...LONG TERM PERFORMANCE OF VALUE VS. GROWTH STOCKS: EVIDENCE FROM INTERNATIONAL MARKETS Zugang Liu, Pennsylvania State University Hazleton, USA Jia Wang, Rowan University, Glassboro, NJ, USA ABSTRACT This paper studies the long-term risk and return characteristics of value stocks versus growth stocks for three international markets: Asia, Scandinavia, and Europe. We focus on the downside of returns and use Value at Risk as our risk measure. We find that value stocks outperform growth stocks in terms of both risks and returns across all time horizons for all three markets. We further conduct cross country analysis. Interestingly, we find that there is some risk and return trade off in short term investment horizon across the three countries. When investment horizon lengthens, Scandinavian market has the best performance in both risks and returns for both value and growth indexes. Keywords: Value, Growth, Risk, Time Horizon 1. INTRODUCTION Value or growth? This is an age old debate in the investment world. Value style stock commonly refers to a stock that is undervalued relative to its fundamentals (i.e. dividends, earnings, sales, etc) and often has a low market to book ratio, a high dividend yield or a low P/E ratio. Growth style stocks are often shares from companies that are expected to grow at a higher than average rate and such stocks often have high market to book ratios, low dividend yields or high P/E ratios. Which one is more profitable? Basu (1977), among others, reports...
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...contact support@jstor.org. . CFA Institute is collaborating with JSTOR to digitize, preserve and extend access to Financial Analysts Journal. http://www.jstor.org This content downloaded from 134.117.10.200 on Mon, 24 Feb 2014 01:32:09 AM All use subject to JSTOR Terms and Conditions FinancialAnalysts Journal Volume 61 . Number 2 ?2005, CFAInstitute X Fundamental Indexation Robert D. Arnott,Jason Hsu, and PhilipMoore to A trillion-dollar industryis basedon investingin or benchmarking capitalization-weighted the This literature indexes, eventhough thefinance rejects mean-variance efficiency suchindexes. of measures whether stockmarket indexesbasedon an arrayof cap-indifferent study investigates of than based market These on "Fundamental" size mean-variance company aremore efficient those cap. indexeswerefound to deliverconsistent,significantbenefitsrelativeto standard cap-weighted The Graham: the In indexes. trueimportance thedifference havebeenbestnotedbyBenjamin of may but shortrun,themarket a votingmachine, in thelongrun,it is a weighing is machine. T he capital asset pricing model...
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...1. For what purpose does Michael Wang need to find the appropriate Chinese stock market index? For what other purposes do you think one may need to use the stock market index? Michael Wong needs to use the appropriate Chinese market index to evaluate the performance of his portfolio. And also he can use the index to understand the direction of the overall market and stay abreast of trends in the different segments. Moreover, Michael Wang can use the stock market index to hedge against his portfolio to minimize risk of investments or to develop derivative products such as index futures and index options. 2. What are the five major Chinese stock market indexes mentioned in the case? Briefly summarize how each index is constructed. The five major Chinese stock market indexes: SSE Composite Index, CSI 300 Index, S&P/CITIC 300 Index, FTSE Xinhua (A) 600 Index, MSCI China A Index. * SSE Composite – Simply includes all listed stocks (A shares and B shares) at Shanghai Stock Exchange. Composite indices are weighted by total number of shares and the base period is the total market capitalization of all stocks of that day. (Base date: Dec. 19, 1990 / Base value: 100) * CSI300 Index – Includes A shares listed at the two exchanges (Shanghai and Shenzhen) in China. Weighted by float-adjusted shares. Stocks that rank top 300 are selected as index constituents considering size and liquidity. (Base date: Dec. 31, 2004 / Base value: 1,000) * S&P/CITIC 300 Index – Includes...
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...the globe for calculating Stock Index) By: Echo Group Russian Trading System (RTS) Stock Exchange 1. Eligibility Factors 2.1. Market Capitalization 2.2.1. A stock’s weight in an index is determined by the float-adjusted market capitalization of the stock 2.2.2. Each company’s market capitalization is capped at 15% in the RTSI and RTS2, and at 25% in the RTS Sector Indices, to restrict the weight of any one company dominating the entire index. 2.2. Liquidity: Securities that do not meet the following criteria over the three month period preceding the date of the revision are excluded from the index eligibility list 2.3.3. The average number of companies-brokers that submitted the “bid” and “ask” quotes for the security at the end of the trading session is at least two. 2.3.4. 2. The average spread between the “ask” and the “bid” prices at the end of the trading session is less than or equal to 15%, as compared to the buying price. 2.3.5. 3. The security should have two-sided quotes in the trading system at the end of the trading session for at least 90% of the trading days of a given period. 2.3.6. 4. The daily average number of transactions in this security is greater than or equal to 0.5. 2.3.7. 5. The daily average trading volume in this security is greater than or equal to US$ 3,000 2.3. Domicile. 2.4.8. Only stocks of a Russian domicile are...
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...INDEX FUNDS.. FM n FS PROJECT Active and Passive Management Before we get into the details of index funds, it's important to understand the two different styles of mutual-fund management: passive and active. Most mutual funds fit under the active management category. Active management involves the art of stock picking and market timing. This means the fund manager will put his/her skills to the test trying to pick securities that will perform better than the market. Because actively managed funds require more hands-on research and because they experience a higher volume of trading, their expenses are higher. Passively managed funds, on the other hand, do not attempt to beat the market. A passive strategy instead seeks to match the risk and return of the stock market or a segment of it. You can think of passive management as the buy-and-hold approach to money management. Defn- An index fund a collective investment scheme that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market condition. An index fund is a mutual fund which merely invests in the securities in the index. It is passive, in the sense that absolutely no effort is made to produce results better than the index. HISTORY: Index funds haven't been around forever -- how did they come about? Long ago, there was a student at the University of Chicago who studied modern ideas of finance taught...
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...Dr. Barbara-Leigh Tonelli. By Ajeeth Pingle 4/05/2011 Wal-Mart Economic Indicators Wal-Mart has become the world's number one retailer. Diversification into grocery (Wal-Mart Supercenters and Neighborhood Markets), international operations and membership warehouse clubs (SAM'S Clubs), has created greater opportunities for growth. But unlike some corporations, whose financial growth does not translate into more jobs, Wal-Mart's phenomenal growth has been an engine for making jobs. Wal-Mart has a history of having become a strong investment for Shareholders. The Company made its initial public offering in October of 1970, when selling 200,000 shares for $16.50 per share. If an investor had purchased 100 shares in the initial offering, those shares would have been worth more than $13 million as of January 31, 2011 and the number of shares owned by that investor would have grown to 204,800 thanks to 11 stock splits. From the beginning, Wal-Mart has created tremendous Shareholder value. The Company raised $3.3 million in its initial public-equity offering. As of April 2, 2010, the Company had grown to a market capitalization of nearly $211 billion. According to About.com (2010), economic indicators are economic statistics that indicate how well the economy is doing and how well the economy will do in the future. Economic indicators can range from unemployment to the inflation rate. ...
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...technologies may acquire funds from households through financial system Financial system: the system of financial markets and financial intermediaries through which firms acquire funds from households. Economics growth is impossible without a well-functioning financial system. Financial markets: markets where financial securities, such as stocks and bonds, are bought and sold. A financial security is a document that states the terms under which funds pass from the buyers of the security (the lender) to the seller (the borrower). One type of financial market is the stock market. Stock: a financial security that represents partial ownership of a firm. Firms can raise funds by selling shakes of stock in a primary market. The original buyers of stocks may resell them in a secondary market, where most daily trading takes place. While shareholders may receive dividends (portions of a firm’s profits) from stocks, most people purchase stocks for the potential capital gains from selling a stock for more that they can paid for it. Firms do not receive funds from transactions （交易） in secondary markets. Another type of financial market is the bond market. Bond: a financial security that represents a promise to repay a fixed amount of funds Firms and governments running budget deficits (spending more than they receive in tax revenue) can borrow funds by selling bonds in a primary market. The seller of the bond promises to pay the buyer of the bond an interest payment each year for the term...
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...An "index fund" describes a type of mutual fund or investment trust whose investment objective typically is to achieve approximately the same return as a particular market index. An Exchange Traded Index Fund is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETIFs experience price changes throughout the day as they are bought and sold. ETIFs, commonly referred to as index-based ETFs, are designed to track the performance of their specified indexes or, in some cases, a multiple of inverses of their indexes. Some people will agree that international investments is good. It allows investors to reduce the risk of their portfolio, but still allowing them with additional profit potentail. If you have the money to spend you would suggest that you invest in international investments. The return and the risk of an investment will depend on the actual currency that was used. The exchange Traded Funds passive nature is a necessity: the funds rely on an arbitrage mechanism to keep the prices at which they trade roughly in line with the net asset values of their underlying portfolios. For the mechanism to work, potential arbitragers need to have full, timely knowledge of a fund's holdings. ETFs are different from Mutual funds in the sense that ETF units are not sold to the public for cash. Instead, the Asset Management Company that sponsors the ETF (Fund) takes the shares of companies comprising the...
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...Portfolio Performance The last decade has been a challenge for many investors, especially those investing for the long term and retirement. Given declines in global stock markets, many investors have seen little to no real growth in their portfolios over this period. For example, $10,000 invested in the S&P 500 Market Index in 2000, was worth just $10,456 at the end of 2010. And this does not take into account inflation, investment fees and taxes.1 This White Paper explains why investors’ portfolios may underperform in both bear and bull markets and incur substantial costs in the process. It also details the impact this chronic underperformance can have on achieving long-term financial goals. Threat 1: The Expenses of Active Management Most us would like to beat the market, but as we’ll explore in this whitepaper, even many professional money managers have had a hard time performing better than the market. To understand why, it is helpful to begin with some definitions. Active investors (and active money managers) attempt to out- perform stock market rates of return by actively trading individual stocks and/or engaging in market timing — deciding when to be in and out of the market. Those investors who simply purchase “the market” through index or asset class mutual funds are called passive or “market” investors. Active mutual fund managers are typically compared to a benchmark index. For example, large cap mutual funds are often compared to the S&P 500 index. To beat...
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...Chapter 1 Financial Markets Financial markets perform two important functions. They transfer funds from savers into investments and they transfer title of ownership of existing securities from sellers to buyers. Financial markets and the transfer of savings Two basic methods exist for transferring funds from savers to users. First is direct investment when you start own business and invest your savings in the operation. A direct investment also occurs when securities are initially sold to investors in primary market. In the second markets, no funds are transferred and no new assets are created, there is only the transfer of ownership of an existing asset. The alternative to direct transfer of savings is an indirect transfer through a financial intermediary. You lend funds to the bank; the bank lends the funds to the ultimate borrower. The role of money Money: anything that is generally accepted as a means of payment. Liquidity: Ease of converting an asset into cash without loss, the depth of a financial market. Federal Reserve has the power to control the supply of money and to oversee the commercial banking system. Money supply: Total amount of money in circulation. 2 measures: M1: Sum of coins, currency, and demand deposits (checking account); M2: M1+saving accounts (70%), small certificates of deposits. The role of interest rates Interest is the cost of credit, the price paid for the use of someone else’s money. Generally, the longer the term of the debt...
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...The country comparison tool can be used to create interactive charts using over 150 indicators. The variables are drawn from major international organizations and prominent NGO's and are updated regularly. One can compare countries over time using the line charts or the rankings of various countries by selecting a specific year. The comparison charts as well as the source data can be downloaded for free after registering. Below are brief guidelines for country comparisons: Compare countries: income levels. One can use GDP per capita in dollar terms to compare incomes across countries. However, the comparison may be somewhat misleading because consumers face different prices in various countries. One thousand U.S. dollars can buy much more in Mexico compared to the U.S. since prices in Mexico are lower. To account for the differences in prices, one should look at the GDP per capita in Purchasing Power Parity terms. In that way, one compares countries in term of real income (what can be purchased) as opposed to the dollar income. Compare countries: level of development. The most basic comparison is between GDP per capita levels or the levels of GDP per capita in terms of Purchasing Power Parity. However, GDP can be a misleading measure as it may not capture other aspects of the quality of life such as crime, education, environmental quality, etc. The Human Development Index published by the UN is a composite measure that accounts for a broader set of development factors. Compare...
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...that well-performed stocks continue to outperform their peers while poor-performed stocks continue to underperform. Thus, more mutual funds use this powerful strategy to draw a broad range of investors by getting higher risk-adjusted returns. AQR is a hedge fund based in Greenwich, Connecticut, offering investing products that applies price phenomenon known as momentum. This case study enables investors to get a closer look at AQR’s momentum fund. Comparison of momentum specifications In order to analyze the momentum effect of different specifications, stocks were divided into ‘winner’ stocks and ‘loser’ stocks according to their rankings. From the data we can see that the decile spread portfolio return is the highest among these momentum specifications. One may argue that the spread between decile 10 and decile 1 is largest and it also has the highest volatility. After adjusting for volatility (using Sharpe Ratio), the decile spread momentum advantage is reduced but still very significant. According to Figure 1.1 and 1.2, raw spread returns witness a sharp decrease as the chosen percentile of highest and lowest stock return increases. After adjusted by volatility, the difference becomes flatter but still significant. From the graphs we can see that the volatility-adjusted return of decile spread is higher than the UMD spread, which means buying top 10% winner stocks and shorting bottom 10% loser stocks earns more profit than buying top 30% winner stocks and shorting bottom...
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...OPTIONS EXCHANGE, INCORPORATED 400 South LaSalle Street Chicago, Illinois 60605 INTERNATIONAL SECURITIES EXCHANGE, LLC 60 Broad Street New York, New York 10004 NASDAQ OMX BX, INC. 101 Arch Street Boston, Massachusetts 02110 NASDAQ OMX PHLX, INC. 1900 Market Street Philadelphia, Pennsylvania 19103 NASDAQ STOCK MARKET, LLC One Liberty Plaza 165 Broadway New York, New York 10006 NYSE AMEX LLC 11 Wall Street New York, New York 10005 NYSE ARCA, INC. 100 South Wacker Drive Chicago, Illinois 60606 1994 American Stock Exchange, LLC, Chicago Board Options Exchange, Incorporated, New York Stock Exchange, Inc., NYSE Arca, Inc. and Philadelphia Stock Exchange, Inc. CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS TABLE OF CONTENTS Page CHAPTER I—INTRODUCTION . . . . . . . . . . . . . . 1 CHAPTER II—OPTIONS NOMENCLATURE . . . . . . 5 CHAPTER III—OPTIONS ON EQUITY SECURITIES 18 Features of Stock Options . . . . . . . . . . . . . . . . . 18 CHAPTER IV—INDEX OPTIONS . . . . . . . . . . . . . 23 About Indexes . . . . . . . . . . . . . . . . . . . . . . . . 23 Features of Index Options . . . . . . . . . . . . . . . . . 26 CHAPTER V—DEBT OPTIONS . . . . . . . . . . . . . . 29 Rates, Yields and Prices of Debt Securities . . . . . . . 29 Treasury Securities . . . . . . . . . . . . . . . . . . . . . . 31 Yield-Based Options . . . . . . . . . . . . . . . . . . . . . 32 CHAPTER VI—FOREIGN CURRENCY OPTIONS . . 35 Market for Foreign Currencies . . . . . . . . . . . . . . . 36 Special Characteristics...
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...Exchange-traded fund From Wikipedia, the free encyclopedia An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks.[1] An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.[2][3] ETFs are the most popular type of exchange-traded product.[citation needed] Only so-called authorized participants (typically, large institutional investors) actually buy or sell shares of an ETF directly from or to the fund manager, and then only in creation units, large blocks of tens of thousands of ETF shares, which are usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long-term, but usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates to the net asset value of the underlying assets.[4] Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market. An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with...
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...IAG INTERNATIONAL AIRLINES GROUP Corporate finance 2013 ------------------------------------------------- Index 1. Company profile 1. Core activities 2. Competitors 3. External finance 1. Corporate governance 4. Corporate governance 5. Compensation of member of the Board of Directors 6. Investor relation section 2. Stock price data and analysis 7. Daily stock prices 8. Comparison with market and sector indexes 9. Dividends policy 10. Investment magazines reports 11. Five selected new facts 3. Financial information 12. Capital structure 13. Liquidity and solvency analysis 14. Beta coefficient and cost of equity 15. Discounted cash flow analysis and implication of fundings 4. Recommendation ------------------------------------------------- 1. COMPANY PROFILE 1.1 Core activities MISSION: "To be the leading international airlines group in future industry consolidation on a regional and a global scale" International Airlines Group (IAG) is one of the world's largest airline groups: with 377 aircraft and an average of 69 million passengers each year flying to 230 different destinations, IAG is the third- largest based in Europe and the sixth in the world. Formed in January 2011 as a result of the merger between British Airways and Iberia, it is a Spanish registered company whose shares are traded on the London and Spanish Stock...
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