FINS5517_APPLIED PORTFOLIO MANAGEMENT & MODELLING_2005 Semester 2_w5_riskadj
Application Portfolio Management 产品说明说明书
Application Portfolio ManagementAssess and manage all applications, business processes, and objectives with the powerful analysis and visualization tools in APM.BrochureBrochureApplication Portfolio ManagementVisualize Y our Application Portfolio LandscapeThe first step to transforming your organization for the digital age is understanding the status quo. In many organizations, application portfolios have grown beyond the IT organization’s ability to e ffectively manage in a budget-constrained environment. Such bloated portfolios increase IT costs and hamper business agility. APM helps enterprises to reduce redundancies and improve efficiency with robust graphical views of cost, risk, and value measures.Applications Are Always OnFrom back end operations to web based services, applications power your enterprise, but over time, legacy applications have multiplied, and the associated data has ballooned in size. In the quest to maintain a competitive advantage and keep IT costs low, your organization may not have retired its legacy applications when it introduced new ones; resulting in an application portfolio that has become bloated and overly complex. Application transformation is defined as a program to streamline and modernize an organization’s application portfolio by reducing the number of applications required to run the business, and ensuring existing applications are delivered in the most cost effective way. In order to help organizations achieve this, OpenT ext™ offers a leadership portfolio of services, software, technology, and experience that delivers the core elements of an application transformation.The Need for Application Portfolio ManagementMany IT organizations fail to maintain an accurate record of all the applications that are being used by the business, which includes what business processes they support, what are the underlying platforms, and who depends upon them. The Application Portfolio Management (APM) software module from OpenT ext begins by documenting business process and application dependencies—through both automated bottom up discovery and manual top down surveys, documentation reviews and interviews—and then records the portfolio into a single repository, enabling comprehensive visibility and control of the application portfolio. APM provides the capability to load industry standard business process frameworks, or client specific models, to capture the enterprise’s organization, business objectives, location, server, and of course, application information. A rich set of analysis tools automates the search for optimization opportunities through relationship and dependency graphing and multi dimensional visualization.Answers provided by OpenT ext™ Application Portfolio Management (APM) include:■How are your applications performing over time?■Do the application returns justify the investment and risk of ownership?■Does the application portfolio need to be adapted to new marketconditions?■Are some application assets degrading, while others improve?■Where should we put new money to maximize returns? Application Portfolio Management enables IT to assess and prioritize the portfolio for rationalization and modernization opportunities based on both business goals and IT technology decisions; and then provides ongoing support through business events such as mergers and acquisitions, divestiture, and IT sourcing strategy changes. APM is not just about optimizing application roadmaps; it is also about synchronizing “IT priorities” with “business priorities”. As a result, APM should be viewed as an extension of the strategic planning of the IT organization, especially given that these applications automate core business operations.T o illustrate how critical strategic alignment is, the Flexera 2020 CIO Priorities Report says:“As organizations advance toward digital transformation, IT strategic alignment with the business becomes increasingly important. IT lead-ers who understand the organization’s strategic goals and align IT with those goals elevate IT from a role of technology implementer to one ofequal partner in the business. In this enhanced role, IT is involved early on in strategic business decisions, especially those regarding technol-ogy direction.”—Flexera 2020 CIO Priorities Report*Figure 1. Elements of application transformationGovernance—a Key to Successful T ransformationsThe application transformation journey is usually undertaken because IT is overcommitted, over budget, and overwhelmed. Once this has been addressed, it is imperative, although not easy, to prevent it from happening again. With multiple operational and strategic activities under evaluation or underway at any given moment, successful delivery and maintenance of your application portfolio is anything but guaranteed.An answer lies in using OpenT ext™ Project and Portfolio Management (PPM) Center software, in conjunction with APM, to manage and enforce governance throughout the application transformation process and beyond. PPM is a comprehensive project and portfolio management offering that gives you the information you need to make the right business decisions, lower the total cost of running your business, and reduce risk associated to the build out or ongoing maintenance of your application portfolio. You can also manage your portfolio with greater financial transparency to meet your requirements to deliver business value efficiently and effectively. This visibility will give executives the information they need to stay the course or make changes as necessary to the investments that are being made. The PPM foundation is also the same foundation upon which the APM software is built.Figure 2. Role of governance and APM togetherOur Unique Value to Application TransformationOpenT ext has taken many years of IP and learning from delivering rationalization engagements for customers and incorporated much of that knowledge into the software product through standardized models, __________*F lexera, 2020. Flexera 2020 CIO Priorities Report. Accessed Nov 15, 2020. https:///SLO-REPORT-CIO-Priorities-2020flexible information capture capabilities, and the ability to analyze the information across multiple dimensions (technical, business, and so on). This experience has taught us that enterprises sometimes need to make the best decision even when the information is not perfect or comprehensive. Hence, the APM software allows for side by side comparisons of multiple alternatives against a variety of criteria and to quickly modify these criteria, thus evaluating the application portfolio across several dimensions prior to arriving at decisions. Furthermore, since enterprise portfolios often become dated due to the difficulty of information capture, the software incorporates key capabilities, such as periodic surveys based on pre built templates to make sure that ongoing decisions and analysis are based on the most current information.T o Learn MoreIf you’re looking for a way to improve your Application Portfolio Management and Project and Portfolio Management, visit: microfocus. com/ppm/opentext“As organizations advance toward digital transformation, IT strategic alignment with the business becomes increasingly important. ITleaders who understand the organization’s strategic goals and align IT with those goals elevate IT froma role of technology implementer to one of equal partner in the business. In this enhanced role, IT is involved early on in strategic business decisions, especially those regarding technology direction.”FLEXERA 2020 CIO PRIORITIES REPORT*__________*F lexera, 2020. Flexera 2020 CIO Priorities Report. Accessed Nov 15, 2020.https:///SLO-REPORT-CIO-Priorities-2020Figure 3. Synchronizing IT priorities with business priorities。
CFA 3 portfolio management 英文原版noteLecture 020
Chapter 1 Portfolio Management Process & IPS
2
Portfolio Management Process
PLANNING Capital Market Expectations E(r)/σ
LT/ST risks
PLANNING Investor Objective & Constraint IPS
3. What is investor’s ABILITY to take risk?
4. How much risk is investor BOTH willing & able to bear? 5. What are specific risk objectives? 6. How should investor allocate risk?
EXECUTION ST Tactical Asset Allocation Security Analysis Transaction Costs FEEDBACK Performance/Monitoring Performance measures Sp Attribution analysis REBALANCE
10tives (Risk & Return)
Risk Tolerance (t): capacity to accept risk
High
Risk Aversion (A): inability & unwillingness to take risk Low
Institutions (homogeneous)
Rational Objective measures
FINS5513_SECURITYVALUATIONANDPORTFOLIOSELECTI..
CHAPTER 19: FINANCIAL STATEMENT ANALYSIS1. ROE = Net profits/Equity = Net profits/Sales × Sales/Assets × Assets/Equity= Net profit margin × Asset turnover × Leverage ratio= 5.5% × 2.0 × 2.2 = 24.2%2.ROA = ROS × ATOThe only way that Crusty Pie can have an ROS higher than the industry average and an ROA equal to the industry average is for its ATO to be lower than the industry average.3. ABC’s Asset turnover must be above the industry average.4. ROE = (1 – Tax rate) × [ROA + (ROA – Interest rate)Debt/Equity]ROE A > ROE BFirms A and B have the same ROA. Assuming the same tax rate and assuming that ROA > interest rate, then Firm A must have either a lower interest rate or a higher debt ratio. 5. SmileWhite has higher quality of earnings for the following reasons:•SmileWhite amortizes its goodwill over a shorter period than does QuickBrush.SmileWhite therefore presents more conservative earnings because it has greatergoodwill amortization expense.•SmileWhite depreciates its property, plant and equipment using an accelerated depreciation method. This results in recognition of depreciation expense sooner andalso implies that its income is more conservatively stated.•SmileWhite’s bad debt allowance is greater as a percent of receivables.SmileWhite is recognizing greater bad-debt expense than QuickBrush. If actualcollection experience will be comparable, then SmileWhite has the moreconservative recognition policy.19-119-26. a. EquityAssetsAssets Sales Sales profits Net Equity profits Net ROE ××=== Net profit margin × Total asset turnover × Assets/equity%92.90992.0140,5510Sales profits Net ===66.1100,3140,5Assets Sales == 41.1200,2100,3Equity Assets ==b.%2.2341.166.1%92.9200,2100,3100,3140,5140,5510ROE =××=××=c.g = ROE × plowback = 23.2% × %1.1696.160.096.1%2.23=−×=7.a.Palomba Pizza StoresStatement of Cash FlowsFor the year ended December 31, 1999Cash Flows from Operating Activities Cash Collections from Customers $250,000 Cash Payments to Suppliers (85,000) Cash Payments for Salaries (45,000) Cash Payments for Interest(10,000)Net Cash Provided by Operating Activities$110,000Cash Flows from Investing Activities Sale of Equipment 38,000 Purchase of Equipment (30,000) Purchase of Land(14,000)Net Cash Used in Investing Activities(6,000)Cash Flows from Financing Activities Retirement of Common Stock (25,000) Payment of Dividends(35,000)Net Cash Used in Financing Activities (60,000) Net Increase in Cash 44,000Cash at Beginning of Year50,000Cash at End of Year $94,00019-3b. The cash flow from operations (CFO) focuses on measuring the cash flow generatedby operations and not on measuring profitability. If used as a measure of performance,CFO is less subject to distortion than the net income figure. Analysts use the CFO asa check on the quality of earnings. The CFO then becomes a check on the reportednet earnings figure, but is not a substitute for net earnings. Companies with high netincome but low CFO may be using income recognition techniques that are suspect.The ability of a firm to generate cash from operations on a consistent basis is oneindication of the financial health of the firm. For most firms, CFO is the “life blood” ofthe firm. Analysts search for trends in CFO to indicate future cash conditions and thepotential for cash flow problems.Cash flow from investing activities (CFI) is an indication of how the firm is investing itsexcess cash. The analyst must consider the ability of the firm to continue to grow and toexpand activities, and CFI is a good indication of the attitude of management in this area.Analysis of this component of total cash flow indicates the type of capital expendituresbeing made by management to either expand or maintain productive activities. CFI isalso an indicator of the firm’s financial flexibility and its ability to generate sufficient cashto respond to unanticipated needs and opportunities. A decreasing CFI may be a sign ofa slowdown in the firm’s growth.Cash flow from financing activities (CFF) indicates the feasibility of financing, the sourcesof financing, and the types of sources management supports. Continued debt financingmay signal a future cash flow problem. The dependency of a firm on external sources offinancing (either borrowing or equity financing) may present problems in the future, suchas debt servicing and maintaining dividend policy. Analysts also use CFF as anindication of the quality of earnings. It offers insights into the financial habits ofmanagement and potential future policies.8. a. CF from operating activities = $260 – $85 – $12 – $35 = $128b.CF from investing activities = –$8 + $30 – $40 = –$18c. CF from financing activities = –$32 – $37 = –$6919-49. a. QuickBrush has had higher sales and earnings growth (per share) than SmileWhite.Margins are also higher. But this does not mean that QuickBrush is necessarily a betterinvestment. SmileWhite has a higher ROE, which has been stable, while QuickBrush’sROE has been declining. We can see the source of the difference in ROE using DuPontanalysis:Component Definition QuickBrush SmileWhiteTax burden (1 – t) Net profits/pretax profits 67.4% 66.0%Interest burden Pretax profits/EBIT 1.000 0.955Profit margin EBIT/Sales 8.5% 6.5%Asset turnover Sales/Assets 1.42 3.55Leverage Assets/Equity 1.47 1.48ROE Net profits/Equity 12.0% 21.4%While tax burden, interest burden, and leverage are similar, profit margin and assetturnover differ. Although SmileWhite has a lower profit margin, it has a far higher assetturnover.Sustainable growth = ROE × plowback ratioROE PlowbackratioSustainablegrowth rateLudlow’sestimate ofgrowth rateQuickBrush 12.0% 1.00 12.0% 30%SmileWhite 21.4% 0.34 7.3% 10%Ludlow has overestimated the sustainable growth rate for both companies. QuickBrush has little ability to increase its sustainable growth – plowback already equals 100%.SmileWhite could increase its sustainable growth by increasing its plowback ratio.b. QuickBrush’s recent EPS growth has been achieved by increasing book value per share,not by achieving greater profits per dollar of equity. A firm can increase EPS even ifROE is declining as is true of QuickBrush. QuickBrush’s book value per share has more than doubled in the last two years.Book value per share can increase either by retaining earnings or by issuing new stock ata market price greater than book value. QuickBrush has been retaining all earnings, butthe increase in the number of outstanding shares indicates that it has also issued asubstantial amount of stock.19-519-610. a. ROE = operating margin × interest burden × asset turnover × leverage × tax burdenROE for Eastover (EO) and for Southampton (SHC) in 2002 are found as follows: profit margin =SalesEBITSHC: EO: 145/1,793 = 795/7,406 = 8.1% 10.7% interest burden =EBITprofits PretaxSHC:EO: 137/145 = 600/795 = 0.95 0.75 asset turnover =AssetsSales SHC:EO: 1,793/2,104 = 7,406/8,265 =0.85 0.90leverage =EquityAssets SHC: EO: 2,140/1,167 = 8,265/3,864 = 1.80 2.14 tax burden =profits Pretax profitsNet SHC: EO:91/137 = 394/600 =0.66 0.66 ROESHC:EO:7.8% 10.2%b.The differences in the components of ROE for Eastover and Southampton are as follows: Profit marginEO has a higher marginInterest burden EO has a higher interest burden because its pretax profits are alower percentage of EBIT Asset turnover EO is more efficient at turning over its assets Leverage EO has higher financial leverageTax Burden No major difference here between the two companiesROEEO has a higher ROE than SHC, but this is only in part due to higher margins and a better asset turnover -- greater financial leverage also plays a part.c. The sustainable growth rate can be calculated as: ROE times plowback ratio. The sustainable growth rates for Eastover and Southampton are as follows:ROEPlowback ratio*Sustainablegrowth rate Eastover 10.2% 0.36 3.7% Southampton7.8% 0.58 4.5%The sustainable growth rates derived in this manner are not likely to berepresentative of future growth because 2002 was probably not a “normal” year. For Eastover, earnings had not yet recovered to 1999-2000 levels; earnings retention of only 0.36 seems low for a company in a capital intensive industry.19-7Southampton’s earnings fell by over 50 percent in 2002 and its earnings retention will probably be higher than 0.58 in the future. There is a danger, therefore, in basing a projection on one year’s results, especially for companies in a cyclical industry such as forest products. *Plowback = (1 – payout ratio)EO:Plowback = (1 – 0.64) = 0.36SHC: Plowback = (1 – 0.42) = 0.5811. a. The formula for the constant growth discounted dividend model is:gk )g 1(D P 00−+=For Eastover:20.43$08.011.008.120.1$P 0=−×=This compares with the current stock price of $28. On this basis, it appears that Eastover is undervalued.b. The formula for the two-stage discounted dividend model is:333322110)k 1(P )k 1(D )k 1(D )k 1(D P +++++++=For Eastover: g 1 = 0.12 and g 2 = 0.08 D 0 = 1.20D 1 = D 0 (1.12)1 = $1.34 D 2 = D 0 (1.12)2 = $1.51 D 3 = D 0 (1.12)3 = $1.69 D 4 = D 0 (1.12)3(1.08) = $1.8267.60$08.011.082.1$g k D P 243=−=−=03.48$)11.1(67.60$)11.1(69.1$)11.1(51.1$)11.1(34.1$P 33210=+++=This approach makes Eastover appear even more undervalued than was the case using the constant growth approach.19-8c. Advantages of the constant growth model include: (1) logical, theoretical basis; (2) simple to compute; (3) inputs can be estimated.Disadvantages include: (1) very sensitive to estimates of growth; (2) g and k difficult to estimate accurately; (3) only valid for g < k; (4) constan t growth is an unrealistic assumption; (5) assumes growth will never slow down; (6) dividend payout must remain constant; (7) not applicable for firms not paying dividends.Improvements offered by the two-stage model include:(1) The two-stage model is more realistic. It accounts for low, high, or zero growth in the first stage, followed by constant long-term growth in the second stage.(2) The model can be used to determine stock value when the growth rate in the first stage exceeds the required rate of return.12. a.In order to determine whether a stock is undervalued or overvalued, analysts often compute price-earnings ratios (P/Es) and price-book ratios (P/Bs); then, these ratios are compared to benchmarks for the market, such as the S&P 500 index. The formulas for these calculations are: Relative P/E = P/E of specific companyP/E of S&P 500Relative P/B = P/B of specific companyP/B of S&P 500To evaluate EO and SHC using a relative P/E model, Mulroney can calculate the five-year average P/E for each stock, and divide that number by the 5-year average P/E for the S&P 500 (shown in the last column of Table 19E). This gives the historical average relative P/E. Mulroney can then compare the average historical relative P/E to the current relative P/E (i.e., the current P/E on each stock, using the estimate of this year’s earnings per share in Table 19F, divided by the current P/E of the market).For the price/book model, Mulroney should make similar calculations, i.e., divide the five-year average price-book ratio for a stock by the five year average price/book for the S&P 500, and compare the result to the current relative price/book (using current book value). The results are as follows:P/E modelEO SHC S&P500 5-year average P/E 16.56 11.94 15.20 Relative 5-year P/E 1.09 0.79 Current P/E17.50 16.00 20.20 Current relative P/E 0.87 0.79Price/Book modelEO SHC S&P500 5-year average price/book1.52 1.102.10Relative 5-year price/book 0.72 0.52Current price/book 1.62 1.49 2.60Current relative price/book 0.62 0.57From this analysis, it is evident that EO is trading at a discount to its historical 5-yearrelative P/E ratio, whereas Southampton is trading right at its historical 5-year relativeP/E. With respect to price/book, Eastover is trading at a discount to its historicalrelative price/book ratio, whereas SHC is trading modestly above its 5-year relativeprice/book ratio. As noted in the preamble to the problem (see problem 10),Eastover’s book value is understated due to the very low historical cost basis for itstimberlands. The fact that Eastover is trading below its 5-year average relative price tobook ratio, even though its book value is understated, makes Eastover seem especiallyattractive on a price/book basis.b. Disadvantages of the relative P/E model include: (1) the relative P/E measures onlyrelative, rather than absolute, value; (2) the accounting earnings estimate for the nextyear may not equal sustainable earnings; (3) accounting practices may not bestandardized; (4) changing accounting standards may make historical comparisonsdifficult.Disadvantages of relative P/B model include: (1) book value may be understated oroverstated, particularly for a company like Eastover, which has valuable assets on itsbooks carried at low historical cost; (2) book value may not be representative ofearning power or future growth potential; (3) changing accounting standards makehistorical comparisons difficult.13.The following table summarizes the valuation and ROE for Eastover and Southampton:Eastover SouthamptonStock Price $28.00 $48.00Constant-growth model$43.20 $29.002-stage growth model $48.03 $35.50Current P/E 17.50 16.00Current relative P/E 0.87 0.795-year average P/E 16.56 11.94Relative 5 year P/E 1.09 0.79Current P/B 1.62 1.49Current relative P/B 0.62 0.575-year average P/B 1.52 1.10Relative 5 year P/B 0.72 0.52Current ROE10.2% 7.8%Sustainable growth rate 3.7% 4.5%Eastover seems to be undervalued according to each of the discounted dividend models.Eastover also appears to be cheap on both a relative P/E and a relative P/B basis.Southampton, on the other hand, looks according to each of the discounted dividendmodels and is slightly overvalued using the relative price/book model. On a relative P/E19-9basis, SHC appears to be fairly valued. Southampton does have a slightly highersustainable growth rate, but not appreciably so, and its ROE is less than Eastover’s.The current P/E for Eastover is based on relatively depressed current earnings, yet thestock is still attractive on this basis. In addition, the price/book ratio for Eastover isoverstated due to the low historical cost basis used for the timberland assets. This makes Eastover seem all the more attractive on a price/book basis. Based on this analysis,Mulroney should select Eastover over Southampton.14. a. Net income can increase even while cash flow from operations decreases. This canoccur if there is a buildup in net working capital -- for example, increases inaccounts receivable or inventories, or reductions in accounts payable. Lowerdepreciation expense will also increase net income but can reduce cash flow throughthe impact on taxes owed.b. Cash flow from operations might be a good indicator of a firm's quality of earningsbecause it shows whether the firm is actually generating the cash necessary to paybills and dividends without resorting to new financing. Cash flow is less susceptibleto arbitrary accounting rules than net income is.15. $1,200Cash flow from operations = sales – cash expenses – increase in A/RIgnore depreciation because it is a non-cash item and its impact on taxes is alreadyaccounted for.16. a Both current assets and current liabilities will decrease by equal amounts. But this isa larger percentage decrease for current liabilities because the initial current ratio isabove 1.0. So the current ratio increases. Total assets are lower, so turnoverincreases.17. a Cost of goods sold is understated so income is higher, and assets (inventory) arevalued at most recent cost so they are valued higher.18. a Since goods still in inventory are valued at recent versus historical cost.19. b Dividend has no effect on interest payments, earnings, or debt, but will reduceequity, at least minimally.19-1020.2005 2009(1) Operating margin = Operating income – DepreciationSales%5.6542338=−%8.6979976=−(2) Asset turnover =SalesTotal Assets21.2245542=36.3291979=(3) Interest Burden =[Op Inc – Dep] – Int ExpenseOperating Income – Depreciation914.03383338=−−−1.0(4) Financial Leverage =Total AssetsShareholders Equity54.1159245=32.1220291=(5) Income tax rate =Income taxesPre-tax income%63.403213=%22.556737=Using the Du Pont formula:ROE = [1.0 – (5)] × (3) × (1) × (2) × (4)ROE(2005) = 0.5937 × 0.914 × 0.065 × 2.21 × 1.54 = 0.120 = 12.0%ROE(2009) = 0.4478 × 1.0 × 0.068 × 3.36 × 1.32 = 0.135 = 13.5%(Because of rounding error, these results differ slightly from those obtained by directly calculating ROE as net income/equity.)b. Asset turnover measures the ability of a company to minimize the level of assets(current or fixed) to support its level of sales. The asset turnover increasedsubstantially over the period, thus contributing to an increase in the ROE.Financial leverage measures the amount of financing other than equity, including short and long-term debt. Financial leverage declined over the period, thusadversely affecting the ROE. Since asset turnover rose substantially more than financial leverage declined, the net effect was an increase in ROE.19-11。
投资组合管理技术 Portfolio Management Technique
November 22-23, 2007
®
Wealth Management System Limited
©
Chapter 1
Portfolio Management Technique
Course Objective : To develop the practical portfolio management skill required such as
Course Length : 2 days
Portfolio Management Technique (Day 1)
Course Agenda : Day 1 • The Psychology of Trading Introduction – Trader Evaluation Profile 1 • Investment Process Technical Analysis Overview Fundamental Analysis Overview Trading System Money Management Reward to Risk Ratio Risk Management Stop Loss Lock in Profit Position Limit (PVO1/VaR) Workshop 1 : Identify Stop Loss / Lock In Profit / Reward to Risk Ratio Workshop 2 : VaR Calculation for Equity and Fixed Income Portfolio
Workshop 4 Trader Evaluation Profile 2
澳洲国立大学金融数学硕士专业课程
澳洲国立大学金融数学硕士专业课程1.金融硕士Master of Finance（2年制，共修96学分）属于授课型项目，是澳洲最受欢迎的金融硕士项目之一。
本科金融或其相近专业领域毕业的学生，最多可抵24个学分（一个学期）。
研究生相关专业可抵48学分，也就是说第一年的基础课程可以跳过，直接进行二年级的学习。
该专业为没有金融背景的学生提供机会，帮助学生获得金融专业知识的提升，打下扎实的金融理论基础。
此课程受CFA认证。
（1）研一课程：48学分必修课：42学分BUSN7008 Financial Statements and Reporting 财物报表与报告FINM7006 Foundations of Finance 金融学基础FINM7007 Applied Corporate Finance 应用企业金融FINM7008 Applied Investments 应用投资FINM7041 Applied Derivatives 应用金融衍生品FINM7044 Applied Valuation 应用评估STAT7055 Introductory Statistics for Business and Finance 商业与金融概述选修课：6学分（二选一）ECON8069 Business Economics 企业经济学STAT6046 Financial Mathematics 财务数学（2）研二课程：48分FINM8004 Advanced Corporate Finance 高级企业金融FINM8006 Advanced Investments 高级投资FINM8007 Topics in International Finance 国际金融学FINM8009 Derivatives: Markets, Valuation and Risk Management 金融衍生品：市场、评估和风险管理FINM8014 Applied Financial Intermediation and Debt Markets 金融中介和债务市场应用FINM8016 Portfolio Construction 资产组合架构FINM8017 Trading and Markets 贸易与市场FINM8100 Applied Project in Finance 金融应用项目如果学生第1年考试的GPA没有到达60%，就没有办法读研二的课程，以及只能拿到财务与精算（Finance and Actuarial Statistics）的diploma（毕业证书），不能获得相关的硕士学位。
FINS5517_APPLIED PORTFOLIO MANAGEMENT & MODELLING_2005 Semester 2_Week 11 Figlewski_1993 Part 2
CONCLUSIONA fixed strike strategy, which involves choosing a specific striking price and always rolling over into another option at that strike, gives good protection in a steep market decline and does not limit return very much when prices rise sharply. Its shortcoming is that it is costly when stock price stays near the strike price for an extended period. Nevertheless, the cost of following a fixed strike strategy for a year was found to be far less than 12 times the one month cost. However, because stock price tends to drift away from any fixed striking price over time, as the investment horizon lengthens, the fixed strike strategy tends increasingly to resemble either a pure long stock position or a position in the riskless asset.A fixed percentage strategy, which always rolls into a new put with a strike at a specified percentage discount or premium to the current market price, may be a more accurate description of the protective put strategy used by actual investors. Adjusting the strike level to produce the same degree of protectiveness each time the option is rolled allows the strategy to earn profits from short-term market swings, even if stock price remains close to its initial value over an extended period. But the fixed percentage strategy is much less protective than the fixed strike strategy in a prolonged bear market.The ratchet strategy combines the downside protection of the fixed strike strategy with the fixed percentage strategy's responsiveness to upward market price moves. As long as the stock price is rising, the striking price is raised in order to maintain it at a fixed percentage discount or premium relative to the stock, but the strategy holds to a fixed strike level if the market drops. Although the ratchet strategy appears to be a way to lock in short-term stock price appreciation, in general its mean return is actually lower than that of a fixed percentage strategy with the same strike. Our results show that the ratchet's advantage is not a higher mean, but its protectiveness, especially against a "disaster."The choice of strike level is naturally a critical determinant of performance. We found that the fixed percentage strategy using deepout-of-the-money or out-of-the-money puts (e.g., more than one standard deviation below the initial stock price) provides only very limited protection. To achieve a low risk of overall loss but a reasonable possibility of a high return on the upside, the fixed percentage strategy needs to use at-the-money or even in-the-money options. Indeed, we found that in many cases buying in-the-money puts offers quite an attractive combination of limited downside risk, mean returns well above the risk-free rate, and opportunities for sizable gains in a good year.The ratchet strategy achieves a greater degree of protectiveness at lower strike prices than the fixed percentage strategy, but again, the use of at-the-money or in-the-money options in a ratchet often produces an interesting risk/return profile.If an investor expects stock price to underperform (that is, expected return to be below the equilibrium value), buying put protection is a desirable way to limit downside risk. But if the stock's true expected return is lower than the risk-free rate, the protected position's mean return will be below the riskless rate as well. In that case, the investorbears the risk of an uncertain return without earning an expected premium. If the investor expects the stock's return to be below the riskless rate over an extended period, she will be better off selling the stock and holding the riskless asset, rather than buying puts.(6)FOOTNOTES1 This problem is compounded by the difficulty raised by P. Dybvig ("Inefficient Dynamic Portfolio Strategies or How to Throw Away a Million Dollars in the Stock Market," Review of Financial Studies, Spring 1988). He shows that, while a simple trading stragetgy such as buying a single protective put may result in a desirable payoff pattern, it may well be possible to achieve the same pattern more cheaply by a different strategy.2. S. Figlewski ("Opitons Arbitrage in Imperfect Markets," Journal of Finance, December 1989) uses simulation to examine the effects of transaction costs and infrequent rebalancing on the performance of delta neutral hedged position. In an early paper, P.P. Boyle ("Options: A Monte Carlo Approach," Journal of Financial Economics, May 1977) suggested simulation as a way to obtain option values. Today, the technique is used extensively in valuing path-dependent mortgage-backed securities.3. R. Merton, M. Scholes and M. Gladstein, "The Returns and Risks of Alternative Put-Option Investment Strategies," Journal of Business, January 1982.4. The formulas for the mean and standard deviation of annualized simple return in the lognormal case are: Mean=e sup (mu+sigma sup 2/2 )-1 and Standard Deviation = e sup mu s. root of e sup sigma sup 2 -15. Of course, if the return distribution is not lognormal and has a "fat" lower tail, deep-out-of-the money puts may provide valuable protection against a truly disastrous disaster, such as October 19, 1987, which would be effectively impossible under lognormality.6. We thank the Gluchsman Institute at New York University for financial support and William Silber for his helpful comments.。
FINS5513_SECURITY VALUATION AND PORTFOLIO SELECTION_2006 Summer_solution_chap011
CHAPTER 11: ARBITRAGE PRICING THEORY AND MULTIFACTOR MODELS OF RISK AND RETURN1.The revised estimate of the expected rate of return on the stock would be the old estimateplus the sum of the products of the unexpected change in each factor times the respective sensitivity coefficient, i.e.,revised estimate = 12% + [(1 × 2%) + (0.5 × 3%)] = 15.5%2.Equation 11.9 applies here:E(r p ) = r f + βP1 [E(r1 ) − r f] + βP2 [E(r2 ) – r f]We need to find the risk premium (RP) for each of the two factors:RP1 = [E(r1 ) − r f] and RP2 = [E(r2 ) − r f]In order to do so, we solve the following system of two equations with two unknowns:31 = 6 + (1.5 × RP1 ) + (2.0 × RP2 )27 = 6 + (2.2 × RP1 ) + [(–0.2) × RP2 ]The solution to this set of equations is:RP1 = 10% and RP2 = 5%Thus, the expected return-beta relationship is:E(r P ) = 6% + (βP1× 10%) + (βP2× 5%)3.The expected return for Portfolio F equals the risk-free rate since its beta equals 0. ForPortfolio A, the ratio of risk premium to beta is: (12 − 6)/1.2 = 5For Portfolio E, the ratio is lower at: (8 – 6)/0.6 = 3.33This implies that an arbitrage opportunity exists. For instance, you can create a PortfolioG with beta equal to 0.6 (the same as E’s) by combining Portfolio A and Portfolio F inequal weights. The expected return and beta for Portfolio G are then:E(r G ) = (0.5 × 12%) + (0.5 × 6%) = 9%βG = (0.5 × 1.2) + (0.5 × 0) = 0.6Comparing Portfolio G to Portfolio E, G has the same beta and higher return. Therefore, an arbitrage opportunity exists by buying Portfolio G and selling an equal amount of11-1Portfolio E. The profit for this arbitrage will be:r G – r E =[9% + (0.6 × F)] − [8% + (0.6 × F)] = 1%That is, 1% of the funds (long or short) in each portfolio.4. a. This statement is incorrect. The CAPM requires a mean-variance efficient marketportfolio, but APT does not.b.This statement is incorrect. The CAPM assumes normally distributed securityreturns, but APT does not.c. This statement is correct.5.Substituting the portfolio returns and betas in the expected return-beta relationship, weobtain two equations with two unknowns, the risk-free rate (r f) and the factor riskpremium (RP):12 = r f + (1.2 × RP)9 = r f + (0.8 × RP)Solving these equations, we obtain:r f = 3% and RP = 7.5%6. a. Shorting an equally-weighted portfolio of the ten negative-alpha stocks and investingthe proceeds in an equally-weighted portfolio of the ten positive-alpha stockseliminates the market exposure and creates a zero-investment portfolio. Denotingthe systematic market factor as R M , the expected dollar return is (noting that theexpectation of non-systematic risk, e, is zero):$1,000,000 × [0.02 + (1.0 × R M )] − $1,000,000 × [(–0.02) + (1.0 × R M )]= $1,000,000 × 0.04 = $40,000The sensitivity of the payoff of this portfolio to the market factor is zero because theexposures of the positive alpha and negative alpha stocks cancel out. (Notice thatthe term s involving R M sum to zero.) Thus, the systematic component of total risk isalso zero. The variance of the analyst’s profit is not zero, however, since thisportfolio is not well diversified.For n = 20 stocks (i.e., long 10 stocks and short 10 stocks) the investor will have a$100,000 position (either long or short) in each stock. Net market exposure is zero,but firm-specific risk has not been fully diversified. The variance of dollar returns11-211-3from the positions in the 20 stocks is:20 × [(100,000 × 0.30)2 ] = 18,000,000,000 The standard deviation of dollar returns is $134,164.b.If n = 50 stocks (25 stocks long and 25 stocks short), the investor will have a $40,000 position in each stock, and the variance of dollar returns is:50 × [(40,000 × 0.30)2 ] = 7,200,000,000The standard deviation of dollar returns is $84,853.Similarly, if n = 100 stocks (50 stocks long and 50 stocks short), the investor will have a $20,000 position in each stock, and the variance of dollar returns is:100 × [(20,000 × 0.30)2 ] = 3,600,000,000The standard deviation of dollar returns is $60,000. Notice that, when the number of stocks increases by a factor of 5 (i.e., from 20 to 100), standard deviation decreases by a factor of 5= 2.23607 (from $134,164 to $60,000).7 a.)e (22M 22σ+σβ=σ88125)208.0(2222A =+×=σ50010)200.1(2222B =+×=σ97620)202.1(2222C =+×=σb.If there are an infinite number of assets with identical characteristics, then a well-diversified portfolio of each type will have only systematic risk since the non-systematic risk will approach zero with large n. The mean will equal that of the individual (identical) stocks.c.There is no arbitrage opportunity because the well-diversified portfolios all plot on the security market line (SML). Because they are fairly priced, there is no arbitrage.8. a.A long position in a portfolio (P) comprised of Portfolios A andB will offer an expected return-beta tradeoff lying on a straight line between points A and B. Therefore, we can choose weights such that βP = βC but with expected returnhigher than that of Portfolio C. Hence, combining P with a short position in C will create an arbitrage portfolio with zero investment, zero beta, and positive rate of return.b. The argument in part (a) leads to the proposition that the coefficient of β2 must bezero in order to preclude arbitrage opportunities.11-49. Any pattern of returns can be “explained” if we are free to choose an indefinitely largenumber of explanatory factors. If a theory of asset pricing is to have value, it must explain returns using a reasonably limited number of explanatory variables (i.e., systematicfactors).10. The APT factors must correlate with major sources of uncertainty, i.e., sources ofuncertainty that are of concern to many investors. Researchers should investigate factors that correlate with uncertainty in consumption and investment opportunities. GDP, theinflation rate, and interest rates are among the factors that can be expected to determine risk premiums. In particular, industrial production (IP) is a good indicator of changes in thebusiness cycle. Thus, IP is a candidate for a factor that is highly correlated withuncertainties that have to do with investment and consumption opportunities in the economy.11. a. E(r) = 6 + (1.2 × 6) + (0.5 × 8) + (0.3 × 3) = 18.1%b.Surprises in the macroeconomic factors will result in surprises in the return of thestock:Unexpected return from macro factors =[1.2(4 – 5)] + [0.5(6 – 3)] + [0.3(0 – 2)] = –0.3%12.The APT required (i.e., equilibrium) rate of return on the stock based on r f and the factorbetas is:required E(r) = 6 + (1 × 6) + (0.5 × 2) + (0.75 × 4) = 16%According to the equation for the return on the stock, the actually expected return on the stock is 15% (because the expected surprises on all factors are zero by definition).Because the actually expected return based on risk is less than the equilibrium return, weconclude that the stock is overpriced.13. b. Since Portfolio X has β = 1.0, then X is the market portfolio and E(R M) =16%.Using E(R M ) = 16% and r f = 8%, the expected return for portfolio Y is notconsistent.14. c.15. d.11-516. d.11-617. c. Investors will take on as large a position as possible only if the mispricingopportunity is an arbitrage. Otherwise, considerations of risk and diversification willlimit the position they attempt to take in the mispriced security.18. d.19. d.20. The first two factors seem promising with respect to the likely impact on the firm’s cost ofcapital. Both are macro factors that would elicit hedging demands across broad sectors of investors. The third factor, while important to Pork Products, is a poor choice for amultifactor SML because the price of hogs is of minor importance to most investors and is therefore highly unlikely to be a priced risk factor. Better choices would focus on variables that investors in aggregate might find more important to their welfare. Examples include:inflation uncertainty, short-term interest-rate risk, energy price risk, or exchange rate risk.The important point here is that, in specifying a multifactor SML, we not confuse risk factors that are important to a particular investor with factors that are important to investors ingeneral; only the latter are likely to command a risk premium in the capital markets.11-7。
Portfolio Management
Portfolio Management1 of 12Asset allocation is part of the execution step of the portfolio management process. The execution step also includes security analysis and portfolio construction.2014 CFA Level I"Portfolio Management: An Overview," by Robert M. Conroy and Alistair Byrne Section 42 of 12A longer time horizon tends to imply greater ability to take risk.2014 CFA Level I"Basics of Portfolio Planning and Construction," by Alistair Byrne and Frank E. Smudde Section 2.2.13 of 12In a defined contribution pension plan, the employee accepts the investment risk and is responsible for ensuring that the plan contains enough funds to meet retirement needs.2014 CFA Level I"Portfolio Management: An Overview," by Robert M. Conroy and Alistair Byrne Section 34 of 1211% = (w A× 8%) + [(1 –w A) × 12%]. Solving for w A = 0.25. Therefore w B = 0.75.(0.25 × 8%) + (0.75 × 12%) = 11%.2014 CFA Level I"Portfolio Risk and Return: Part I," by Vijay SingalSection 2.1.75 of 121.12(12/16) -1 = 0.0887, or = 8.87%.2014 CFA Level I"Portfolio Risk and Return: Part I," by Vijay SingalSection 2.1.66 of 12(1.122 × 0.915 × 1.067 × 0.967)0.25– 1 = 0.0145 = 1.45%.2014 CFA Level I"Portfolio Risk and Return: Part I," by Vijay SingalSection 2.1.37 of 12The formula for the CAPM is expressed as:E(R i) =R f+ βi[E(R m) – R f]or 3% + [1.3 × (8% – 3%)] = 9.5%.2014 CFA Level I"Portfolio Risk and Return: Part II," by Vijay SingalSection 4.28 of 12The expected value of the uncertain investment is 9% which is less than the guaranteed return of 10%. Only a risk-seeking person would be willing to accept this investment.2014 CFA Level I"Portfolio Risk and Return: Part I," by Vijay SingalSection 3.19 of 12βi = Cov(R i,R m)/σm2 = 0.01104/(0.16)2 = 0.43.2014 CFA Level I"Portfolio Risk and Return: Part II," by Vijay SingalSection 3.2.410 of 12With a correlation coefficient of +1.0, no diversification benefits are obtained and the portfolio risk is equal to the weighted average of the risk of the two assets in the portfolio.2014 CFA Level I"Portfolio Risk and Return: Part I," by Vijay SingalSection 4.1.311 of 12The security market line is a graphical representation of the CAPM with beta on the x-axis and expected return on the y-axis. The slope of the line is given by the market risk premium, the difference between the equity market return and the risk-free rate of interest.2014 CFA Level I"Portfolio Risk and Return: Part II," by Vijay SingalSection 4.212 of 12[(0.252 × 0.122)+(0.752 × 0.162)+(2 × 0.25 × 0.75 × 0.12 × 0.16 × 0.75)]0.5=0.1493=14.39%.2014 CFA Level I"Portfolio Risk and Return: Part I," by Vijay SingalSections 4.1.2, 4.1.3。
FINS5514_s1_2011
Australian School of BusinessSchool Banking and FinanceFINS5514C APITAL B UDGETING AND F INANCING D ECISIONSC OURSE O UTLINES EMESTER 1,2011TABLE OF CONTENTS1. STAFF CONTACT DETAILS12. COURSE DETAILS12.1Teaching Times and Locations 1 2.2Units of Credit 1 2.3Summary of Course 1 2.4Course Aims and Relationship to Other Courses 12.5Student Learning Outcomes 23.L EARNING AND T EACHING ACTIVITIES23.1 Approach to Learning and Teaching in the Course 23.2 Learning Activities and Teaching Strategies 34.A SSESSMENT34.1Formal Requirements 3 4.2Assessment Details 3 4.3Late Submission 45.A CADEMIC H ONESTY AND P LAGIARISM46.C OURSE R ESOURCES47.C OURSE EVALUATION AND DEVELOPMENT58.S TUDENT RESPONSIBILITIES AND CONDUCT58.1 Workload 5 8.2 Attendance 5 8.3 Special Consideration and Supplementary Examinations 6 8.4 General Conduct and Behaviour 7 8.5 Occupational Health and Safety 78.6 Keeping Informed 79. ADDITIONAL S TUDENT R ESOURCES AND S UPPORT710.C OURSE S CHEDULE81. STAFF CONTACT DETAILSPosition Name Email ConsultationHours andlocationPhoneLecturer-in-charge Dr. Jin Yu jin.yu@.au Monday2-4pm (weeks 5 –12)@ ASB Level 3- Room 339(the west wing)93857886Lecturer Mr.MarkHumphery-Jenner M.HumpheryJenner@.au TBA@ ASB Level 3-Room 350(the west wing)2. COURSE DETAILS2.1 Teaching Times and LocationsLectures:Section A: Tuesday, 18 – 21 pm @ Chemical Sc M11Section B: Tuesday, 14-17 pm @ Mechanical Eng 203Section C: Wednesday, 13-16pm @ Chemical Sc M102.2 Units of CreditThis course carries 6 UOC2.3 Summary of CourseCapital budgeting and financing decisions are primarily concerned with the major financial decisions faced by firms. These decisions can be broadly categorized as the investment policy, the financing policy, the dividend/repurchase policy, and the restructuring policy.This course will examine the main theories and empirical evidence surrounding these decisions and to use this knowledge to help solve typical ‘real’ finance problems.2.4 Course Aims and Relationship to Other CoursesThe two main aims of this course are:∙to provide students with an understanding of the basic theories of corporate finance decision marking∙to provide students with the ability to apply these theories to numerical problemsThis course is a Disciplinary Specialization for students specializing in Finance on the Master of Commerce Degree. Students specializing in Finance, International Finance, Funds Management, and Banking must take this course. Students specializing in Financial Econometrics may take this course or choose another Disciplinary Specialization and should consult the Postgraduate Handbook for details. Security Valuation and Portfolio Selection (FINS5513) is either a prerequisite or a co-requisite for FINS5514. It is the responsibility ofeach student to ensure that this criterion has been met prior to the commencement of this course.2.5 Student Learning OutcomesBy the end of this course, you should be able to:1. Explain why the separation of the ownership and the control of most major corporationscan cause agency problems and describe how a judicious use of different financing vehicles can reduce these costs;2. Apply several capital budgeting techniques using MS Excel, appreciating the strengthsand weaknesses of the different techniques;3. Understand how to incorporate risk and uncertainty into capital budgeting decisionsand how capital budgeting is applied in practice;4. Describe how the arbitrage-based arguments of Modigliani and Miller establish theirrelevance propositions and to explain why their framework can contribute to our understanding of financing decisions;5. Explain why managers face an adverse selection problem to convince outside investorsto give the financing that the firm needs to implement investment decisions and to describe how costly signalling mechanisms can assist the managers to make informed corporate finance decisions;6. Explain the key issues of a company’s dividend/repurchase policy;7. Understand the restructuring choices faced by managers and how these choices canhelp resolve agency problems within the firm;8. Critically evaluate the core empirical evidence related to each of the key financialdecisions.ASB Graduate AttributesThis course contributes to your development of the following Australian School of Business Graduate Attributes, which are the qualities, skills and understandings we want you to have by the completion of your degree.LearningASB Graduate AttributesOutcomes1 – 8 1. Critical thinking and problem solvingCommunication2.3. Teamwork and leadership1 4. Social, ethical and global perspectives1-8 5. In-depth engagement with relevant disciplinary knowledgeskillsProfessional2,3 6.More information on the ASB Graduate Attributes and how they align with the UNSW Graduate Attributes (2010) is available on the ASB website (Learning and Teaching >Graduate Attributes).3.L EARNING AND T EACHING ACTIVITIES3.1 Approach to Learning and Teaching in the CourseThe course provides the foundations of corporate finance through the explanation of financial theories and their application to numerical problems. The lectures build from the student notes to set out the main ideas, theories, and conceptual framework for the course. The lectures also include numerical examples to demonstrate the applications of the theories. The tutorials offer an opportunity to discuss numerical questions.3.2 Learning Activities and Teaching StrategiesThis course is a combination of formal lectures and tutorials (problem solving classes). The lectures are used to explain concepts and to give real life examples of situations in which these concepts are employed. The tutorials are for problem-solving and discussion of issues raised in the lectures. Students are expected to prepare answers/solutions for the tutorials in advance. In all classes, students are encouraged to ask related questions.To prepare for the course, each week you must:∙download the weekly lecture notes from the course website;∙prepare yourself through the weekly readings;∙work through the tutorial questions;∙read the financial press for relevant current events;∙be ready to participate in the class discussions, group work, and practical activities.4.A SSESSMENT4.1 Formal RequirementsIn order to pass this course, you must:∙achieve a composite mark of at least 50; and∙make a satisfactory attempt at all assessment tasks (see below).4.2 Assessment DetailsAssessment Task Weighting LearningOutcomesassessedASB GraduateAttributesassessedLength DueDate1. Class Test 1 25% 1, 2, 3 1, 2, 3, 4 1.5 hoursWeek 62. Class Test 2 25% 4,5,6,8 1, 3 1.5 hoursWeek12 3. Final Exam 50% 1- 8 1, 2, 3, 4 2 hours TBAThe assessment tasks on this course are:∙Class Tests: Class Tests will be held during the normal lecture times in week 6 and also in week 12. These tests are designed to give students an opportunity to check their understanding of the concepts and issues raised in the material covered in the course. The tests will be of multiple choice format in which students have to answer 45 questions in 1.5 hours. The first (second) test covers material from week 1 to 5 (6 to11). The first test carries a weight of 25% and the second test 25%,which amounts to a50% weight in total.∙ A formal end of semester written exam will be held during the University’s exam period.The exam includes written short answers and numerical problems. Details will be posted on the web later in the semester. The final exam has a weight of 50%.4.3 Late SubmissionQuality AssuranceThe ASB is actively monitoring student learning and quality of the student experience in all its programs. A random selection of completed assessment tasks may be used for quality assurance, such as to determine the extent to which program learning goals are being achieved. The information is required for accreditation purposes, and aggregated findings will be used to inform changes aimed at improving the quality of ASB programs. All material used for such processes will be treated as confidential and will not be related to course grades.5.A CADEMIC H ONESTY AND P LAGIARISMThe University regards plagiarism as a form of academic misconduct, and has very strict rules regarding plagiarism. For UNSW policies, penalties, and information to help you avoid plagiarism see: .au/plagiarism/index.html as well as the guidelines in the online ELISE and ELISE Plus tutorials for all new UNSW students:.au/skills/tutorials/InfoSkills/index.htm.To see if you understand plagiarism, do this short quiz:.au/plagiarism/plagquiz.htmlFor information on how to acknowledge your sources and reference correctly, see:.au/onlib/ref.htmlFor the ASB Harvard Referencing Guide, see the ASB Referencing and Plagiarism webpage (ASB >Learning and Teaching>Student services>Referencing and plagiarism)6.C OURSE R ESOURCESPrescribed textbook∙Ross, S. A., R. W. Westerfield, and B. D. Jordan (RWJ), ‘Corporate Finance Fundamentals’, 8th Edition, McGraw-Hill, 2008;Other texts that students may find useful include:∙Copeland, T. E., J. F. Weston, and K Shastri, ‘Financial Theory and Corporate Policy’, 4th Editiion, Pearson, 2003;∙Damodaran, A., ‘Corporate Finance, Theory and Practice’, 2nd Edition, Wiley, 2001.BlackboardBlackboard is used to disseminate lecture notes, tutorial problems and selected answers/solutions, assessment details, journal articles, and announcements. This is the only place where these resources can be accessed. Students should make appoint of checking this site regularly. The address is:.auCalculatorsStudents will need to have their own ‘approved’ calculator for class tests and exams.The list of calculators approved for use in exams at UNSW is updated frequently. The current list and the exam calculator policy is available at:.au/student/academiclife/assessment/examinations/Calculator.html7.C OURSE EVALUATION AND DEVELOPMENTEach year we seek feedback from students and other stakeholder about the course offered in the Australian School of Business and continual improvements are made based on this feedback. UNSW’s Course and Teaching Evaluation and Improvement (CATEI) Process (.au/content/LT/evaluation/catei.cfm?ss=2) is one of the ways in which student evaluative feedback is gathered. In this course, we evaluate and use your course-level feedback, both quantitative and qualitative, to guide our continued review and redesigning of the course.Our teaching team reflects on a range of feedback sources over time. This continuous improvement process can affect one or more particular areas of the course, whether this has to do with structure, content, resources, delivery or assessment. For example, we have introduced additional student participation in class by forming break out groups to discuss key issues and concepts. A group/groups will be selected to have a nominated member present briefly to the class on key issues and raise questions.8.S TUDENT RESPONSIBILITIES AND CONDUCTStudents are expected to be familiar with and adhere to university policies in relation to class attendance and general conduct and behaviour, including maintaining a safe, respectful environment; and to understand their obligations in relation to workload, assessment and keeping informed.Information and policies on these topics can be found in the ‘A-Z Student Guide’: https://.au/student/atoz/A.html. See, especially, information on ‘Attendance and Absence’, ‘Academic Misconduct’, ‘Assessment Information’, ‘Examinations’, ‘Special Consideration’, ‘Student Responsibilities’, ‘Workload’ and policies such as ‘Occupational Health and Safety’.8.1 WorkloadIt is expected that you will spend at least ten hours per week studying this course. This time should be made up of reading, research, working on exercises and problems, and attending classes. In periods where you need to complete assignments or prepare for examinations, the workload may be greater.Over-commitment has been a cause of failure for many students. You should take the required workload into account when planning how to balance study with employment and other activities.8.2 AttendanceYour regular and punctual attendance at lectures and seminars is expected in this course. University regulations indicate that if students attend less than eighty per cent of scheduled classes they may be refused final assessment.8.3 Special Consideration and Supplementary ExaminationsYou must submit all assignments and attend all examinations scheduled for your course. You should seek assistance early if you suffer illness or misadventure which affects your course progress.General Information on Special Consideration:1. For assessments worth 20% or more, all applications for special consideration mustgo through UNSW Student Central(https://.au/student/academiclife/StudentCentralKensington.html) andbe lodged within 3 working days of the assessment to which it refers;2. Applications will not be accepted by teaching staff, but you should notify thelecture-in-charge when you make an application for special consideration throughUNSW Student Central;3. Applying for special consideration does not automatically mean that you will begranted a supplementary exam;4. Special consideration requests do not allow lecturers-in-charge to award studentsadditional marks.Special Consideration and the Final Exam:Applications for special consideration in relation to the final exam are considered by an ASB Faculty panel to which lecturers-in-charge provide their recommendations for each request. If the Faculty panel grants a special consideration request, this will entitle the student to sit a supplementary examination. No other form of consideration will be granted. The following procedures will apply:1. Supplementary exams will be scheduled centrally and will be held approximately twoweeks after the formal examination period. The dates for ASB supplementary examsfor session 1, 2011 are:12 July 2011 – exams for the School of Accounting13 July 2011 – exams for all Schools other than Accounting and Economics14 July 2011 – exams for the School of EconomicsIf a student lodges a special consideration for the final exam, they are stating theywill be available on the above dates. Supplementary exams will not be held at anyother time.2. Where a student is granted a supplementary examination as a result of a request forspecial consideration, the student’s original exam (if completed) will be ignored andonly the mark achieved in the supplementary examination will count towards the finalgrade. Failure to attend the supplementary exam will not entitle the student to havethe original exam paper marked and may result in a zero mark for the final exam.If you are too ill to perform reasonably on the final exam, do not attend the final and apply for a supplementary instead. However granting of a supplementary exam in such cases is not automatic. If a student attends the regular final, s/he is unlikely to be granted a supplementary exam.The ASB’s Special Consideration and Supplementary Examination Policy and Procedures for Final Exams for Undergraduate Courses is available at:.au/currentstudents/resources/forms/Documents/supplementaryexamp rocedures.pdf.8.4 General Conduct and BehaviourYou are expected to conduct yourself with consideration and respect for the needs of your fellow students and teaching staff. Conduct which unduly disrupts or interferes with a class, such as ringing or talking on mobile phones, is not acceptable and students may be asked to leave the class. More information on student conduct is available at: https://.au/student/atoz/BehaviourOfStudents.html8.5 Occupational Health and SafetyUNSW Policy requires each person to work safely and responsibly, in order to avoid personal injury and to protect the safety of others. For more information, see .au/.8.6 Keeping InformedYou should take note of all announcements made in lectures, tutorials or on the course web site. From time to time, the University will send important announcements to your university e-mail address without providing you with a paper copy. You will be deemed to have received this information. It is also your responsibility to keep the University informed of all changes to your contact details.9. ADDITIONAL S TUDENT R ESOURCES AND S UPPORTThe University and the ASB provide a wide range of support services for students, including:∙ASB Education Development Unit(EDU).au/learningandteaching/studentservices/Pages/default.aspx Academic writing, study skills and maths support specifically for ASB students. Servicesinclude workshops, online and printed resources, and individual consultations. EDU Office: Room GO7, Ground Floor, ASB Building (opposite Student Centre); Ph: 9385 5584; Email: edu@.au∙Capturing the Student Voice: An ASB website enabling students to comment on any aspect of their learning experience in the ASB. To find out more, go to the CurrentStudents/Resources/Student Feedback page here.∙Blackboard eLearning Support: For online help using Blackboard, follow the links from .au to UNSW Blackboard Support / Support for Students. For technical support, email: itservicecentre@.au; ph: 9385 1333∙UNSW Learning Centre (.au )Academic skills support services, including workshops and resources, for all UNSWstudents. See website for details.∙Library training and search support services:.au/web/services/services.html∙UNSW IT Service Centre: :https://.au/students/index.html Technical support for problems logging in to websites, downloading documents etc.: UNSW Library Annexe (Ground floor); Ph: 9385 1333.∙UNSW Counselling and Psychological Services (.au) Free, confidential service for problems of a personal or academic nature; and workshops on study issues such as ‘Coping With Stress’ and ‘Procrastination’.Office: Quadrangle Building, Level 2, East Wing ; Ph: 9385 5418∙Student Equity & Disabilities Unit (.au) Advice regarding equity and diversity issues, and support for students who have a disability or disadvantage that interferes with their learning. Office: Ground Floor, John GoodsellBuilding; Ph: 9385 473410.C OURSE S CHEDULEWeek 1. (Lecturer: Mr. Mark Humphery)Introduction to the CourseAgency TheoryRequired Reading:∙RWJ Chapter 1;∙Dobson J. (1999), ‘Is Shareholder Wealth Maximization Immoral?’, Financial Analysts Journal, Sept-Oct, 69-74;∙Byrd, J., Parrino R. and G. Pritsch (1998), ‘Stockholder-Manager Conflicts and Firm Value’, Financial Analysts Journal, May-June, 14-29;∙Palepu, K. G. and P. M. Healy, (2003), ‘The Fall of Enron’, Journal of Economic Perspectives, Vol. 17, 3-26;∙Bigger than Enron: /wgbh/pages/frontline/shows/regulation/∙Friedman, H. And L. Friedman (2009), ‘The Global Financial Crisis of 2008: What Went Wrong?’, available at SSRN: /sol3/papers.cfm?abstract_id=1356193∙Inside the meltdown: /wgbh/pages/frontline/meltdownWeek 2. (Lecturer: Mr. Mark Humphery)The Investment Decision IRequired Reading: RWJ Chapters 5&6Week 3. (Lecturer: Mr. Mark Humphery)The Investment Decision IIRequired Reading: RWJ Chapters 9Week 4. (Lecturer: Mr. Mark Humphery)The Investment Decision IIIRequired Reading: RWJ Chapters 10Week 5. (Lecturer: Dr. Jin Yu)The Investment Decision IVRequired Reading: RWJ Chapters 11&15Week 6. (Lecturer: Dr. Jin Yu)Class Test 1Raising CapitalRequired Reading: RWJ Chapters 16Week 7. (Lecturer: Dr. Jin Yu)Capital Structure IRequired Reading: RWJ Chapters 17Myers, S. (2001), ‘Capital Structure’, Journal of Economic Perspectives, Vol. 15, 81-102 Week 8. (Lecturer: Dr. Jin Yu)Capital Structure IIRequired Reading: RWJ Chapters 17Graham, J. and C. Harvey (2002), ‘How do CFOs make capital budgeting and capital structure decisions?’, The Journal of Applied Corporate Finance, Vol. 15, 8-23Week 9. (Lecturer: Dr. Jin Yu)The Dividend DecisionRequired Reading: RWJ Chapters 18Week 10. (Lecturer: Dr. Jin Yu)Options and Corporate FinanceRequired Reading: RWJ Chapters 24Week 11. (Lecturer: Dr. Jin Yu)The Restructuring Decision – Mergers and AcquisitionsRequired Reading: RWJ Chapters 25Week 12. (Lecturer: Dr. Jin Yu)Class Test 2Revision LectureFINS5514 – Capital Budgeting and Financing Decisions。
FINS5517_APPLIED PORTFOLIO MANAGEMENT & MODELLING_2005 Semester 2_Buffett_onhelpers
Buffett: Cut your gains!In his 2006 letter to Berkshire Hathaway shareholders, Warren Buffett explains how costly it can be to letadvisors come between you and your money.By Warren BuffettMarch 6, 2006: 5:54 AM EST(FORTUNE Magazine) - Warren Buffett often uses his annual report to comment on subjects he believes of importance to today's markets. Here, from the report published Saturday, is an allegory about "How to Minimize Investment Returns."It's been an easy matter for Berkshire and other owners of American equities to prosper over the years. Between Dec. 31, 1899, and Dec. 31, 1999, to give a really long-term example, the Dow rose from 66 to 11,497. (Guess what annual growth rate is required to produce this result; the surprising answer is at the end of this piece.)This huge rise came about for a simple reason: Over the century, American businesses did extraordinarily well and investors rode the wave of their prosperity. Businesses continue to do well. But now shareholders, through a series of self-inflicted wounds, are in a major way cutting the returns they will realize from their investments.The explanation of how this is happening begins with a fundamental truth: With unimportant exceptions, such as bankruptcies in which some of a company's losses are borne by creditors, the most that owners in aggregate can earn between now and Judgment Day is what their businesses in aggregate earn. True, by buying and selling that is clever or lucky, investor A may take more than his share of the pie at the expense of investor B.And, yes, all investors feel richer when stocks soar. But an owner can exit only by having someone take his place. If one investor sells high, another must buy high. For owners as a whole, there is simply no magic -- no shower of money from outer space -- that will enable them to extract wealth from their companies beyond that created by the companies themselves.Indeed, owners must earn less than their businesses earn because of "frictional" costs. And that's my point: These costs are now being incurred in amounts that will cause shareholders to earn far less than they historically have.To understand how this toll has ballooned, imagine for a moment that all American corporations are, and always will be, owned by a single family. We'll call them the Gotrocks. After paying taxes on dividends, this family -- generation after generation -- becomes richer by the aggregate amount earned by its companies.Today that amount is about $700 billion annually. Naturally, the family spends some of these dollars. But the portion it saves steadily compounds for its benefit. In the Gotrocks household everyone grows wealthier at the same pace, and all is harmonious.But let's now assume that a few fast-talking Helpers approach the family and persuade each of its members to try to outsmart his relatives by buying certain of their holdings and selling them certain others. The Helpers -- for a fee, of course -- obligingly agree to handle these transactions. The Gotrocks still own all of corporate America; the trades just rearrange who owns what.So the family's annual gain in wealth diminishes, equaling the earnings of American business minus commissions paid. The more that family members trade, the smaller their share of the pie and the larger the slice received by the Helpers. This fact is not lost upon these broker-Helpers: Activity is their friend, and in a wide variety of ways, they urge it on.After a while, most of the family members realize that they are not doing so well at this new "beat my brother" game. Enter another set of Helpers. These newcomers explain to each member of the Gotrocks clan that by himself he'll never outsmart the rest of the family. The suggested cure: "Hire a manager -- yes, us -- and get the job done professionally."These manager-Helpers continue to use the broker-Helpers to execute trades; the managers may even increase their activity so as to permit the brokers to prosper still more. Overall, a bigger slice of the pie now goes to the two classes of Helpers.The family's disappointment grows. Each of its members is now employing professionals. Yet overall, the group's finances have taken a turn for the worse. The solution? More help, of course.It arrives in the form of financial planners and institutional consultants, who weigh in to advise the Gotrocks on selecting manager-Helpers. The befuddled family welcomes this assistance. By now its members know they can pick neither the right stocks nor the right stock pickers. Why, one might ask, should they expect success in picking the rightconsultant? But this question does not occur to the Gotrocks, and the consultant-Helpers certainly don't suggest it to them.The Gotrocks, now supporting three classes of expensive Helpers, find that their results get worse, and they sink into despair. But just as hope seems lost, a fourth group -- we'll call them the hyper-Helpers -- appears. These friendly folk explain to the Gotrocks that their unsatisfactory results are occurring because the existing Helpers -- brokers, managers, consultants -- are not sufficiently motivated and are simply going through the motions. "What," the new Helpers ask, "can you expect from such a bunch of zombies?"The new arrivals offer a breathtakingly simple solution: Pay more money. Brimming with self-confidence, the hyper-Helpers assert that huge contingent payments -- in addition to stiff fixed fees -- are what each family member must fork over in order to really outmaneuver his relatives.The more observant members of the family see that some of the hyper-Helpers are really just manager Helpers wearing new uniforms, bearing sewn-on sexy names like HEDGE FUND or PRIVATE EQUITY. The new Helpers, however, assure the Gotrocks that this change of clothing is all-important, bestowing on its wearers magical powers similar to those acquired by mild-mannered Clark Kent when he changed into his Superman costume. Calmed by this explanation, the family decides to pay up.And that's where we are today: A record portion of the earnings that would go in their entirety to owners -- if they all just stayed in their rocking chairs -- is now going to a swelling army of Helpers. Particularly expensive is the recent pandemic of profit arrangements under which Helpers receive large portions of the winnings when they are smart or lucky, and leave family members with all the losses -- and large fixed fees to boot -- when the Helpers are dumb or unlucky (or occasionally crooked).A sufficient number of arrangements like this -- heads, the Helper takes much of the winnings; tails, the Gotrocks lose and pay dearly for the privilege of doing so -- may make it more accurate to call the family the Hadrocks. Today, in fact, the family's frictional costs of all sorts may well amount to 20 percent of the earnings of American business. In other words, the burden of paying Helpers may cause American equity investors, overall, to earn only 80 percent or so of what they would earn if they just sat still and listened to no one.Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: Helost a bundle in the South Sea Bubble, explaining later, "I can calculate the movement of the stars, but not the madness of men." If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the fourth law of motion: For investors as a whole, returns decrease as motion increases.Here's the answer to the question posed at the beginning of this piece: To get very specific, the Dow increased from 65.73 to 11,497.12 in the 20th century, and that amounts to a gain of 5.3 percent compounded annually. (Investors would also have received dividends, of course.) To achieve an equal rate of gain in the 21st century, the Dow will have to rise by Dec. 31, 2099, to -- brace yourself -- precisely 2,011,011.23. But I'm willing to settle for 2,000,000; six years into this century, the Dow has gained not at all.。