Sunday, March 24, 2013

Shiller P-E Ratio



The ratio was published by Shiller in his book, Irrational Exuberance. It is a cyclically adjusted P-E ratio (CAPE ratio).

It takes 10 year earnings into account and adjusts it for inflation. For S&P 500, the ratio is updated regularly on Yale website.

According to http://multpl.com,  the current shiller P-E ratio is 23.56 (18 March 2013).

The highest was 44.20 reached in December 1999 and the lowest was 4.78 in December 1920. The median figure is 15.88.
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Wednesday, September 12, 2012

Using Neural Networks for Stock Price Prediction - Bibliography



M.S. Report
1998
Kutsurelis, J.
FORECASTING FINANCIAL MARKETS USING NEURAL NETWORKS: AN ANALYSIS OF METHODS AND ACCURACY
http://www.wardsystems.com/Financial%20Forecasting%20Thesis%20Kutsurelis.pdf





2012
Selvon Simon
http://airccse.org/journal/ijsc/papers/3211ijsc03.pdf
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Wednesday, September 5, 2012

Cash Flow

Cash Flow

Cash Flow

Authors

Subject: Investment Analysis  
 Index of concepts
  1. Aa to Az
  2. Ba to Bz
  3. Ca to Cz
  4. Da to Dz  
  5. Ea to Ez
  6. Fa to Fz
  7. Ga to Gz
  8. Ha to Hz
  9. Ia to Iz
11. Ka to Kz
24. Xa to Xz

Chapter/Topic: Financial Statement Analysis
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Concept Definition and Explanation

 Disounted cash flow valuation techniques need cash flow estimates to calculate values of securities. Hence analysts have to estimate cash flows based on the financial statements pubished by companies.
 
Traditionally, one of the cash flow measures used by analysts based on the financial statements was net income plus depreciation expense and deferred taxes.
 
Now cash flow statements are made mandatory and they contain three sections:
1. Cash flow from operating activities
2. Cash flows from investing activities
3. Cash flows from financing activities.
 
 
Free Cash Flow
 
Free cash flow modifies the cash flow from operating activties shown in the statement of cash flows for investing and financing activities that are critical to the firm. The idea is that unless these expenditures are made, the company cannot use its cash flow for rewarding its shareholders. Two additional items capital expenditure and sales of assets are taken into account and the remaining cash flow is termed as free cash flow.
References:
Reilly, Frank and Keith Brown, Investment Analysis and Portfolio Management, 7th Edition, Thomson-South Western, 2003
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Investment Analysis

Investment Analysis

Investment Analysis

Branches of knowledge knol series

Authors

Contributers

Investment Analysis deals with investment decision making.
 
Investment has many definitions, explanations and usage.
 
Reilly and Brown defined investment as deployment of savings in such a way that the amount increases over a time. This they contrasted with storing the savings below the mattress in which case the amount remains the same.
 
Investment can be done in physical assets or financial assets. Investment analysis as a popular subject deals with investment in securities (financial). But nowadays popular subjects like real estate investment analysis also are available.
 
Investment, speculation and gambling can be differentiated and were differentiated by many authors.
 
Investment has a low risk attached to it. The risk is not zero but it is relatively low risk. Speculation has high risk and there is high probability that the entire capital committed to the transaction or portfolio can be lost.
 
Gambling is creation of games based on chance. The risk is high and the risk is not a natural risk that somebody or other has to bear in the society. They are created opportunities for chance gains and losses.
 
Benjamin Graham is hailed as the dean of security analysis or investment analysis. Warren Buffett studied and worked under Bejamin Graham
 
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Mutual Fund Cash Position - A Technical Indicator

Mutual Fund Cash Position - A Technical Indicator

Mutual Fund Cash Position - A Technical Indicator

IB, SAPM Concept

The knol will have brief introduction to the concept, links to various knols on the concept, books on the concept and research papers on the concept. Knol is on open collaboration basis, so that visitors and authors can add their knols and research papers and update and enrich the knol on a continuous basis

Authors

 Index of concepts
  1. Aa to Az
  2. Ba to Bz
  3. Ca to Cz
  4. Da to Dz  
  5. Ea to Ez
  6. Fa to Fz
  7. Ga to Gz
  8. Ha to Hz
  9. Ia to Iz
11. Ka to Kz
24. Xa to Xz

Subject

Chapter/Topic
_______________________________________________________________

 

Concept Definition and Explanation

 

Mutual fund cash positions and their net subscriptions are followed closely by technicians.
 
A low cash ratio would indicate a reasonably fully invested position, with the implication that not much reserve buying power remains in the hands of funds as a group. Low ratios of the order of 5 to 5.5 per cent are frequently associated with tops.
 
At bottoms cash ratios will be high and this indicates significant buying power in reserve. 
 
References:
Reilly, Frank and Keith Brown, Investment Analysis and Portfolio Management, 7th Edition, Thomson-South Western, 2003
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Relative Stength - Technical Analysis

Relative Stength - Technical Analysis

Relative Stength - Technical Analysis

IB, SAPM Concept

The knol will have brief introduction to the concept, links to various knols on the concept, books on the concept and research papers on the concept.

Authors

 Index of concepts
  1. Aa to Az  2. Ba to Bz  3. Ca to Cz
  4. Da to Dz  
  5. Ea to Ez  6. Fa to Fz  7. Ga to Gz
  8. Ha to Hz
  9. Ia to Iz
11. Ka to Kz
24. Xa to Xz

Subject

Chapter/Topic
__________________________________________________________________

 

Concept Definition and Explanation

 According to the proponents of technical analysis, one a trend begins, it will continue until some event causes a change in direction.  According to technicians, a similar behavior occurs in relative performance also.  If an individual stock is outperforming the market index, the outperformance is expected to continue. Technicians believes in market moves and the reason for the move will become public in due course of time is their argument. Relative strength concept is applied to industry in comparison to general market and specific stock in comparison to industry index.
 
References:
Reilly, Frank and Keith Brown, Investment Analysis and Portfolio Management, 7th Edition, Thomson-South Western, 2003
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Narayana Rao - 18 Feb 2011
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Equity Share - Financial Asset

Equity Share - Financial Asset

Equity Share - Financial Asset

Authors


Equity share is a financial asset that persons can buy in exchange for cash. Common stock is another name used to describe equity shares. Companies established under the company law of a country issue equity shares through a prospectus, which is specified by the company law provisions of the country. The condition of prospectus is applicable to companies which want to provide trading facility for the equity shares issued by them on the recognized stock exchanges. Such companies, whose shares are traded on the stock exchange are termed 'listed companies.' To get a company's shares listed on a stock exchange, the company has to approach the stock exchange and comply with certain provisions put forward by the stock exchange. These provisions are insisted by stock exchanges so that public at large have information about the working of company and also to facilitate quick transfer of the equity shares from seller to the buyer.

Companies issue equity shares to finance the working of the company. Finance means the money resources of a company. Companies generally accumulate money resources first and then convert these money resources into tangible and intangible assets of the company. Tangible assets are the physical buildings and machinery in the company ownership and intangible assets are the investments or expenditures made to build awareness and trust in the market. Companies also acquire money resources for running the company through bank loans and fixed income securities. Bank loans and fixed income securities have a specified interest which is to be paid periodically on specified dates and it is obligatory for the company to pay that interest. If there is a default, the creditors who gave loans or bought securities can go to court and ask for liquidation of the company to pay their dues. In such cases, court will interfere in the operations of the company, seek information from the company and also give directions to the company and even order liquidation. In contrast, on equity share, there is no contractual periodical obligation to pay a return. The companies prepare profit and loss account for every financial year according to generally accepted accounting principles of the country as well as certain guidelines given under the company law of the country. If the profit and loss account reports profit, the board of directors, have to decide the amount of profit that they would like to distribute as return to the shareholders. The profit distributed on equity shares to shareholders is termed dividend. In the years, when the company reports loss in the profit and loss account, the board of directors may declared if there are retained profits from earlier years. Otherwise, they can't distribute any dividend and shareholders will not receive any return in that year. Thus return on equity shares is variable from year to year. One can only estimate future dividends based on past performance of the company and plans and prospects but there is no contractual agreement anywhere for payment of a specified amount.

Equity shares comes into existence when a company issues them to public and they are traded on stock exchanges of a country, if they are listed for trading on them. Persons with savings can buy them from companies when companies make an issue of equity share or they can buy them from existing shareholders on stock exchange. The return on equity shares is in the form of dividends. As the companies as a practice do not distribute the entire profit as dividends, and retain some profit with them to support their business further, shares appreciate in value. The appreciation in value of shares is also a return to shareholders. If the companies make losses, the retained profits will reduce and therefore shares can lose value also. Therefore return on equity shares is variable from year to year, and they are aptly called variable return securities or risk securities. Return on government bills, notes, and bonds is called risk free return and they are called risk free securities. On risky securities, there is promise and expectation of higher return compared to risk-free securities and there is an increase in variability of realized return.


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Narayana Rao - 26 Feb 2011
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