Security Analysis Or Portfolio Management free essay sample

Before Fama and French question it, most business schools taught their student CAPM is the means of describing the relationship between expected return and risk in stocks. In 1992, Fama and French hade a study on stock market decision factors of differences between stock returns, they found the beta (sensitivity to the market return) of the CAPM cannot explain all the differences between the stock returns, and the market value, book value ratio, p/e ratio of listed companies can explain the differences between the stock returns. The Capital Asset Pricing Model (CAPM) by Sharpe (1964), Lintner (1965), Black (1972), believe that stock returns just relative to the risk of the whole stock market. But in fact, only measures the risk cannot explain all the variation in expect returns, the sensitivity to the market return is more complicated. This article will show the different between Capital Asset Pricing Model and Fama amp; French Model, and the way to analysis the stock return. We will write a custom essay sample on Security Analysis Or Portfolio Management or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 2. Comparison of Value versus Growth Stock 2. 1 Value Stock amp; Growth Stock In this article, the researchers define the value stock as those stocks that have low ratios of book value to market value, the growth stocks as those that have low ratios of book value to market value. 2. 2 Findings of Value versus Growth Stock on Investing Most investors think the growth stocks can bring a better return, because they think those are good company, and the returns will be high. But the researchers find the growth can bring a better return, the value stocks got a high price by the market, which make their returns be low. In fact, the growth stocks have low ratios of book value to market value, it make the growth stocks get good return. 3. Determinants of stock return Fama and French founding that the market risk factor and the value-growth risk factor can explain average return of this set of large international stocks. The market risk factor is the return on an international market portfolio of stocks, and the value-growth factor is the difference between he return on an international portfolio of high book-to-market stocks and the return on an international portfolio of low book-to-market stocks. 4. Capital Asset Pricing Model vs. Fama amp; French Model 4. 1 CAMP and Its Importance The CAPM is built on a single measure of risk that explains asset returns. The CAPM helps investors determine how much they will earn by taking into account the risk of investments and the time value of money. With higher risk, the investor will want a higher rate of return for his investment. Although most researcher question CAMP, but this model still used widely in investing. Use beta to forecast single stock is different, but the investors still believe that, when the stocks’ portfolio of beta is small, it means the stock change small than the volatility of the market; when the stocks’ portfolio of beta is large, it means the stock change more than the volatility of the market. For the fund managers, this is important, they can use the CAMP, and no matter the market price is rising or falling. When the market price is falling, they can invest the portfolio of beta is low, and vice versa. 4. 2 Fama and French Explanation about Stock Return Compared with the CAMP, Fama and French use more complicated way to explain the stock return. They use three risk factors to design a more perfect model. It often used by the finance professionals to explain the risk and return of equity portfolios. In this model, the beta still is the most important risk factors. The second risk factor is the size, it compare the weighted average market value of stocks in the market. Small stocks have a different activity than big stocks in ever market. In the long run, the big stocks have low returns than small stocks. But this return is not free, the small stock have more risk. The third factor is comparing the amount of value stock exposure in relation to the market. In most companies, the value stock rend have lower earnings growth rates, higher dividends, and higher book-market value. In the long run, the value have higher return. 4. 3 Implications of the Two Models for Investors This tow models had implications for investors, although the CAPM is not accurate,but it still can help people to get investing idea for the market. First of all, the CAPM thinks the market too simple, it only considers the risk, and there are at least two additional dimensions of risk, no matter it is a domestic or international portfolios of stock, it is get rewarded in average returns. Secondly, another implication is that, it makes the investors believe the value stocks have higher returns than growth stocks in markets around the world. Looking at book-to-market equity, Fama and French found that value stocks outperformed growth stocks in 12 of 13 developed countries from 1975 to 1995, and that the difference between average returns on global portfolios of high and low book-to-market stocks was 7. 6 percent per year. Furthermore, when earnings-to-price, cash flow-to-price and dividend-to-price were examined, the value premium continued to be evident. Conclusion Although the CAPM stills an important mean to describe the relationship between expected return and risk in stocks. But CAPM has some serious flaws, especially with the assumptions of the risk-free rate and the market rate. Investors must consider current market conditions before deciding what numbers to use. Additionally, CAPM ignores taxes and transaction costs, lower returns on higher risk and adequate risk measurement. Fama and French think more about the stock return, this model use more risk factors to analysis the change of the stock price.

Essay Topics That Students Should Not Use in Their Personal Essays

Essay Topics That Students Should Not Use in Their Personal EssaysThere are many topics that can be covered in a sample of a writing assignment. As a final exam, students often use these assignments as a place to practice their skills or as a way to learn a new skill. Whatever the reason for using a sample of a writing assignment as a practice exercise, it is important to read this article to find out how.Writing assignments should not be taken literally. While they are intended to be practice exercises, students should never write their entire essays about themselves. They should concentrate on speaking about an independent topic and addressing other people. It may be easier to write about yourself in this manner, but writing about yourself in this way is not appropriate in a final exam or in a student journal or thesis. A student should make sure that all of the information in the writing assignment is presented to the reader in a neutral manner.In addition, make sure that the writ ing assignment is always concise. Many students do not focus on the important information that they must include in a final exam. When they try to write an essay about themselves, they may include too much information that is irrelevant and detracts from the main point.An excellent example of this can be found in the composition sample used for personal essays. Students often try to express their feelings, but this essay task is much more challenging than that of a regular composition. The sample of a personal essay to be used in a composition is often long and complex. While it is not impossible to complete, it will require the student to think through different sections of the essay before completing it.Students should also make sure that they are only writing about themselves in the sample of a composition. If the student finds that they need to speak to other people, they should use the written assignment as a way to practice their skills. By writing about themselves, they will learn how to write about other people as well. In addition, they will be able to see how their writing stands up to the demands of the final exam.In addition, final exams are often timed and students should pay attention to how long they have left before the time is up. In some cases, students will need to get up and walk away from the computer in order to rearrange their papers and look for important notes. This is why it is important to always begin a composition sample with the right chapter header. This will be an indication to the student that they need to pause the work for a few minutes in order to make notes. The chapter headings that are placed on top of the chapters are also there to help the student organize their thoughts and ideas.Many students find that the first chapter of the composition is most important. This is a great time to introduce the concept of the sample of a writing assignment. Before they have finished the entire essay, they will feel comfortable enough to begin writing about themselves and the other students in the composition. At this point, the student should be able to begin writing about other people.If you are looking for sample essays that you can use in class, make sure that the essay is written about a topic that you are familiar with. Try to choose a topic that has not been addressed before and also look for a good sample to write about.