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Questions tagged [finance]

Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments.

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Distribution of news for small stocks vs. large stocks

I wonder whether there exist any research regarding the distribution of news or newspapers for different part of the week. Is there a significant difference in the amount of news published between ...
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Commonly used indicators for currency pair strength?

I am attempting to write a program in Python that monitors a single currency pair, GPB/NZD to be specific. My main focus will be to run constant calculations every 2 to 3 minutes in order to give ...
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How to define the optimal lag K in GARCH-MIDAS?

Does anyone here have experience with GARCH-MIDAS? I estimated a garch midas model using the package mfGARCH and I have to choose the lag K that corresponds to the model with the minimum BIC. The ...
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How to evaluate customer lifetime value

I am learning about calculating Customer Lifetime Value (CLV). So far I have learned that there are many ways to calculate it, like stated here, which I understand, different industries will also need ...
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Comparing values of 5s and 7% notes

I am a beginner in investment. I was reading Security Analysis (Sixth Edition) by Benjamin Graham, and on page 63 the last paragraph is written that: A third kind of analytical conclusion may be ...
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Relation between Captial Market Line and Security Market Line

I am referring to the book, "William Sharpe et al, Investments, 6th Edition. I am trying to wrap my head around some lines from the book, pertaining to Security Market Line. It reads, "Earlier it ...
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Since the financial crisis, what measures have been taken to solve the too-big-to-fail problem?

Ben Bernanke (2010): If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved. So, what measures have been taken to solve the too-big-to-fail problem? To what ...
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Are these views on money creation set out by McLeay, Radia, & Thomas (BoE, 2014) mainstream/widely-accepted or heterodox?

In the Bank of England's Quarterly Bulletin, 2014 Q1, McLeay, Radia, & Thomas write a pair of articles titled: "Money in the modern economy: an introduction" and "Money creation in the modern ...
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How does a bank create new money when it pays its own staff?

I am reading Ryan-Collins et al. (2013, Where Does Money Come From? A Guide to the UK Monetary and Banking System). I think I understand how banks create new money whenever they make a loan. Using ...
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Calculating the weighted average cost of capital

Question : Provided that interest on debt is 12%, dividend to share holders are 15%. Calculate the weighted average cost of capital if debt is 70% and equity is 30%. Given, tax rate is 20%. I know, ...
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Amout of total investment being pension capital

Is there data on how many percent of the total investments in the US i.e stock, funds, bonds etc, that are owned as pension capital? The corresponding global info would also be nice if someone know ...
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Net present value of studying?

Suppose I attend college with 10k tuition fee per year meanwhile I have a part time job for 5k annually. After 3 years, I get a job for 45 years and earn 40k each year. What is my net present value in ...
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Cross Currency Swaps

How can cross currency swaps or derivatives be used to help a country hide its debt? How did Goldman Sachs do this in Greece’s case?
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What country has the highest requirements for loans?

I was looking to find countries with the toughest regulations on loans(general loans not any specific ones) By that I mean: I mainly care to know where it is toughest for people to get a loan from a ...
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On a statement of Harry Browne (revised)

I am reading a book on an investment strategy proposed by Harry Browne (1999, Fail-Safe Investing: Lifelong Financial Security in 30 minutes, pp. 39–40) known as the "permanent portfolio". He makes ...
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Can a government invest in public companies so their dividends can finance the government

Is it possible that a country could use the money in its sovereign wealth fund to invest in different country's Stock Market and use the dividends to finance its government thus increasing spending ...
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1answer
25 views

Calculating expected tenure of a customer

In his How To Project Customer Retention, Fader computes the expected tenure of a customer according to $$E = \sum_{t=0}^{\infty}S(t)$$ where $S(t)$ is the Survival Function. From a purely ...
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Transformation of random variables and second order stochastic dominance

Suppose X and Y are two random variables where X SOSD Y. Let g(•) be a monotonic function and X'=g(X) and Y'=g(Y).Under what conditions of g, X' SOSD Y'? I know if g is linear SOSD property is ...
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Can central bank interest rate hikes lead to a price gain in equities?

I ran an empirical analysis on recent interest rate changes of European central banks on Swiss equity prices and found statistically significant results. A 1 percentage point increase in interest ...
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primary impact on real estate prices/taxes

Are my housing prices/taxes more influenced by the $40M beach house a few miles away from my home or those in the lower-class well beyond my county line? Assuming a few basics: there are differing ...
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1answer
27 views

log returns in fianance

Why are log returns used in finance? For example to calculate a stocks performance. There are a lot of articles on that topic yet I don't find them very helpful. Could somebody please explain step by ...
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1answer
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What data/factors/attributes do the professionals monitor in a top-down analysis on the macroeconomics?

I am learning to do top-down analysis on a number of sectors in the US equity markets. I have never done it before and I would appreciate it if some professionals can share their experiences with me. ...
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Use of Normal distribution in financial simulations

In paper such as this, I see the normal distribution being used to model the process of a financial investment. This seems strange because aggregating i.i.d. normal variables yields a mean that ...
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1answer
29 views

Analyzing vast economic/financial data

I have data science projects coming up in a university course in the upcoming quarters, and I was interested in using financial/economic data since there is so much of it. Also, I do have a hobby for ...
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1answer
40 views

Collapse of Lehman Brothers: What did they have in their books?

What kind of products did Lehman Brothers have on their books that caused the collapse? Do we have access to data on this topic?
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1answer
25 views

What is the difference between Margin and Markup?

Please clarify the difference in meaning behind markup and margin. Why would I use one or the other? Markup = (Price - Cost)/Cost useful for examining how much actual profit is made on each sale. ...
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Showing that a market model has arbitrage and describing martingales

This is an exercise which I came upon while studying an introduction to financial mathematics. Exercise : Consider the finite sample space $\Omega = \{\omega_1,\omega_2,\omega_3\}$ and let $\...
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1answer
31 views

Black-Scholes Model question

Suppose a company has a zero coupon bond with face value of 200 million which matures in a year. Its assets has a market value of 300 million. The standard deviation is 30% and the risk free rate is ...
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2answers
38 views

Yield To Maturity exact meaning

From investopedia: "YTM is the total return anticipated on a bond if the bond is held until it matures" I have also seen this interpretation used in other sources however this seems wrong to me. ...
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1answer
27 views

The “permanent portfolio” content

I am considering the idea of "Harry Browne's permanent portfolio". I seen a few versions of this strategy where the different parts consists of funds which in turn have some costs associated with them....
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1answer
54 views

Why do companies sit on cash while they have debt?

Why don't they use cash to pay down their debts?
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3answers
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Why use marginal rather than average tax rates in incentive analysis?

Why do tax analysts worry about marginal tax rates, not average effective rates, in looking for incentive effects of taxes
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79 views

J Curve and DD Schedule in the Short Run (International Finance)

Assume that the J-curve is true. What would the DD curve look like during the early period of the J-curve (where the value effect dominates)? What would the effect of temporary changes in monetary ...
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1answer
17 views

Is there any reason deflation would reduce profits?

Profits are the difference between input and output prices. So profits would only fall in those industries where output price fell faster than input price. Is there any reason deflation would reduce ...
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Why can anyone buy insurance of an, without owning the, underlying asset?

A Random Walk Down Wall Street (2015 11 ed, but an 2019 ed. is upcoming). p. 100 Top.   To make matters even more complicated, there was not just one bond issued against a package of mortgages. The ...
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What would an investment bank have to gain by warning of an impending financial crisis?

After reading a recent article and a discussion with a friend, I was left wondering what an investment bank would have to gain by claiming that a financial crisis is coming. I can see an obvious ...
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Value of companies with circular ownership [duplicate]

Given two companies, total assets of $100 million each. Company 'A' owns \$50M of company 'B'. Company 'B' owns \$50M of company 'A'. If you look at the value of both companies do you ...
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1answer
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Common sense of economics as reflected in proverbs [closed]

May I ask what other proverbs reflect the common sense of economics, such as those who dig for gold are not better than those who sell shovels? What I'm talking about is that during the Gold Rush in ...
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Are there any experiments about financial games with just one player?

I was wondering if there are any experiments of financial games (laboratory games under controlled circumstances like Plott and Sunder's Rational Expectations and the Aggregation of Diverse ...
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1answer
55 views

What are the arguments for banning insider trading?

I can't see any economic argument for banning insider trading. In general, the point of allowing financial securities to be traded is to ensure that they are properly valued. "Insiders" seem better ...
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1answer
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how to measure the funding liquidity, i.e., equivalent U.S. TED spread, in the Australian market?

I'm stuck on how to estimate the credit (counterparty) risk in interbank lending in the Australian market. TED spread is usually measured as the difference between the LIBOR rate and the T-bill rate. ...
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2answers
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Reading list for physics undergrad who'd like to cover the economics related to the hedge fund/ private equity field

I have had relatively little exposure to economics( nothing more than EC101) and would greatly appreciate help in answering the following questions: Which sections of economics are more or less ...
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What accounts for the high GDP of the United States?

Wikipedia defines GDP as: Measure of the market value of all final goods and services produced in a period (quarterly or yearly) of time. So, I take it that the total value of all goods (and ...
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98 views

When does gambling reduce risk?

Suppose that you face risk. It is obvious that taking gambles whose outcomes are negatively correlated with the outcomes of your other gambles can reduce your overall risk ('hedging'). My question, ...
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What is the easiest and cheapest way to store big money with option to any moment get then in cash? [closed]

Imagine I have a lot of money and my number 1 aim is to store them somewhere where I can get them fast if I need them. I don’t want to have dividends from my money but if I will it would be great. ...
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1answer
38 views

Futures delivery price [closed]

Can someone tell me how to find the 'delivery price' on a futures exchange? This is the one detail I cannot find on a real futures exchange.
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1answer
26 views

Emerging Market dollar debt, FX swaps and exchange rate risks

"An FX swap, on the other hand, creates no exchange rate risk for its counterparties. This is because currencies are sold and repurchase at fixed spot and forward rates. In other words, when you sell ...
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2answers
89 views

What at all justifies income taxes (as opposed to sales taxes only)?

For those who do not know, in America, the higher your income, the higher the percent of it is spent on taxes. This means that, whatever tax money is used for, those who are more hardworking (or, at ...
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1answer
52 views

Forward rate discounts

I'm working with the following task: "You are convinced that the bond market is dominated by long-term investors. Hence, you have your own view on the liquidity premium/discount that forward rates ...
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1answer
67 views

Proof of DCF model by mathematical induction

I am confident with the concept of DCF. However, I wanted to check the following proof given that if investors hold a share in $ t $, sell it at $t+1$, receive dividend $\ D_{t+1} $ and the price at $...