We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Literature review - Essay Example

Comments (0)
Summary
Finance proposal 1. Introduction 1.1 Setting In the modern world with growing complexities in the financial markets, the agents associated in the market face continuous difficulties in investment decisions and returns associated with them. Every individual in the business world are guided by the motive of profit maximization along with minimization of risks associated with the investments they make…
Download full paper
GRAB THE BEST PAPER
Literature review
Read TextPreview

Extract of sample
Literature review

Download file to see previous pages... The model is basically represented in a mathematical equation which is equated with the “expected rate of return on a stock to risk free rate plus a risk premium for the stock’s systematic risk” (Keown, 1998, p.242). Risk premium for a particular security is basically defined as the required return after deducting the risk free rate existing in the market. Total risk which is calculated as a standard deviation of return is generally fragmented into two parts. They are unsystematic and risk systematic risk, Beta () (Strong, 2008, p.168). The investors are rewarded bearing through this risk only and is very crucial. The equation for CAPM can be given as follows: ……….. (1) The above equation is a CAPM equation and it is also known as the security market line. In this equation, is the expected return, is the risk free return, is the required return for a particular market portfolio. , measure the systematic risk (Keown, 1998, p.242). 1.2 Application The model provides a logical approach for analyzing the return that an investor should receive from an investment. More interestingly, the model is applied in a wide spectrum in the field of modern finance for the purpose of estimating the cost of equity and the performance of a company. Evaluating performance of companies in a particular industrial area is of great importance as it reflects the economic functioning of the area and further decides the strength of investor’s attraction in that particular area (Armitage, 2005, p.278). 2. Research Aims and Objectives The rationale thus created is that the CAPM model helps to calculate expected return of an investor and evaluate the performance of the companies. The concentration in this paper will be on the later trajectory i.e. performance of the companies. The aim of the paper is to find proper application of CAPM model in a real world scenario. The objective of the paper is centered on finding out the intensity of the companies creating value for their shareholders with data on ten US companies listed in the New York Stock Exchange. 4. Research questions The research questions that will be discussed in this paper are discussed below: 1. What is the importance of CAPM model in corporate finance? 2. What are the fields where the model is applicable and what important results it yield? 3. What decision criterion the model generates that drives the financial managers to take important business decisions? 3. Research hypothesis The research hypothesis that will be tested in this paper can be represented in a tabular format as given below: H0: The companies selected are not performing strongly to create value for the shareholders H1: The companies selected are performing strongly to create value for the shareholders H0 is the null hypothesis which will be tested against the alternative hypothesis H1. The data and testing procedure will be explained in a detailed manner in the methodology section. Now, the subsequent section will focus on a brief literature review on this particular financial model i.e. CAPM. 4. Literature Review Rigorous testing has been employed with CAPM model in the last three decades. Studies of Jensen and Scholes in 1972, Blume and Friend in 1973, Reinganum in 1981, Banz in 1981 founded that there exist a positive correlation between the realized return and as well as that between risk and return is a linear function. Through the ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Literature Review
However, both are critical in research papers and thesis and their choice depend on the requirements (Larocque, 2009). This paper will analyze the difference and similarities between annotated bibliographies and literature reviews. The paper will also look at the experiences of preparing a literature review.
3 Pages(750 words)Essay
Literature review
Hence, in this regard, both the private and the public sector have devoted considerable attention to the notion of customer satisfaction, which is a rudimentary basic in the customer-company relationship. Naturally, in order to increase the awareness about this concept, administrators have increasingly encouraged their staff to gain knowledge by studying and researching on this phenomenon of customer satisfaction for the welfare and growth of the organization.
10 Pages(2500 words)Literature review
LITERATURE REVIEW
The research was meant to do a pilot survey on skin hypersensitivity as a result of exposure to cyanobacteria. The study was carried out on volunteers mainly between the ages of 18 to 65 years. The use of a wide age range expanded the research and ensured reliable data was got.
6 Pages(1500 words)Essay
Literature review
This has not always been an easy task, yet society has continued to function one way or another for thousands of years. It is quite fascinating to define and describe culture because there are so many different ideas as to what constitutes a given group of people.
4 Pages(1000 words)Essay
Literature Review
2008). This review of literature will therefore, adopt the relevant studies, through which the researcher will be able to identify the issues that have been addressed and those that have not been addressed on the study topic. a) Purpose and Importance of Study The purpose of this qualitative study is to investigate the Indian business negotiation styles, and various factors that shape these negotiation styles.
5 Pages(1250 words)Essay
Literature Review
Different forms of negotiation are recommended for different disputes. Therefore, negotiation skills can be learnt and applied to help resolve these differences. Indeed, disagreement and misunderstandings are inevitable in our society due to the presence of individuals and their interrelationships.
5 Pages(1250 words)Essay
Literature review
In the study of the concept of learning organization, one of the issues that commonly arise is the distinct characteristics as compared to organizational learning. It is important to focus on the fact that learning organization means the
2 Pages(500 words)Essay
Literature review
lift would be using periodically repeated cycles, with accumulated liquid columns (neutralizing ions in this case) would be physically displaced to the surface by the high pressure lift gas injected below them. During the intermittent period, well fluids will be allowed to
2 Pages(500 words)Essay
Literature review
Shortage of nurses has been around for some years, but has aggravated as an issue in the recent years. There is shortage in the nursing profession at all levels ranging from educators to professionals. “Nursing colleges surveyed by the American
1 Pages(250 words)Essay
Literature Review
Market structure is the number one factor that directly influences the operations of any company, and certainly that of Kuehne+Nagel in the aerospace logistics sector. With little yet crucial elements like
3 Pages(750 words)Essay
Let us find you another Essay on topic Literature review for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us