical and empirical literature on the finance-growth nexus. What is the role of the financial sector in economic growth? Does finance cause growth or simply follows it? There is no wide agreement about this task among recognised economists. Even Nobel Prize winners disagree in regard to the role of finance in economic development. Levine (2003) states that the role of finance as a major determinant of economic growth is over-stressed. Moreover Levine (2003) argued that where enterprise leads finance follows. Quite the opposite, important acknowledgment should be taken into account and it follows as “[the idea] that financial markets contribute to economic growth is a proposition too obvious for serious discussion.” Levine (2003) p.1 Similar to that, he also declared that the finance growth...
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...Economic and Financial Outlook in 2015 External Shocks Creating New Opportunities FSDH Research January 2015 Economic and Financial Outlook: 2015-2019 1.0 Global Economic Growth: According to the World Economic Outlook (WEO) Update of the International Monetary Fund (IMF), January 2015 Edition, the global economic growth is forecast at 3.5% and 3.7%, for 2015 and 2016 respectively. The forecasts were reviewed downward by 0.3% The IMF forecasts a global economic growth of 3.5% and 3.7% for 2015 and 2016 respectively. relative to the October 2014 WEO. The revisions reflect a reassessment of prospects in China, Russia, the Euro-area, and Japan as well as the weaker activity in some major oil exporters because of the sharp drop in oil prices. The United States (U.S.) is the only major economy for which growth projections have been raised upward. The IMF added that the global growth will receive a boost from the lower oil prices. However, this boost is projected to be more than offset by the negative factors, including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies. The U.S. is expected to grow by 3.6% in 2015 and slow down to 3.3% in 2016, supported by domestic demand due to lower oil prices, more moderate fiscal adjustment, and The U.S. is expected to grow by 3.6% in 2015 and slow down to 3.3% in 2016. continued support from an accommodative monetary policy stance...
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...Annals of Financial Economics The Causal Relationship Between Bank Capital and Profitability David E. Hutchison and Raymond A. K. Cox 1 Westwood Development Group and University of Ontario Institute of Technology Abstract: The relationship between capital structure and return on equity is examined. It is shown that for banks in the U.S., for the relatively less regulated 1983 to 1989 period as well as the more highly regulated 1996 to 2002 period, there is a positive relationship between financial leverage and the return on equity. The analysis is extended to determine the relationship between return on assets and equity capital. The evidence supports the hypothesis that there is a positive relationship between equity capital and return on assets. Relevance to Practice: Previous empirical evidence for U.S. banks had indicated a perverse negative relationship between financial leverage and the return on equity for the 1983 to 1989 period. The cause of such an association was attributed to a reputation effect for large banks who adopted an aggressive capital structure. These contrary findings coupled with regulations on improving equity capital adequacy from the Basel II accord supported the efforts to promote a reduced capital structure risk posture by banks. However, these opposite results conflicted with traditional thought from the DuPont analysis wherein, when operating profitability is positive, increased financial leverage augments the return on equity. Thus,...
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...Article 1. ECONOMIC AND FINANCIAL MARKET OUTLOOK (June 2012) No replay of 2011 in the cards for Canadian and US economies Part 1. Summary of the Article First article that I chose is the outlook for advanced economic and financial market particularly US, European union, Canadian and Chinese market that are strongly influence to the world market. Source of the Information and analysis are IMF World Economic outlook and RBC Economic research for year 2012 and forecast for year 2013. This paper includes several economic issues such us economic recession and growth, risk, Labour market and Inflation additionally monetary policies for central banks. Researcher and forecasters compared those issues for different countries and they aim to differentiate and discuss for each of the countries and market situation. Overall, the world economy faces significant challenges in the recent years and is expected to grow by 3.5% this year. Authors stated some significant issues and problems and explained them in detail. For example, paper includes several subtitles about European risk and recession situation, Finding the right policy for Europe, China is in slow growth stage, Canada and US economic situation and factors that impacted in positive and negative ways on the economy, Labour market volatility, Housing market, Households income and debt status, Consumer spending shift, Businesses that are supporting market, Canada’s dollar appreciation, Fed and other central bank policy,...
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...Role of Financial Institutions in the financial development and economic development Financial intermediaries perform an important role in the development process, particularly through their role in allocating resources to their most productive uses. More efficient financial markets help economic agents hedge, trade, pool risk, raising investment and economic growth. Financial institutions provide consumers and commercial clients with a wide range of services and different types of banking products. The importance of financial institutions to the wider economy is apparent during market booms and recessions. During economic upturns, financial institutions provide the financing that drives economic growth, and during recessions, banks curtail lending. This can exacerbate a country's financial problems and draw attention to the fact that economies are heavily reliant upon the financial sector. The importance of financial institutions and passed legislation made it easier for more people to obtain products and services from these entities. In many countries, banks are encouraged or even compelled to lend money to home buyers and small businesses. Readily available loans encourage consumer spending, and this spending leads to economic growth. There is now a clear realization that sustainable development will not and cannot be achieved by governments acting alone. In this context, the expertise of the private sector plays an important role. Role of Financial Institutions in the...
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...INFOANALYTICA FINANCIAL, ECONOMIC RESEARCH AND INDUSTRY ANALYSIS SUMMER INTERNSHIP REPORT ANANDARUP GHOSHAL 2008 ICFAI BUSINESS SCHOOL, AHMEDABAD SUMMER INTERNSHIP PROJECT FINANCIAL, ECONOMIC RESEARCH AND INDUSTRY ANALYSIS IBS AHMEDABAD 2|Page SUMMER INTERNSHIP PROJECT REPORT PROJECT AREA: FINANCIAL AND ECONOMIC RESEARCH AND INDUSTRY ANALYSIS FACULTY GUIDE: PROF. AMIT SARASWAT COMPANY NAME: INFOANALYTICA COMPANY GUIDE: ULLAS UNNIKRISHAN MARAR IBS AHMEDABAD SUBMITTED BY: ANANDARUP GHOSHAL ENROLLMENT NO: 07BS0024 MOBILE NO: 9913815561 E-MAIL: anandarup99@yahoo.co.in 3|Page I am thankful towards my company INFOANALYTICA a division of the Agarwal management consultants for giving me this great opportunity to work into the company for the summer internship project. It was a very good learning experience for me. I am thankful to the CEO of the company Mr. Amit Gupta. My project guide Mr. Ullas Marar has helped me a lot whenever I needed. My regards to my college faculty guide Mr. Amit Saraswat for being extremely helpful during the project. For him this was working as well as a learning experience. During my project I have got help from many other faculties. I am very thankful to Dr. Rashid Saiyeed, Prof. Toby Mammen, Dr. Saji Kumar and Mr. Ravi Gor. I am thankful to our director Prof. Bala Bhaskaran for providing me this great opportunity of the learning. 4|Page Table of Contents INTRODUCTION: ....................
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...The impact of financial liberalization reform on economic growth: an empirical survey on China Introduction: In the past few decades, financial liberalization would be a main driving force and trend on countries’ financial reform. It aims to eliminate restrictions on financial markets and financial institutions, both domestically and internationally (Financial Liberalization). Thus, as a benefit of financial liberalization, a surge of competition and innovation was awakened in the US and rapid spread to other advanced economies’ financial market between 1970s and 1980s. As a result, banks had become bigger and financial intermediation was cheaper (Anon. 2007). However, an excessive freedom could encourage financial institutions to take unnecessary risks on lending business which would lead to financial crisis. The current great economic recession was caused by a new financial instrument crisis, subprime crisis which started from developed economies which had high level of financial liberalization. Therefore, to some extent, financial liberalization is risky in the process of financial reform. China had conducted its financial reform for more than 30 years. It had benefited from financial liberalization to accelerate capital accumulation. Now, it has the world’s most valuable banks and has the largest foreign exchange reserve. But, in general, Huang et al. (2010) stated that China’s financial reform is still focus long on quantitative growth but short on qualitative growth in...
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...Global economic slowdown and its impact on the financial services industry in India April 2009 The global slowdown was an outcome of two events - absence of a sound regulatory framework & mismatch between financial innovation and the ability of the regulators to monitor them immediate aim should be to fix the financial system and to maintain the aggregate demand at a high enough level to stimulate the real sector 2 Contents Executive summary 1. Global financial markets: A perspective 2. Indian financial services industry 3. Impact of the recession on the financial sector of the Indian economy 4. Future outlook 5. Conclusion Contacts 4 6 9 14 18 20 23 3 Executive summary The global economy is reeling with the impact of the ongoing recession which started with the sub-prime crisis in the United States and found its way to other developed and emerging economies of the world. This recession has its roots in the initial collapse of the financial sector. However, in a world that is more integrated within each country as well as across nations, the events in the financial sector have eventually trickled down to the real sector of the economies as well. Finance and financial markets play a dominant role in growth and development of modern economies – hence, any recovery from the current recession must be couched in an overall recovery of the health and performance of the financial sector. In the absence of mature financial markets in their own economies,...
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...Q1 (i) Histogram for the return on Asset A Asset A –Frequency Distribution Class Intervals-Return | | Frequency | Cumulative Frequency | Class Width | Frequency Density | Probability | Cumulative Probability | -8% | -7% | 1 | 1 | 0.01 | 100 | 0.0000 | 0.0000 | -7% | -6% | 1 | 2 | 0.01 | 100 | 0.0002 | 0.0002 | -6% | -5% | 7 | 9 | 0.01 | 700 | 0.0002 | 0.0004 | -5% | -4% | 16 | 25 | 0.01 | 1600 | 0.0014 | 0.0018 | -4% | -3% | 42 | 67 | 0.01 | 4200 | 0.0032 | 0.0050 | -3% | -2% | 113 | 180 | 0.01 | 11300 | 0.0084 | 0.0134 | -2% | -1% | 224 | 404 | 0.01 | 22400 | 0.0226 | 0.0360 | -1% | 0% | 408 | 812 | 0.01 | 4200 | 0.0448 | 0.0808 | 0% | 1% | 591 | 1403 | 0.01 | 59100 | 0.0816 | 0.1624 | 1% | 2% | 714 | 2117 | 0.01 | 71400 | 0.1182 | 0.2806 | 2% | 3% | 826 | 2943 | 0.01 | 82600 | 0.1428 | 0.4234 | 3% | 4% | 725 | 3668 | 0.01 | 72500 | 0.1652 | 0.5886 | 4% | 5% | 536 | 4204 | 0.01 | 53600 | 0.1450 | 0.7336 | 5% | 6% | 391 | 4595 | 0.01 | 39100 | 0.1072 | 0.8408 | 6% | 7% | 211 | 4806 | 0.01 | 21100 | 0.0782 | 0.9190 | 7% | 8% | 120 | 4926 | 0.01 | 12000 | 0.0422 | 0.9612 | 8% | 9% | 52 | 4978 | 0.01 | 5200 | 0.0240 | 0.9852 | 9% | 10% | 11 | 4989 | 0.01 | 1100 | 0.0104 | 0.9956 | 10% | 11% | 9 | 4998 | 0.01 | 900 | 0.0022 | 0.9978 | 11% | 12% | 2 | 5000 | 0.01 | 200 | 0.0018 | 0.9996 | | Total | 5000 | | | | 0.0004 | 1.0000 | ii) Whether one asset stochastically dominates the other to first order: First-order Stochastic...
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...Report of Kweichow Moutai Co., Ltd Abstract This paper intends to research into the chosen company-- Kweichow Moutai Co., Ltd about its characteristics which entitle it to be the leading firm in the white spirit industry within China. Based its general conditions, this paper mainly focus on its capital structure with very leverage ratio and very high liquidity ratio of debt and asset, as well as its payout policy which returns relatively small amount of cash back to the investors. Simultaneously we also take the interest conflicts and the competitive scenario with other rivals into consideration. It can be concluded that the financial response of its leverage level and dividend policy is not significant. While the major suggestions given from this paper contend that it should raise more debt when faced with worthwhile investing projects and should increase the dividend ratio for the feedback of its investors, which can also reduce its excess cash at hand. Key words: Kweichow Moutai Co., Ltd, Capital Structure, Payout Policy 1. Introduction 1.1 Company introduction Kweichow Moutai Co., Ltd. is mainly engaged in the manufacture and distribution of Maotai liquor series products. The Company’s main products portfolio consists of Maotai liquors and other liquor series. It distributes its products in domestic and overseas markets. The Company is also involved in the manufacture and distribution of drinks and food packaging materials, the development of anti-counterfeit technology...
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...to Ely (2008), “financial regulation is a form of supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. The regulatory body may be handled by either a government or non-government organization”. The Jamaican financial landscape consists of various financial institutions. These include banks, security brokers, pension schemes and insurance companies. The main objectives of the financial regulator are usually: • Market confidence – to maintain confidence in the financial system • Financial stability – contributing to the protection and enhancement of stability of the financial system • Consumers’ protection – securing the appropriate degree of protection for consumers. • Reduction of financial crime – reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime. With the objectives being outlined, the Bank of Jamaica is the Central Bank of Jamaica that carries out the government’s financial regulation and supervision pertaining to all banks’ operations. The Bank of Jamaica, established by the Bank of Jamaica Law (1960), began operations in May 1961. The establishment of the Central Bank was in recognition of the need for an appropriately regulated financial structure to encourage the economy’s development process after independence. Although the Bank of Jamaica carries out the financial regulation of the...
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...Andrey Artemenkov, The department of economic measurements, GYY artemenkov@rambler.ru Modern Portfolio theory (MPT) and Financial Economics: a theory of lesser turf?♣ “In this age, which believes that there is a short cut to everything, the greatest lesson to be learned is that the most difficult way is, in the long run the easiest.” Henry Miller “[These are colossal] disproportions that have accumulated over the last few years. This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral. … In effect, our proposal implies that the audit, accounting and ratings system reform must be based on a reversion to the fundamental asset value concept. In other words, assessments of each individual business must be based on its ability to generate added value, rather than on subjective concepts. In our opinion, the economy of the future must become an economy of real values. How to achieve this is not so clear-cut. Let us think about it together.” From the Address of Vladimir Putin, Prime Minister of Russia, at the Davos Economic Forum (February, 2009) This Part analyzes the pre-analytical foundations and macro-economic impact of the Modern Portfolio Theory1 (MPT) tenets, on which much of the present Western investment theory and financial economics is erected. Our general inference is that while the former are tautological...
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