A formative analysis of securities within the financial market - Free Essay Example

Sample details Pages: 4 Words: 1311 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Unexpected changes in money supply can be due to tax actions, changes in interest rates, changes in discount rates among other factors. Stock returns are generally positive or negative. In this essay, the motive is to find whether the statement, unexpected changes in money supply and stock returns are inversely related, holds ground or is not valid. To begin with, we will first look at the money supply process in brief and see which factors affect stock return. Post this we will confirm the empirical validity of this statement with the help of evidence available in the literature. The Money Supply Process Bodie, Kane, Marcus and Mohanty (2009, p.592) explain that the Government can manipulate the money supply through the use of fiscal and monetary policies. Fiscal policy refers to government spending and tax actions and is considered the most direct way to stimulate or slow the economy. Federal Reserve System (FED) determines the monetary policy which generally functions through its impact on interest rates. Short term interest rates decrease due to increase in money supply, ultimately encouraging investment and consumption demand. Over long periods, however, most economists believe a higher money supply leads to higher price levels. An example of monetary policy functioning through open market operations can be illustrated as below: *Note: Unlike us, the FED can pay for security without drawing down funds at a bank account From Bodie, Kane, Marcus and Mohanty (2009), we can narrow down the following factors related to money supply affect stock return: Inflation Interest rate (discount rate) Monetary growth Don’t waste time! Our writers will create an original "A formative analysis of securities within the financial market" essay for you Create order Empirical Evidence Whether unexpected changes in money supply are positively or negatively related to stock returns seems to be a topic debated by many researchers. At one end where many international researchers have found a significant negative relationship (Bodie, 1976; Jaffe and Mandelker, 1976; Fama and Schwert, 1977; Amihud, 1996; Hu and Willett, 2000; Hagmann and Lenz, 2004), on the other hand a positive relationship is proved by quite a few researchers (Fama, 1981; Geske and Roll, 1983; Kaul, 1987; Zhao, 1999; Luintel and Paudyal, 2006). Effect of Discount Rate/ Interest rate on Stock return Chen et al. (1999) found that equity returns generally respond negatively and significantly to the unexpected announcements of discount rates. They reason this out by stating: A discount rate increase, ceteris paribus, decreases the expected future equity cash flows because firms must borrow at a higher cost. At the same time, the increase also raises the risk-free rate which, in turn, increases the required rate equity investors use to discount the future cash flows. As a result, an unexpected increase in market interest rates depresses equity prices, and, therefore, one would expect an unexpected change in the Federal Reserve discount rate to cause changes in equity prices. However, there have been contrasting views relating to the pre-1979 period. Research carried out by Smirlock and Yawitz (1985 cited in Thorbecke and Alami, 1994, p.14) have found that changes in the discount rate had no effect on the NYSE index over the pre-1979 period. Pearce and Roley (1985 cited in Thorbecke and Alami, 1994, p.14) did find that innovations in the weekly money supply announcements lowered stock prices during this period. A further research by Thorbecke and Alami (1994), over the September 1974 to September 1979 period, concludes that the Fed raising (lowering) the federal funds rate target caused stock prices to decline (increase) immediately. Effect of Inflation on stock re turn The rate at which general levels of prices rise is called inflation (Bodie, Kane, Marcus and Mohanty, 2009) According to the efficient market hypothesis, stock prices are a sign of all available public information; therefore, only the unexpected inflation rate, which contains new information, will influence stock returns at the time when the announcement is released (Joyce and Read, 2002). Consistent with the efficient market hypothesis, L. Li et al. (2010) found that the expected inflation rate has very little impact on stock returns while the unexpected inflation rate has a statistically significant and negative effect on stock returns. Amihud (1996) states The evidence that stock prices are affected by unexpected inflation seemed puzzling given that stocks are claims on income generated by real assets. But unexpected inflation indicates an economic shock, hence its effect depends on its source. Aggregate demand shocks should create positive correlation between th e resulting unexpected inflation and stock prices, whereas aggregate supply shocks should create negative correlation. The research on Israel concluded that inflation has a significant negative effect on stock prices. The effect of inflation on stock returns, in terms of time horizons is cited by Luintel and Paudyal (2006) in their research. They state, event studies, which look at the effects of inflation announcements on stock returns, report a negative relation between inflation and stock returns (e.g., Amihud 1996). Short-horizon studies that use monthly data covering what is typically 10 to 15 years also report either a negative or an insignificant relation between stock returns and inflation (e.g., Jaffe and Mandelker 1976). In contrast, long-horizon studies (e.g., Boudoukh, Richardson, and Whitelaw 1994) and studies that test for cointegration between stock and commodity price indexes (e.g., Ely and Robinson 1997) find a positive and significant relation between stock retu rns and inflation. Effect of monetary growth on stock returns Paudyal (1990) points out that money growth and stock returns are inversely related. Pearce and Roley (1983) shed more light on this topic. They infer that first, stock prices respond only to the unanticipated change in the money supply as predicted by the efficient markets hypothesis. Second, an unanticipated increase in the announced money supply depresses stock prices while an unanticipated decrease elevates stock prices. Third, the stock price response does not depend on the relationship of the money supply to the long-run ranges of the Federal Reserve. Using weekly data 1977-1982, they estimated the following model, ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‚  Pt= a + b (ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‚  Mat ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‚  Met) + ÃÆ' Ãƒâ€šÃ‚ µt Where ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‚  Pt is the percentage change in the stock price, ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‚  Mat is the announced change in the money stock, and ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‚  Met is the expected change in the money stock. They estimated the model for three sub-periods and obtained a negative estimate of b parameter in each sub-period. Conclusion As stated earlier, unexpected changes in money supply can be due to tax actions, changes in interest rates, changes in discount rates among other factors. Stock returns are generally positive or negative. In this essay, I initially explained the money supply process. Next, we studied some empirical evidence to check if unexpected changes in money supply had an inverse effect on stock return or not. Although few results did state the otherwise, most results showed that factors which affect money supply did have an inverse effect on stock returns. In conclusion we can further look at a few more precise points made in certain research papers. Chen et al. (1999) find that few equity returns respond negatively and significantly to the unexpect ed announcements of discount rate changes, while the expected changes generally have no bearing on the equity returns. On average, stock returns change by 0.5% for every 10 basis point change in the discount rate. Equity returns measured by the Dow Jones industrial index respond rather rapidly to the unexpected announcement of discount rate changes. Within the trading period/hour after the information is released, the market impounds the information. Hardouvelis (1987) has discussed, a higher real interest rate would reduce stock prices because firstly it would curtail real activity and hence earnings and secondly it would increase the discount rate at which those earnings were discounted. L. Li et al. (2010) determine that 1 day returns of the FTA fall by 0.17% in response to an increase in the unexpected inflation rate of 1% on the announcement day. Therefore, an unexpected increase in the inflation rate is considered bad news for the stock market since this leads to a reduc tion in stock prices. Thus through the empirical evidence we have assessed, we can infer that the statement unexpected changes in money supply and stock returns are inversely related, holds ground to a respectable extent.

The Odyssey Is Odysseus Really a Hero - 872 Words

Odysseus can be portrayed as an antihero in The Odyssey. A hero is clever, respectful, brave, and shows mercy. Odysseus is the complete opposite of a hero. He is immature, barbaric, unfaithful, and a coward. Being faithful, or loyal, is one of the main aspects of being a hero. Book V shows us that Odysseus might not have been so faithful to Penelope: â€Å"Now as he spoke the sun set, dusk drew on/ and they retired, this pair, to the inner cave/ to revel and rest softly, side by side† (5. 234-236) This quote describes Odysseus with Kalypso, before he left her cave to return to Ithaka. â€Å"Resting softly, side by side† might mean more than what Homer is giving us. Odysseus is also very immature and childish. After tricking the Kyklops,†¦show more content†¦The first time is with an unlucky suitor who tries to get out of being killed: â€Å"’Mercy,/ mercy on a suppliant, Odysseus!/ Never by word or act of mine, I swear./ was any woman troubled here. I told them the rest/ to put an end to it. They would not listen,/ would not keep their hands from brutishness,/ and now they are all dying like dogs for it./ I had no part in what they did: my part/ was visionary--reading the smoke of sacrifice./ Scruples go unrewarded if I die.’/ The shrewd fighter frowned over him and said:/ ‘You were diviner to this crowd? How often/ you must have prayed my sweet day of return/ would never come, or not for years!—and prayed/ to have my dear wife, and beget children on her./ No plea like yours could save you/ from this hard bed of death. Death it shall be!’/ He picked up Agelaos’ broadsword/ from where it lay, flung by the slain man,/ and gave Leodes’ neck a lopping blow/ so that his head went down to mouth the dust.†(22. 350-370) Another example of Odysseus showing no mercy is when he makes the maids, who slept with the suitors, clean up the dead bodies and wash the furniture. Then they were to be executed: â€Å"As he spoke/ here came the women in a bunch, all wailing,/ soft tears on their cheeks. They fell to work/ to lug the corpses out into the courtyard/ under the gateway, propping one/ against another as Odysseus ordered,/ for he himself stood over them. In fear/ these woman bore the cold weight of the dead./ The next thing was to scrub offShow MoreRelatedThe Epic Of The Odyssey Essay942 Words   |  4 PagesHowever, compared to Odysseus in The Odyssey, who is strong, but untrusting, we will soon see that Sunjata is not only a man but a hero. In both texts we see each man adored by many and even compared to Gods like Odysseus in The Odyssey. However, when we break down the words of each epic we are faced to confront the truths of what a hero really is. This claim explains why The Odyssey expresses a false sense of heroism whereas Sunjata gives the audience and example of a real hero. 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Involvement and Involvement Factors When Buying a Computer Free Essays

You should first have an idea of the type of computer you want. You should plan to purchase your new computer so that you can get a good product life out of your computer. It will be very disheartening to purchase a brand new computer only for you to get a small use out of it. We will write a custom essay sample on Involvement and Involvement Factors When Buying a Computer or any similar topic only for you Order Now You should purchase a computer for two or three years out; due to the rapid changes in the technology field. The next step should include finding a good store to purchase from. A general rule to remember is that computers are much cheaper if you buy them versus leasing one. If you are tight on cash, you would be better off leasing, as a better alternative. If the store you purchased your new computer from is overall helpful and friendly, you can expect great things if you have questions about your new computer purchase in the future. You should decide whether you want a laptop or a desktop computer. Desktop computers are much cheaper than laptop computers, about twice as much cheaper for some brands. If you are a business person and are always on the go, you should consider the purchase of a laptop computer. If you are a stay at home parent, a desktop computer would best fit your lifestyle. You should always invest in a good monitor. Monitors with a 17 inch screen or less causes you to squint a bit. You can either choose from a flat panel monitor or a tube type monitor. Flat panels don’t have the best image quality as tube type monitors have. However, tube type monitors take up a lot of space. They also tend to get blurry when they age, while flat panels won’t corrupt when they age. Networking is what makes the computer fun. Another key factor that you should consider while purchasing a computer is your Ethernet cords. Be sure to purchase a computer with 10/100/1000 Ethernet jack; as it is preferred by most computer lobbyist. You should also enable encryption codes to keep other people from hacking into your wireless internet. Another key involvement factor would be purchasing a warranty for your new computer. Extended warranties just make perfect sense when purchasing a new electronic device. They are excellent for big retailers and you should be sure to know about the coverage on your warranty, what it covers and what it doesn’t cover. I think apple has complicated things for the average consumer. I don’t feel as if the website broke down all of the products and services down to a tee. How to cite Involvement and Involvement Factors When Buying a Computer, Papers

Juvenile Delinquency Essay Thesis Example For Students

Juvenile Delinquency Essay Thesis Juvenile DelinquencyRemember doing something mischievous or wrong when you were a kid and gettingthe label delinquent slapped on you ? Did you ever wonder what it meant ?That is what my topic for today is . . . juvenile delinquency. In this report Iwill: define juvenile delinquency, give the extent of juvenile delinquency,give some suggestions on what causes juvenile delinquency, and what is beingdone in various communities to deal with this growing problem. The legal termjuvenile delinquent was established so that young lawbreakers could avoid thedisgrace of being classified in legal records as criminals. Juveniledelinquency laws were designed to provide treatment, rather than punishment, forjuvenile offenders. Young delinquents usually are sent to juvenile courts,where the main aim is to rehabilitate offenders, rather than to punish them. But the term juvenile delinquency itself has come to imply disgrace in todayssociety. A youngster can be labeled a delinquent for breaking any one of anumber of laws, ranging from robbery to running away from home. But an actionfor which a youth may be declared a delinquent in one community may not beagainst the law in another community. In some communities, the police ignoremany children who are accused of minor delinquencies or refer them directly totheir parents. But in other communities, the police may refer such children toa juvenile court, where they may officially be declared delinquents. Crimestatistics, though they are often incomplete and may be misleading, do give anindication of the extent of the delinquency problem. The FBI reports thatduring the early 1980s, about two-fifths of all arrests in the United Statesfor burglary and arson were of persons under the age of 18. Juveniles alsoaccounted for about one-third of all arrests for larceny. During any year,about 4 % of al l children between the ages of 10 and 18 appear in a juvenilecourt. The percentage of youngsters in this group who are sent to court atleast once is much higher. A third or more of those boys living in the slumareas of large cities may appear in a juvenile court at least once. Girls arebecoming increasingly involved in juvenile delinquency. Today, about one ofevery five youngsters appearing in juvenile court is a girl. In the early1900s, this ratio was about 1 girl to every 50 or 60 boys. Sociologists haveconducted a number of studies to determine how much delinquency is not reportedto the police. Most youngsters report taking part in one or more delinquentacts, though a majority of the offenses are minor. Experts have concluded thatyouthful misbehavior is much more common than is indicated by arrest records andjuvenile court tatistics. Many studies have been made in an effort to determinethe causes of delinquency. Most of these have focused on family relationshipsor on neighborhood or community conditions. The results of these investigationshave shown that it is doubtful that any child becomes a delinquent for anysingle reason. Family Relationships, especially those between parents andindividual children, have been the focus of several delinquency studies. Anearly study comparing delinquent and nondelinquent brothers showed that over 90% of the delinquents had unhappy home lives and felt discontented with theirlife circumstances. Only 13 % of their brothers felt this way. Whatever thenature of the delinquents unhappiness, delinquency appeared to them to be asolution. It brought attention to youths neglected by their parents, orapproval by delinquent friends, or it solved problems of an unhappy home life inother ways. More recent studies have revealed that many delinquents had parentswith whom they did not get along or who were inconsistent in their patterns ofdiscipline and punishment. Neighborhood conditions have been stressed in studiesby sociologists. Many of these inquiries concentrate on differing rates ofdelinquency, rather than on the way individuals become delinquents. A series ofstudies have shown that delinquency rates are above average in the poorestsections of cities. Such areas have many broken homes and a high rate ofalcoholism. They also have poor schools, high unemployment, few recreationalfacilities, and high crime rates. Many young people see delinquency as theironly escape from boredom, poverty, and other problems. Social scientists havealso studied the influence of other youngsters on those who commit delinquencies. .u13432e7cb529406ffd3c0d1a618c45ee , .u13432e7cb529406ffd3c0d1a618c45ee .postImageUrl , .u13432e7cb529406ffd3c0d1a618c45ee .centered-text-area { min-height: 80px; position: relative; } .u13432e7cb529406ffd3c0d1a618c45ee , .u13432e7cb529406ffd3c0d1a618c45ee:hover , .u13432e7cb529406ffd3c0d1a618c45ee:visited , .u13432e7cb529406ffd3c0d1a618c45ee:active { border:0!important; } .u13432e7cb529406ffd3c0d1a618c45ee .clearfix:after { content: ""; display: table; clear: both; } .u13432e7cb529406ffd3c0d1a618c45ee { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u13432e7cb529406ffd3c0d1a618c45ee:active , .u13432e7cb529406ffd3c0d1a618c45ee:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u13432e7cb529406ffd3c0d1a618c45ee .centered-text-area { width: 100%; position: relative ; } .u13432e7cb529406ffd3c0d1a618c45ee .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u13432e7cb529406ffd3c0d1a618c45ee .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u13432e7cb529406ffd3c0d1a618c45ee .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u13432e7cb529406ffd3c0d1a618c45ee:hover .ctaButton { background-color: #34495E!important; } .u13432e7cb529406ffd3c0d1a618c45ee .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u13432e7cb529406ffd3c0d1a618c45ee .u13432e7cb529406ffd3c0d1a618c45ee-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u13432e7cb529406ffd3c0d1a618c45ee:after { content: ""; display: block; clear: both; } READ: Solar Cells Essay PaperFor example, they point out that most youngsters who engage in delinquentbehavior do so with other juveniles and often in organized gangs. Studiesindicate that the causes of delinquency also extend to a whole society. Forexample, delinquency rates tend to be high among the low-income groups insocieties where most people are well-to-do. The pain of being poor and livingin slum conditions are felt more strongly in a rich society than in a poor one. Many efforts have been made to develop programs of delinquency prevention. There is little evidence, however, that any of these programs is truly effective. Some programs provide counseling services to youths who appear to be on theverge of becoming delinquents. Other programs draw youngsters into clubs andrecreational centers in an effort to keep them away from situations in whichdelinquency is likely to occur. In recent years, many efforts have centered onimproving the educational and work skills of youngsters. For those juvenileswho have already become delinquents, there are programs designed to prevent themfrom committing future delinquent acts. Probation services are offered throughjuvenile courts in an effort to provide guidance for delinquent children. Themore progressive institutions for juveniles attempt to provide treatmentprograms for offenderswork experiences, counseling, education, and grouptherapy. However, many other institutions provide little more than protectivecustody for juvenile delinquents. In conclusion, I have defined juveniledelinquency, explained the extent of juvenile delinquency, gave some suggestionson what c auses juvenile delinquency, and what is being done in variouscommunities to deal with the problem of juvenile delinquency.