Sunday, May 11, 2014

Finance and Investment Management - Bulletin Board

Authors and Visitors can use the bulletin board to write about finance and investment knols as well as other online sources of information regarding finance and investment. - Make it a favorite on knol of yours and visit the knol frequently to write your ideas and read others ideas

Write below this line


Alexander Hamilton as Secretary of State established a national bank and used all the tools that were later recommended by Bagehot in Lombard Street,.





Today is birthday of Paul Samuelson, an economist and nobel prize winner. Let us celebrate it as Knol Day of Economics on Knol and read knols and highlight knols in the area of economics.
2011 - Knol Day of Economics - 15th May - Birthday of Paul Samuelson
The World Bank has launched a programme to put a value on nature and bring that value into national accounts. This will give the natural wealth of nations and account for its increase or decrease. This was revealed by the President of WB in Nagoya, Japan where a UN meet is taking place.


Knol Sub-Directory - Investment Management - Interesting Knols  is now having more than 60 knols. The number may go up to 100. Interesting knols are increasing on Knol platform in various topics.
Visit Knol Directory of Interesting Knols for the large number of subject sub-directories (250)

09.2.2010 Prospect theory

Trying to explain simply a Nobel prize theory:

Parable of the lost cookie and prospect theory



Another basic stuff

01.6.2009 Basic valuation arithmetic

Interest rates and rates of returns are intuitively understood by most people, but their arithmetic (compound rates, future value, present value) are mysterious for many.
The Compound rate of return and present value knol aims at explaining the bases to calculate financial returns and financial values. 


16.5.2009 Defining finance

A set of activities, tools and institutions that collect money, that provide it to realize projects and that exchange risks and returns between economic players.
As seen in the Financial knol index
Interesting definition. As a function, finance function collects money, and provides it to projects or expenditure or investment proposals and then after the completion of projects or periodically during the projects exchanges cash flows with providers of finance. Risk is inherent in finance activity. (KVSSNrao)

13.5.2009 Knols on Analysis of Financial Statements


11.5.2009 Warren Bufett

Buffett said in a television channel interview that on a 10-year horizon people should invest in equity today instead of short term liquid funds or bonds.

10.5.2009 - Portfolio Management Knols


9.5.2009 KVSSNRao - Investment Links

A set of links shared by Dan O'Shea in his MBA class.
About Books
The Either/Or Investor by Clark Winter Pub. by Random House, 181 pages, $26 
Clark Winter is the director of portfolio strategy at Goldman Sachs.
"Successful investors have a unique ability to process an enormous information and boil it down to binaries that simplify decision making." A quote from the book.
Any further information on the important issues covered in the book is welcome

8.5.2009 KVSSNRao - Mechanical Estimating Models for Forecasting Financials

"A prospective approach should also be used, as investment is anticipating evolutions."

Theoretically the above statement is perfectly right. Methods which use only historical information use an implicit assumption that past data has the ability to predict the future and instead of making explicit future estimates, they give a judgment in either qualitative way or quantitative way. Are they useful or not is an empirical issue. I shall try to give details of some research papers on various methods proposed by Graham.

I also support approaches based on estimating the future and developing scenarios of future evolution. But my study of various texts on security analysis makes me conclude that they texts have not tackled the issue of estimating the future with rigor.  They probably make an implicit assumption that some argument that provides some justification for the projected scenario is sufficient enough to take risk in the stock market. Statisticians have not paid attention to the subject of forecasting company financials because they were not getting models that fit the data adequately. Still, fitting a model with poor fit will bring out the risk inherent in the company's financial information. Benjamin Graham advised that security analysis should be limited only to those companies which have a stable financial performance based on which future can be predicted. For other company securities, security analyst should not give any opinion. They are a class of securities for which security analysis cannot be done. My request to security analysis faculty and academic researchers is to examine and describe the statistical nature of company financial information in more detail.

There has to be initial estimates using statistical methods or mechanical methods, which may be subjectively modified to bring in the assessments of analysts which are based on their interaction with the company, customers, suppliers, employees, consultants, competitors, regulators, bankers, trade associations etc.  By relating their specific estimates with a mechanical estimate, analysts need to continually do hypothesis testing.  Rejecting mechanical estimate is aim of the hypothesis testing. I gave the following mechanical model to my students for their assignment work.

All authors and visitors are requested to post their ideas, opinions and comments on the board as it is an open collaboration knol. If they want, they can post in the comment box also. Your opinions may help authors to write new knols in the area, modify their knols, or offer an explanation to the issue being pointed out.

A Knol on Speculation

7.5.2009 KVSS - Bulletin board started.

A knol by me on a basic method of fundamental analysis based on historical data.
Certainly, although a prospective approach should also be used, as investment is anticipating evolutions.
Another issue is what parts should the various types of analyses (fundamental, but also quantitative, technical, behavioral) play when deciding investments, disvestments, arbitrages ?

7.5.2009 KVSS
The knol  Financial analysis tables   is a good one giving details of issues to be looked into in evaluating a company.

Original knol - 1189

No comments:

Post a Comment