Essays on Fama

Abstract

The topic of body dysmorphic disorder (BDD) among adolescents is well documented, and so is the peer conformity in relation to teenagers’ decision making process. However, there are solely secondary references to how peer conformity influence decision making process among adolescence diagnosed with BDD, which is why, the aim of the proposed research is to investigate this relationship. The hypothesis suggest that adolescence diagnosed with BDD take extreme approaches in relationship to peer conformity, which further influence their decision making process. The methods section describes the research methodology, the focus group, the descriptive research design, also presenting information about ...

Agency Problems

1. The agency theory is a supposition that tries to develop an explanation for the relationship that exists between principals and agents in a business (Pfeffer and Salancik, 2003). Normally, agency theory involves developing solutions to the problems that might exist in agency relationships, such as problems between the principals and agents of the principals. One aspect of agency theory is separation ownership. The relationship developed between the owners of the company (shareholders) and the agent (directors) in a company creates a separation in the ownership and control of the company. Major companies such as the ones listed in ...

Comparison of Information Gathered in 2(b) and 1(b) The field of finance is extremely broad, and it usually depends upon the working of sophisticated models and tools to analyze the things accordingly. Investment is one of the most important elements that stride under the field of finance, as it is important for the long run productivity and efficacy of an organization as well as an economy particularly. The tradeoff of risk and return cannot be ignored, as both of these things are interlinking with each other. It is an important thing for an investor to overcome on the ...

With the current levels of competition in the business world, every investor dreams of minimizing any form of risk to enable them record higher returns (Fama & French, 2004). Realistically, the success of any investment is defined by the level of returns as well as the competitive advantage over the risks and threats in the market. Therefore, for an investor to predict the future returns of the investment, an effective description and analysis of the relationship between the expected returns and possible risk is necessary. The capital asset pricing model (CAPM) is the best technique to use for such analysis ...

Executive Summary

Banks such as UK bank get the money that they lend from the deposits. The level of lending is usually dependent on the demand of the funds by the public and on the economic level of the state. When the demand for money is high, UK bank will have to check on the level of money that is circulation before it decides on how much to lend out (Sessa, 2011). It is done to reduce chances of having excess money supply into the economy that may result to the inflation. The bank can use various ways to ensure that ...

Capital Asset Pricing Model

The primary role of capital market is allocation of ownership of the economy’s capital stock . Capital market theory extends portfolio theory and develops a model for pricing all risky assets. Capital asset pricing model (CAPM) allows determining the required rate of return for any risky asset. CAPM offers powerful and intuitive pleasing predictions about how to measure risk and the relation between expected return and risk. It is widely used in application such as estimating the cost of capital for firms and evaluating the performance of managed portfolio . CAPM has been the basis for calculating the required rate of ...

Expected stock return reefers to the amount expected to be received on an investment such as stock, which has diverse known rated of return. For instance, in a stock, which had 20% probability of producing 5% profit and a 20% probability of producing 2% loss, the expected return would be 0.1% (0.2* 0.05+0.2-0.02). This essay seeks to examine the two measureable variables, which are used to capture the cross sectional variation in average stock returns attributed with the market β, size, earning price, leverage and book-to market equity. The variables include are size and book to market equity. As a point ...

The “Equity premium,” written by Eugene F. Fama and R. French (2002) describes how to estimate equality premium using both dividend and the growth rate of earning to predict the rates of expected capital gain. The equality premium is important in making decisions on portfolio allocation and in estimation of capital gain. The expected market return is estimated using the returns on portfolio of stocks. To estimate the stock return, the dividend and earnings are used along with other evidence to determine if the expected return is higher than the realized average. In this case, the average stock return ...

Taxes are in direct relation with the macro-economic operation of the state, in which, the revenue generated by the state is invested to ensure the smooth running of the administration; it also directly affects the micro-economic behavior of consumers/individuals/citizens as well as numerous public goods and services. Every action or policy pertaining to economic structure has a benefit or a drawback (Agliardi, 2001). People are influenced by incentives: will a particular product or a service satisfy their demand? How will it bring private benefits to them? Does the use of that particular product or a service has an overall positive/negative social cost? If the ...

Abstract:

The research paper deals with the Efficient Market Hypothesis(EMH) and the related market anomalies and to find that despite there has been extensive research conducted in support of EMH, why is it possible that investors like Warren Buffet and many others have consistently beaten the market year after year and have made billions in profit and if markets are efficient why does the stock prices deviate from their value. For the purpose of this research, we will include a brief introduction of EMH, existing literature review in support of EMH and will then finally proceed to conduct our analysis ...

Executive Summary

Bank of England acts as a central bank and performs the credit rationing and is also the controller of the monetary policy, so as to ensure that there is no hindrance to the economic stimulus. It cautiously exercise its credit control function. For Instance, at the time of inflation, when the demand for money is high and so is the rate of consumer spending, Bank of England increases the interest rates and also adopt other measures as Open market operations to limit the money supply. This will impact the total availability of funds in the market and will ultimately lead ...

Money crisis in UK can be controlled by the Bank of England through changing the interest rate while attempting to alter the level of economic activity. Actions can be taken when the money in circulation increases in fast rate as compared to the output volume produced. This situation can be referred to as inflation. To control this situation, interest rates should be changed. The Bank of England uses monetary policy to increase or decrease the money in the banking system. However, the Bank of England does not print more money to alter money supply as this is against the ...

Debt of Capital: Debt or Equity

Debt signaling is a sign provided to investors and other stakeholders of the company that the company is going to issue debt financing or delay the issuance of this form of financing. If a company management decides to issue debt financing, it gives out a positive signal. A company that is in a stable financial position would be willing to issue debt. As interest has to be paid on debt, a company that has a stable financial basis would opt for this method of raising finance. On the other hand, if the company delays the issuance of debt financing it gives out negative signals. This ...

In markets and financial analysis, Efficient Market Hypothesis (EMH) that is also popularly known in finance language as the Random Walk Theory is a phenomenon that gives that the current stock prices fully reflect all and any available information or data pertaining to the value of the firm or company. According to this hypothesis, it is assumed that there is no way an earning of excess profits is possible by the investors when this information is used. According to Mendelker. G, Clarke J & Jandik T, the efficient market hypothesis deals with one of the most fundamental and interesting( exciting) issues ...

Capital markets are markets in which institutions and individuals buy and sell financial securities. Capital markets channel funds from wealth savers institutions that need funds for long term investments. Capital markets comprise of both the equity and debt markets. Investors participate in the capital market in order to maximize their wealth by buying, holding and selling financial securities in order to take advantage of price fluctuations in the capital market. There are various theories that have been developed to explain the performance of investors’ portfolio. One of the dominant theories is the efficient market hypothesis. This paper discusses the ...

Introduction

According to Fama (1970), market efficiency refers to “a market in which prices always ‘fully reflect’ available information.” In discussing market efficiency, three sets of information are considered and include historical prices, publicly available information, and private information. Market inefficiency therefore refers to a condition in which current prices of common stocks and similar securities do not reflect all the public information about a market. This theory opposes the efficient market hypothesis. Market inefficiency is also used to refer to a market that is not operating efficiently, for example, low-volume stocks traded over the counter represent an inefficient market when contrasted with blue ...

Introduction

The bank of Queensland was instituted in 1874 as the first permanent building society in Queensland, Australia. Initially, it was being operated as Brisbane Permanent Benefit Building and Investment Society. This society was later incorporated in 1887 and then got amalgamated with the City and Suburban Building Society in 1921. Later on in 1931, it was again amalgamated with Queensland Deposit Bank. It received a license to operate as a trading bank in 1942. The bank computerized its operations in 1970 and then underwent a series of transformations that included changing its name to bank of Queensland. The bank was first listed ...

Agency Theory in Supply Chain Management

Introduction

The agency theory has been around for quite a long time, but formalization of theory dates back into the 70s. In the past, there have been researches done on this topic such as the one done by Rechner and Dalton (1989) to examine the effect of management duality on risk and its effects to the share price. Others include but not limited to (Grover and Malhotra, 2003; Slack et al, 2004; Mabert and Venkataramanan, 1998; Pannirselvam et al, 1999; Selen and Soliman, 2002). In supply management, the agency theory implies that the retail chain is a series of agreements between ...

Efficient market hypothesis is a hypothesis that was introduce by Fama in1970. The hypothesis postulates that business people who seek to make profits exploits whatever is at their disposal till it’s no more. In real business practices, there can not be markets that are 100% efficient or inefficient. It is therefore correct to say that markets in cooperate the two aspects of efficiency and inefficiency presenting a situation of only one choice, i.e. the mixture of both. Changes that occur due to various decisions and events can not influence the markets immediately. In such a situation the, none can outdo the ...

The Australian stock exchange has been established to economically assist the investors by bring to together in one market the investors who have the capital and the companies in need of capital in a highly liquid and well regulated market. In this case the companies are assisted to raise capital while the investors are given the chance to create and accumulate their wealth. Investors have a pool of more than 2000 listed companies to invest in. Amcor ltd, APA ltd, amp ltd, ASX ltd, Asciano ltd and Suncorp ltd are some of the companies listed in the ASX; each operates in ...

A share split is an action taken by corporate executives to increase the number of outstanding shares by dividing each share by a given split ratio that diminishes its price. In this case, the stock market capitalization does not change since the price per share reduces by the ratio of the share split. For instance, if a company splits its shares in the ratio of two shares for each one share held, the share holders will enjoy an increased numbers of shares nut at a reduced price thus the overall market capitalization remains unchanged.

Stock splits are not a new term in world ...