StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Finance market - Essay Example

Comments (0) Cite this document
Summary
Returns from the stock markets have been the subject of intense debate since a long period of time .Several theories suggesting various constructs and factors responsible for determining the returns from the stocks have been postulated thus far.It was not until the late 1960s and early 1970s that a fully-developed, empirically-supported theory of share prices' behavior emerged in the form of the Efficient Markets Hypothesis (EMH).Prior to the development of the EMH , analysts assumed some degree of dependence across successful price changes…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.6% of users find it useful
Finance market
Read TextPreview

Extract of sample "Finance market"

Download file to see previous pages RWT basically stated that speculative price changes were independent and identically distributed, so that the past price data had no predictive power for future share price movements. RWT also stated that the distribution of price changes from transaction to transaction had finite variance. In addition, if transactions were fairly uniformly spread across time and were large in numbers, then the Central Limit Theorem suggested that the price changes would be normally distributed. Kendall (1953) calculated the first differences of twenty-two different speculative price series at weekly intervals from 486 to 2,387 terms. He concluded that the random changes from one term to the next were large and obfuscated any systematic effect which may be present. In fact, he stated that 'the data behaved almost like a wandering series' (random walk). Specifically, an analysis of share price movement revealed little serial correlation, with the conclusion that there was very little predictability of movements in share prices for a week ahead without extraneous information. In 1959, Roberts generated a pattern of market levels and changes akin to real levels and changes in the Dow Jones Industrial Index. He estimated the probability of different share price movements over time by using a frequency distribution of historical changes in the weekly market index, and assumed weekly changes were independently drawn from a normal distribution with a mean of + 0.5 and a standard deviation of 5.0. He concluded that changes in security prices behaved as if they had been generated by a simple chance model .The fundamental concept behind random walk theory is that competition in perfect markets would remove excess economic profits, except from those parties who exercised some degree of market monopoly. This meant that a trader with specialized information about future events could profit from the monopolistic access to information, but that fundamental and technical analysts who rely on past information should not expect to have speculative gains.
From the empirical evidence and theory of random walks arose the theory of efficient markets. Fama (1970, 1976) gives out the details of the early literature on both the theoretical and empirical foundations of the Efficient Markets Hypothesis, whilst Cuthbertson (1996) summarizes the latest research developments. While EMH has empirical findings in respect of aspects like market perfection and information availability when combined with practices like trading platform and transaction costs may produce only marginal and well calculated opportunities for speculative gains; many other economists have quoted the existence of stock market bubbles. A bubble is generally defined by the economists as a deviation from stock market fundamentals; whereas Kindleberger reckons a bubble as an upward price movement over an extended range that tends to implode (Kindleberger 1996). By the same analogy an extended negative bubble is a crash. The existence of such situations has immediate ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Finance market Essay Example | Topics and Well Written Essays - 2500 words”, n.d.)
Finance market Essay Example | Topics and Well Written Essays - 2500 words. Retrieved from https://studentshare.org/miscellaneous/1533491-finance-market
(Finance Market Essay Example | Topics and Well Written Essays - 2500 Words)
Finance Market Essay Example | Topics and Well Written Essays - 2500 Words. https://studentshare.org/miscellaneous/1533491-finance-market.
“Finance Market Essay Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.org/miscellaneous/1533491-finance-market.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Finance market

Finance and Accounting Assignment: Credit and Market Risk

...?The seminars and workshops conducted throughout the semesters have been very helpful in making me aware about how firms are making use of different concepts in the real world that I have learnt throughout the semester. In addition to this, these seminars and workshops are helpful in learning from the experience of some of the top management people in different organizations as they share their own experience as well. This report represents and analyzes the seminar 3 which was related to Ratio analysis and their implications in the real world. Ratio analysis is an important way for researchers and financial analysts to analyze the performance of the firm against their past performances and at the same time ratio analysis... seminars and...
13 Pages(3250 words)Assignment

Behavioural Finance Viev On Market Bubbles

... 1990s, and the recent sub-prime mortgages and the Collateral Debt Obligations crisis. This paper investigates these market events through relevant research material and identifies the anatomy and behavioral finance phenomena of the events using information. The tulip bulbs speculation, which was at its peak in February 1637, and the consequent market crash that followed mark the most notorious economic hard times in the History of Dutch (Goldgar, 2007:5). Together with Britain’s Sothern Sea Buble in the 18th century, these are the earliest example of irrational market behavior that affected investors in Europe. The Semper Augustus, a tulip bulb type, was both sublime and prosaic than any comparable bonds or stocks, it was extraordinarily...
10 Pages(2500 words)Essay

Economics and Finance: The Corporate Bond Market

... for any company. The following sections give an outlook of the market, on how it functions(the securities which can be issued in the market), the advantages of issuing bonds over other sources such as equity markets and other sources of finance, the types of firms that can issue the corporate bonds, the providers of debt and their requirements. The information of the corporate bond markets will help the Board in making informed decision regarding the use of corporate bonds for raising capital to finance the new project which is worth 800 million. Types of securities that can be issued in the corporate bond market The following are the three types of securities that a firm can issue. 1. Debentures A debenture is a type of a document...
8 Pages(2000 words)Term Paper

Finance and Market , short essay question

...? Finance and Market Question Answer: Real E Investment Trust can conduct property investment in two different approaches. The first approach is the application of diversification, where the REIT considers a combination of various lines of business under the same business title. The second approach is by focusing on a specific real estate portfolio. In the focused approach, REITs focus on specific lines of specialization in Real estate property business. In whichever the option that the REITs prefer, there comes a package of advantages and disadvantages. For the purpose of this study, we dwell on the advantages and disadvantages of the diversification of REITs holdings’ activities as opposed to the focused approach. Advantages Wider Market...
34 Pages(8500 words)Essay

Impact of Personal Finance on UK Housing Market

...?Impact of Personal Finance on UK Housing Market Introduction The United Kingdom (UK) housing market is highly fragmented and involves heavy investment in form of individual household and properties for rental purposes. The housing market is very crucial for the UK economy and consists of high, medium and low income residential, shopping and industrial complex. Presently, the UK housing market resembles a great unsustainable economic bubble which is fuelled by the cash reserves of the overseas investors (BBC News, 2003). The high price valuation in the main cities of the UK like, London is no longer considered an attractive site for rental and permanent housing complex. The individual household and rental properties form the backbone...
8 Pages(2000 words)Essay

Behavior finance and market efficiency

...? [BEHAVIOUR FINANCE AND MARKET EFFICIENCY] Behaviour Finance and Market Efficiency Date: November 18, 2013. Section A: Behavioural Finance The Main Causes and Underlying Drivers of the Recent Global Financial Crisis The recent global, financial crisis spread from the source crisis country to other countries, and consequently, across global, financial markets. It commenced from the United States’ subprime mortgage market and spread across global, financial markets (Gonzalez-Hermosillo, 2008, p, 3). Conditions in global, financial markets affect international investors’ risk appetite. Changes in international investors’ risk appetite may be responsible for the spread of the original shock across, global, financial markets (Gonzalez...
11 Pages(2750 words)Essay

BEHAVIOURAL FINANCE AND MARKET EFFICIENCY

...? Behavioural Finance and Market Efficiency Total Number of Words: 2,998 Introduction Since 1990s, the study of behavioural finance and market efficiency often goes hand in hand. In most cases, inefficient market can lead to the development of economic recession. As a result of having poor market efficiency, a lot of global investors have become reluctant in investing their money on local and internal businesses. In general, the ability of each country to develop efficient market has something to do with the development of capital asset1. Due to the presence of inefficiency within the global market, the sales and profitability of a company is not only affected but also the country’s ability to build a more reliable capital asset. Therefore...
12 Pages(3000 words)Essay

International Finance Market

...Introduction The financial market worldwide has transformed dramatically post World War II. Presently a strong interconnecting link has developed between the various financial markets (Coles, 1981). These days the large companies spend a lot of resources in deciding their optimal capital requirement (National Bank Share and Bond Trading, 2008). This assignment aims to explore how companies raise capital from the bond and equity markets. These include initial public offering, seasoned equity offering, and straight debt issues. Various finance literatures which explore the topics in-depth are looked into. Also, the importance of the capital asset pricing model for firms which want to evaluate their cost of capital, is explored in the next...
6 Pages(1500 words)Essay

Market segmentation (finance)

... 03 July 2009 Market Segmentation Market segmentation is one of the main concepts used by marketing companies to divide the market between particular target groups and meet needs and wants of target customers. Divergent product policies adjust product lines to individual market segments -- they implement market segmentation. By assuming that demand is heterogeneous, market segmentation obtains a better match with distinguishable market segments. Product differentiation gives marketers a share of a broad, horizontal market, whereas market segmentation tends to result in cultivation of a market position in depth. Given the analogy of a layer cake, product differentiation seeks to secure a layer of the cake, whereas segmentation seeks a wedge...
2 Pages(500 words)Essay

Virgin Airlines finance and market capability

... Corse Virgin Airlines finance and Market Capability Virgin Atlantic was started in the 80s by Richard Branson after his success with his music label. In the later years, he focused on improving the services of the airline and in general bulk investments. Since then, the airline has grown into an award winning organization which yet shows great potential. In UK, the airline has recently founded the Little Red project which purposefully does domestic flights within the UK. Ratio analysis for Virgin Atlantic year 2014 financial statement. All figures are in thousand dollars Debt-to-Equity Ratio 1. Total Liabilities / Shareholders Equity 2014: 540,923 / 459,253  1.18 The ratio shows that Virgin has been aggressive in financing its growth...
1 Pages(250 words)Essay

Starbucks in Chinese Market

In the year 1996, the coffee giant marked its global presence. Up until 2004, the Chinese government prohibited Starbucks to operate its own stores in China. As a result, the coffee giant enters the Chinese market by joint-venturing with Chinese food and beverage companies and licensing other companies to own and operate its stores--differs from its domestic approach. But the company was able to easily overcome its initial obstacles and marked its presence in China very quickly and successfully with great brand recognition and customer satisfaction. The company also tailors its stores to match the local atmosphere. This is a transnational strategy. “For example, the Starbucks strategy in Shanghai is to attract middle to high...
7 Pages(1750 words)Case Study

The Challenges of Foreign Market

Any multinational company is exposed to risks such as change of foreign currency exchange rate, commodity prices, and interest rates because it denominates its transactions in foreign currencies. That’s why there is also some uncertainty in future earnings, liabilities and assets values.
Therefore, before taking a decision on the country of entry, a profound analysis of its current political and economical situation is to be performed. According to Kotler and Armstrong (351-361), a decision on whether to enter a foreign market should be based on a profound analysis of potential risks and opportunities, as well as the company’s internal resources.
The company is a Limited Liability that exports roasted and gro...
11 Pages(2750 words)Case Study

Contemporary Managerial Issues in Accounts and Finance

Political theorists like Veblen argued that the separation of corporate ownership from control generates a transfer of power from a minority of stockholders to a group of decisive owners who have the control over the way of access to credit and finance (Roe, 1994, p. 5).
However, contemporary analysts of corporate power contested that dominance and ownership in modern corporations have shifted to a property-less group of managers. Consequently, this current shift of power and control in large modern corporations could usher in ultimate preoccupation over profit rather than non-financial motives. Furthermore, the separation of power and ownership will lead to the destruction of the traditional legal theory of property which en...
23 Pages(5750 words)Literature review

Market Structure

The market structure is mainly classified based on the number of active players in that market. These market players are the main component to supply a particular type of product in that market. If we look at the economists' view, these players within an industry are the main parameter for the level of competition in that industry. Whether it is a perfect competition or monopolistic competition these players supply only a small portion of the total output for the industry but this small contribution only determines the main market structure. If we talk about the market types there are few players in the oligopoly markets, only two in duopoly and a single player in the monopoly markets.
If we talk about car manufacturing compa...
10 Pages(2500 words)Coursework

Oil Prices by OPEC and Market Fundamentals

Market failure is defined as the inefficient allocation of resources by the market, the free market is considered to optimally prices and resources in the production of goods and services, and this is because the price and quantity produced are determined by market forces which include the demand and the supply. The control of prices by a firm or an organization in the market results in market failure, therefore OPEC leads to market failure due to its nature in the market.

OPEC was formed in 1960 by 5 oil-producing countries which include Venezuela, Saudi Arabia, Kuwait, Iran and Iraq, The aim of this organization was to unify petroleum-producing countries in order to realize fair and stable prices of oil .other oil-pro...
6 Pages(1500 words)Report

The Effects of Financial Crisis on Supplier Selection Criteria of the Oil and Gas Industry Equipment Market

It is a difficult task to find those vendors who not only have the adequate quality and quantity of the needed raw materials but who also have an attitude of efficiency and display commitment to customer service (Sonmat, 2006). Further, organizations also strive to locate and select vendors who can be depended upon for long term relationship.

The number of factors or attributes desired from the vendor is vast, and different organizations and different industries place different importance on the attributes (Sonmat, 2006). Some of the vendor attributes may gain importance owing to the nature of the industry, for example, in the case of consumer perishables suppliers, like fresh vegetables or fruits, the buying firm would...
20 Pages(5000 words)Literature review

Economic Models: The Free Market and The State Owned System

The free market concept is mainly a theoretical concept as every country, even capitalist ones place some restrictions on the ownership and exchange of commodities (Free market economy). Therefore, the term free-market economy primarily means a system where the buyers and sellers are solely responsible for the choices they make. It gives the buyers and sellers the power to do business without being afraid of any regulations and intervention by the state. Hence, a free market gives the absolute power to prices to determine the allocation and distribution of goods and services (Free Market Economy). The pricing mechanism is in turn, driven by the forces of demand and supply of goods and services. Demand and supply of...
9 Pages(2250 words)Case Study

Money Policy versus Credit Market

Financial institutions generally engage in securitization to enhance their profits by trading in the collateralized backed securities that generate high yield returns to the financiers. This nevertheless inversely and negatively affected the credit markets as their efforts to enhance their liquidity positions backfired. Consequently, the import of these monetary strategies has generated cyclical effects on the monetary system to the detriment of the financial system.

Normally, money markets demonstrate a more efficient allocation of credit whenever additional liquidity is injected into the system, which would otherwise display some undesirable distortions. Ultimately, the liquidity market is not easily susceptible to ex...
6 Pages(1500 words)Case Study

Foreign Market Entry and Diversification

...Foreign Market Entry and Diversification Table of Contents Identification and discussion of the trendsin the global beer markets 3 International expansion trends and Modelo’s internal expansion 5 The next foreign market Modelo should enter 6 Challenges from InBev 7 Modelo should diversify 8 References 10 Identification and discussion of the trends in the global beer markets Beer industry is one of the largest industries in the world. Over the last few years the entire alcohol industry enjoyed a satisfactory performance. In 14th century modern beer industry started in Europe. Since the tastes of consumers vary from region to region, the industry was clustered in nature and it was dominated by several local breweries. Earlier transportation...
7 Pages(1750 words)Assignment

Introductory Economics and Finance: Why Governments Regulate Firms and Markets

By government regulation, it is meant by the rules administered by a government or government agency to influence any economic activity which determines the price, types, and standards of products, and most importantly the conditions under which the entry and exit of the firms are possible.

Like death, it is impossible to keep away from regulation in about every aspect of daily life. The business regulation may be classified into two- economic and social (Litan). The economic regulation deals with price controls and the entry limits of the firms into markets. The second type regulation mostly deals with externalities (the outside influences of the company or firm which may or may not be decided by them)

Examp...
6 Pages(1500 words)Assignment
sponsored ads
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.

Let us find you another Essay on topic Finance market for FREE!

Contact Us