Financial market

A financial market can be defined as a marketplace where assets such as equities, bonds, currencies and derivatives are traded between buyers and sellers. Financial markets are also known to have the following characteristics, transparent pricing, conditions and regulations on trading, fees and costs (Investopedia). Bonetti and Cobham (1992) state that financial markets can be seen as a system which allows ultimate lenders also referred to as the economic agents to lend money ultimate borrowers. Ultimate lenders are those who save out of their incomes whereas ultimate borrowers are the ones who invest and buy these assets. The UK financial market has three components which form the market, the stock (equity) market, bond (debt) market and…

The aim of this paper is to test whether the momentum effect is still exist in UK financial market and the test for the effect and profitability of momentum strategies in paper is based on the methodology used by Jegadeesh and Titman (1993) and DeBondt and Thaler (1985, 1987). While, this study assess the profitability of JxK trading strategies, where the securities are assigned to portfolios according to a ranking in period t based on the previous J months ‘returns. In order to avoid biases,…

John Allison lays out his plan to fix the world economy, following the financial crisis in 2007, in his book, The Financial Crisis and the Free Market Cure. Allison begins by detailing what he believes to be the cause of the financial crisis. From the very beginning of the book, it is clear he has a very strong conservative bias. The majority of the chapters in his book follow the same format: blame some federal regulatory body, show how those regulatory actions pushed the financial industry to…

Equity Analyst Recommendations Researchers Baker and Dumont study the analyst of equity and give recommendations. The researchers state that the recommendations accuracy has been a discussed topic of debate. William and Bakers say that the research done recently shows that the agreed upon analysis has not been leading to greater net returns compared to the average market research. But the researchers state the problem with recommendations are Baker and Dumont (2014) : there was evidence that…

regulation, has progressed into an industry threatened by corruption. This corruption led America straight into the 2008 financial crisis, now known as one of the greatest crashes within the financial industry. The movie, The Big Short, successfully portrays this corruption by capturing the truth behind the big banks along with the lies told to the American people. A primary factor in the collapse of the financial market deals with predatory lending. Predatory lending is the process of placing…

used in establishing the required rate of return for different types of assets. The models, including the capital asset pricing model (CAPM), the Arbitrage Pricing Theory (APT), and the Dividend Discount Model (DDM) use several assumptions regarding the information available to investors to establish the value of assets. Information is essential in the financial markets, it influences investors decision to invest and how successful is the investment if one gets it right. This is achieved after…

Two different perspectives disagree that the size of the firm and the BTMR should be included as main variables in explicating the ER. The first perspective explicates why small stocks, as well as high BTMR stocks, beat the market by using the behavioural principles of the stock. For instance, Lakonishok, Shleifer and Vishny (1994) indicated that the size of the firm and BTMR cannot be proxies of risk. Accordingly, the TFM cannot be utilised to explicate the return of stocks. They tested the…

TI current strategy to focus in customer and involve earlier into customer’s product life cycle, differentiate itself with rivals. TI sales grow faster than industry average. The firm’s image and reputation grows stronger, TI profit margin increase and better than industry. The net profit and return on investment grow stably. The overall financial strength improves. TI can create the premium value to customer by providing additional service to help customer to solve issue and delivery when…

The asymmetric information in the financial market The imperfect nature of the financial market can be a cause of the crisis. In many economic models markets are assumed to be efficient, which is the demand and supply will match each other under the guidance of the price. Although there is nothing such as perfect market, the assumption of near perfect efficient market does stand for itself in some cases. For example, the food grain market and some raw material markets. However, the financial…

The two factor model not only explains some of the missing attributes of the factor model Fama and French (1993) but also describes the fundamental to price ratios (such as Earnings to price, book to market, dividend to price and cashflow to price), returns to portfolio on size and the contrarian strategy of DeBondt and Thaler (1985). This paper also discusses the relation between risk using pooled cross section time series and liquidity as a firm characteristic in the least squares regression…