Download or read book Estimating the Cost of Capital Implied by Market Prices and Accounting Data written by Peter Easton and published by Now Publishers Inc. This book was released on 2009 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: Estimating the Cost of Capital Implied by Market Prices and Accounting Data focuses on estimating the expected rate of return implied by market prices, summary accounting numbers, and forecasts of earnings and dividends. Estimates of the expected rate of return, often used as proxies for the cost of capital, are obtained by inverting accounting-based valuation models. The author describes accounting-based valuation models and discusses how these models have been used, and how they may be used, to obtain estimates of the cost of capital. The practical appeal of accounting-based valuation models is that they focus on the two variables that are commonly at the heart of valuations carried out by equity analysts -- forecasts of earnings and forecasts of earnings growth. The question at the core of this monograph is -- How can these forecasts be used to obtain an estimate of the cost of capital? The author examines the empirical validity of the estimates based on these forecasts and explores ways to improve these estimates. In addition, this monograph details a method for isolating the effect of any factor of interest (such as cross-listing, fraud, disclosure quality, taxes, analyst following, accounting standards, etc.) on the cost of capital. If you are interested in understanding the academic literature on accounting-based estimates of expected rate of return this monograph is for you. Estimating the Cost of Capital Implied by Market Prices and Accounting Data provides a foundation for a deeper comprehension of this literature and will give a jump start to those who have an interest in these topics. The key ideas are introduced via examples based on actual forecasts, accounting information, and market prices for listed firms, and the numerical examples are based on sound algebraic relations.

Download or read book Bank Capital and the Cost of Equity written by Mohamed Belkhir and published by International Monetary Fund. This book was released on 2019-12-04 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample of publicly listed banks from 62 countries over the 1991-2017 period, we investigate the impact of capital on banks’ cost of equity. Consistent with the theoretical prediction that more equity in the capital mix leads to a fall in firms’ costs of equity, we find that better capitalized banks enjoy lower equity costs. Our baseline estimations indicate that a 1 percentage point increase in a bank’s equity-to-assets ratio lowers its cost of equity by about 18 basis points. Our results also suggest that the form of capital that investors value the most is sheer equity capital; other forms of capital, such as Tier 2 regulatory capital, are less (or not at all) valued by investors. Additionally, our main finding that capital has a negative effect on banks’ cost of equity holds in both developed and developing countries. The results of this paper provide the missing evidence in the debate on the effects of higher capital requirements on banks’ funding costs.

Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.

Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.

Download or read book Mastering Illiquidity written by Thomas Meyer and published by John Wiley & Sons. This book was released on 2013-04-18 with total page 309 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arms investors with powerful new tools for measuring and managing the risks associated with the various illiquid asset classes With risk-free interest rates and risk premiums at record lows, many investors are turning to illiquid assets, such as real estate, private equity, infrastructure and timber, in search of superior returns and greater portfolio diversity. But as many analysts, investors and wealth managers are discovering, such investments bring with them a unique set of risks that cannot be measured by standard asset allocation models. Written by a dream team of globally renowned experts in the field, this book provides a clear, accessible overview of illiquid fund investments, focusing on what the main risks of these asset classes are and how to measure those risks in today's regulatory environment. Provides solutions for institutional investors in need of guidance in today's regulatory environment Offers detailed descriptions of risk measurement in illiquid asset classes, illustrated with real life case studies Helps you to develop reliable risk management tools while complying with the regulations designed to contain the individual and systemic risks arising from illiquid investments Features real-life case studies that capture an array of risk management scenarios you are likely to encounter

Download or read book Market Liquidity written by Yakov Amihud and published by Cambridge University Press. This book was released on 2013 with total page 293 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores the effect of liquidity on asset prices, liquidity variations over time and how liquidity risk affects prices.

Download or read book Merger Decisions written by Federal Deposit Insurance Corporation and published by . This book was released on with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Bank Liquidity Creation and Financial Crises written by Allen N. Berger and published by Academic Press. This book was released on 2015-11-24 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank Liquidity Creation and Financial Crises delivers a consistent, logical presentation of bank liquidity creation and addresses questions of research and policy interest that can be easily understood by readers with no advanced or specialized industry knowledge. Authors Allen Berger and Christa Bouwman examine ways to measure bank liquidity creation, how much liquidity banks create in different countries, the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, the effects of bailouts, and much more. They also analyze bank liquidity creation in the US over the past three decades during both normal times and financial crises. Narrowing the gap between the "academic world" (focused on theories) and the "practitioner world" (dedicated to solving real-world problems), this book is a helpful new tool for evaluating a bank's performance over time and comparing it to its peer group. - Explains that bank liquidity creation is a more comprehensive measure of a bank's output than traditional measures and can also be used to measure bank liquidity - Describes how high levels of bank liquidity creation may cause or predict future financial crises - Addresses questions of research and policy interest related to bank liquidity creation around the world and provides links to websites with data and other materials to address these questions - Includes such hot-button topics as the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, and the effects of bailouts

Download or read book Market Microstructure Theory written by Maureen O'Hara and published by John Wiley & Sons. This book was released on 1998-03-06 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by one of the leading authorities in market microstructure research, this book provides a comprehensive guide to the theoretical work in this important area of finance.

Download or read book Investment Valuation written by Aswath Damodaran and published by John Wiley & Sons. This book was released on 2002-01-31 with total page 1014 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation is a topic that is extensively covered in business degree programs throughout the country. Damodaran's revisions to "Investment Valuation" are an addition to the needs of these programs.

Download or read book Equity Markets in Action written by Robert A. Schwartz and published by John Wiley & Sons. This book was released on 2004-10-06 with total page 482 pages. Available in PDF, EPUB and Kindle. Book excerpt: An in-depth look at the nature of market making and exchanges From theory to practicalities, this is a comprehensive, up-to-date handbook and reference on how markets work and the nuances of trading. It includes a CD with an interactive trading simulation. Robert A. Schwartz, PhD (New York, NY), is Marvin M. Speiser Professor of Finance and University Distinguished Professor in the Zicklin School of Business, Baruch College, CUNY. Reto Francioni, PhD (Zurich, Switzerland), is President and Chairman of the Board of SWX, the Swiss Stock Exchange, and former co-CEO of Consors Discount Broker AG, Nuremberg.

Download or read book Measuring Systemic Liquidity Risk and the Cost of Liquidity Insurance written by Tiago Severo and published by International Monetary Fund. This book was released on 2012-07-01 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: I construct a systemic liquidity risk index (SLRI) from data on violations of arbitrage relationships across several asset classes between 2004 and 2010. Then I test whether the equity returns of 53 global banks were exposed to this liquidity risk factor. Results show that the level of bank returns is not directly affected by the SLRI, but their volatility increases when liquidity conditions deteriorate. I do not find a strong association between bank size and exposure to the SLRI - measured as the sensitivity of volatility to the index. Surprisingly, exposure to systemic liquidity risk is positively associated with the Net Stable Funding Ratio (NSFR). The link between equity volatility and the SLRI allows me to calculate the cost that would be borne by public authorities for providing liquidity support to the financial sector. I use this information to estimate a liquidity insurance premium that could be paid by individual banks in order to cover for that social cost.

Download or read book Inside and Outside Liquidity written by Bengt Holmstrom and published by MIT Press. This book was released on 2013-01-11 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.

Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stock Market Liquidity in Chile written by Mr.Luis Brandao-Marques and published by International Monetary Fund. This book was released on 2016-11-16 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chile has a large but relatively illiquid stock market. Global factors such as global risk appetite and monetary policy in advanced economies are key cyclical determinants of liquidity in Chilean equities. Evidence from a cross-section of emerging markets suggests strong protection of minority shareholders can help improve stock market liquitidity. Currently, illiquid in Chilean may have to pay 31⁄2 percent more as cost of equity. Corporate governance should be improved, namely through the adoption of a stewardship code.

Download or read book Measuring Liquidity in Financial Markets written by Abdourahmane Sarr and published by International Monetary Fund. This book was released on 2002-12 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.

Download or read book Theories of Liquidity written by Dimitri Vayanos and published by Now Pub. This book was released on 2012-10 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: Theories of Liquidity surveys the theoretical literature on market liquidity focusing on six main imperfections studied in that literature: participation costs, transaction costs, asymmetric information, imperfect competition, funding constraints, and search. The authors address three basic questions in the context of each imperfection: (a) how to measure illiquidity, i.e., the lack of liquidity, (b) how illiquidity relates to underlying market imperfections and other asset characteristics, and (c) how illiquidity affects expected asset returns. The theoretical literature on market liquidity often employs different modeling assumptions when studying different imperfections. Instead of surveying this literature in a descriptive manner, Theories of Liquidity uses a common, unified model to study all six imperfections that are considered, and for each imperfection addresses the three basic questions within that model. The model generates many of the key results shown in the literature. It also serves as a point of reference for surveying other results derived in different or more complicated settings, and for describing fruitful areas for future research.This survey is related to both market microstructure and asset pricing. It emphasizes fundamental market imperfections covered in the market microstructure literature, and examines how these relate to empirical measures of illiquidity used in that literature. It also examines how market imperfections affect expected asset returns - an asset-pricing exercise - and, in that sense, connects the two areas of research.