Design an Investment Strategy using Behavioral Finance Concepts Introduction Traditional economic and finance literature assumes that investors approach risk and return rationally. However‚ in real life‚ the emotions drive investors to make many fundamental missteps during investment. After study Behavioral Finance this year‚ I understand how people actually make decisions and ways in which they tend to deviate from full rationality. Understanding of these biases can help me to avoid some
Premium Stock market Investment Stock
Summary Wanting to add Nike’s share to her portfolio‚ Kimi Ford asked her new assistant‚ Joanna Cohen‚ to estimate Nike’s cost of capital. Cohen‚ later‚ came up with the cost of capital of 8.4% that was contradicted to Ford’s cost of capital of 12%. This report points out flaws of Cohen’s assumption and recalculates the WACC to obtain the most accurate cost of capital. In the cost of equity calculation‚ we will use CAPM‚ the dividend discount model (DDM)‚ and the earnings capitalization model (ECM)
Premium Weighted average cost of capital Stock market Stock
9-204-109 REV: OCTOBER 23‚ 2006 MIHIR DESAI Globalizing the Cost of Capital and Capital Budgeting at AES In June 2003‚ Rob Venerus‚ director of the newly created Corporate Analysis & Planning group at The AES Corporation‚ thumbed through the five-inch stack of financial results from subsidiaries and considered the breadth and scale of AES. In the 12 years since it had gone public‚ AES had become a leading independent supplier of electricity in the world with more than $33 billion in assets
Premium Weighted average cost of capital Asset Balance sheet
Professor Barney Hartman-Glaser Finance 898 Real Estate Finance Duke University‚ Fuqua School of Business Description This course will consist of 50% Real Estate investment analysis and 50% Real Estate Capital Markets. The course should be of interest for students interested in real estate investment‚ real estate finance‚ fixed-income investments‚ and the recent global financial crisis. Real Estate Investments The course will begin with an introduction to the fundamentals of Real Estate valuation
Premium Subprime mortgage crisis Mortgage
Investment Theory and Strategies A. Passive vs. Active Strategy i. Passive One of the most profound ideas affecting the investment decision process‚ and indeed all of finance‚ is the idea that the securities markets‚ particularly the equity markets‚ are efficient. In an efficient market‚ the prices of securities do not depart for any length of time from the justified economic values that investors calculate for them. Economic values for securities are determined by investor expectations about earnings
Premium Stock market Option Financial markets
paper will look at the three most common models used for estimating the rate of return for a given company; dividend growth‚ Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT). The board of directors for Apple Computer Corporation will receive this report‚ and based on the findings and analysis included‚ Apple will be given a recommendation as to the cost equity model they should implement to estimate their future rate of returns. This report will discuss the accuracy and ease
Premium
University of Bristol - School of Economics‚ Finance and Management QUANTITATIVE METHODS FOR FINANCE AND INVESTMENT (EFIMM005) Review Questions Question 1: Concepts a. Define a stochastic process. Give an example in Finance of a quantity that can be modelled as a stochastic process. b. Define a stationary stochastic process. c. Consider a stochastic process {Yt ‚ t = 1‚ ..‚ T }. Define the partial autocorrelation function (pacf) associated to this process. d. Explain the difference between estimator
Premium Time series analysis Variance
According to Attrill and Mclaney‚ 2009‚ there are four (4) approaches to capital budgeting. The net present value (NPV) is one of such and is a summation of all discounted cash flows(Present Value) associated with whichever project(s) are undergoing appraisal. Every appraisal method have decision rules‚ examples include the Payback Period(PBP) which stipulates the approval of projects that pays back the initial investments within a specific period. For this method (Net Present Value) to be most
Premium Net present value
Assignment | Cost of Capital‚ Capital Budgeting and Financial Planning | Chapter(s) | 9‚ 10‚ 12 | Group Name | | Student Name(s) | | Date | | Instructions: HW Assignments will be uploaded to Kean Blackboard and must be accessed from there. You must work in groups where assigned (or independently if not assigned to groups) on homework assignments. Points are noted against each question. You are required to submit Home Work assignments electronically on Kean Blackboard using MS-Office
Premium Net present value Internal rate of return
review what does our traditional finance framework and the CAPM model‚ for example‚ have to say about risk? What is it? How is it approached? The traditional finance framework uses discounted expected future cash flow to determine the NPV of the project. The amount of the opportunity cost is based on a relation between the risk and return of some sort of investment. People are rational and adverse to risk and need incentive to accept risk. The incentive in finance comes in the form of higher expected
Premium Risk Investment Interest