Questions tagged [investment]

Regarding the purchasing of capital and productive materials by firms. this differs from saving which is a similar action done by consumers.

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Link between recession and decline in investments

I recently followed MIT online lectures for economy and I found this - one of the reason for investments decline in recession is bad expectations about economy -----> leading to Higher capital output ...
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Investments during recession

During Recession, banks loans decrease which leads to financial constraints and ultimately Investment suffers and declines. my question is - "Are loans lower because of demand or supply?" My ...
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Is it just as profitable for a brokerage to service investments in 401k plans as opposed IRAs?

Why would a brokerage charge fees to the employer, if they could just charge fees to the individual, like they would do otherwise? If an employer wouldn't want to spend any extra money on 401k plans, ...
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Solving a problem using CAPM and capital structure theory

I am given the following problem: A firm currently owns assets worth $4$ milllion dollars that have a beta of 1. The risk-free interest rate is 10% and the market risk premium is 8%. Suppose the firm ...
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Moral hazard, bubbles, and economies of scale in limited companies and organizations

http://eprints.lse.ac.uk/100058/1/Goodhart_CEPR_DP13494.pdf What would be the disadvantage of limiting the liability to the product of the proportion of the company and the debt(a person with 2% of a ...
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83 views

Private Investment Impact on Bond Yields

From Japan to the US to Germany, we are currently seeing longer term bond yields falling at an alarming rate. I tune into a fair bit of economic commentary, and can often come to some sort of ...
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How does investment lead to generation of jobs?

I quote from India's Economic Survey 2019 (an official document) - While the claim is often made that investment displaces jobs, this remains true only when viewed within the silo of a specific ...
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Does investment directly influence demand?

I quote from the first page of India's Economic Survey 2019 (an official document) - Investment, especially private investment, is the “key driver” that drives demand, creates capacity, ...
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124 views

Does stock picking work?

Does stock picking work? Why/why not? What does the research say about it? (I was expecting that this should already have been asked and looked quite extensively for such a question but couldn't find ...
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rental cost of capital

I am estimating time series for rental price of capital using Hall-Jorgenson method: $$r=\frac{P_k}{P}(i-inf+\delta)$$ here, $r$ is the rental cost of capital, $P_k$ is the price of capital goods (...
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Are sales (discounts) an investment or a loss?

Are sales (discounts) during a promotional period considered an investment by the company/manufacturer to drag in more customers? Or a loss that wouldn't be paid back anytime in the future, but also ...
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Did real interest rates decrease during the Great Recession

Assuming the stock market/housing market crash decreased consumer wealth, decreased business confidence, and decreased expected appreciation rates on houses (thus increasing perceived user cost of ...
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Leveraged Return on Investment

A general return on investment (ROI) formula is: \begin{equation} \text{ROI}=\frac{\text{Net Profit}}{\text{Total Investment}}. \end{equation} But if you think about an investment that requires some ...
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How do stockbrokers purchase shares?

Do they use "Direct Stock Plans," or some other method? Not sure if this is the right place to ask, but I'm curious.
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How to calculate capital investment?

So i have this question: After spending 3 million on research, Better Mousetraps has developed a new trap. The project requires an initial investment in plant and equipment of 6 million. This ...
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How to calculate indentical cash flows?

So i have this question: Homemade leverage Companies A and B differ only in their capital structure. A is financed 30% debt and 70% equity; B is financed 10% debt and 90% equity. The debt of both ...
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Are corporate savings deflationary?

Example: Apple. People "overpay" for their products, money that ends up in corporate savings and not in their competitors' coffers, sort of a black hole because Apple doesn't see enough investment ...
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How to calculate payback period of the project?

In order to finish a technological product, it was spent 50000 dollars (for materials, salary). 500 dollars per month is needed for support of the project (will be spend for servers). This product ...
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Is FDI the principal route for funds directed offshore to return to a country?

Is foreign direct investment the principal route for funds directed offshore to return to a country? For example, the UK has perpetual trade deficit. But the sterling sent overseas must make its way ...
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Economic Metrics (ROI, PP, NPW)

So I am doing this project, which includes in calculating the Economic Metrics for a profitability analysis. I have calculated Return on Investment (ROI), Net Present Worth (NPW) and Payback Period (...
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How does a govt surplus increases investment?

From the closed economy equilibrium condition $I = S + (T - G)$, how does exactly a surplus (which I assume would be used for paying debt) increases investment in the same amount? I ask that because ...
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What mathematical structure or formalism can be used for modelling strategic investment decisions of agents in the context of competition?

I'm trying to analyze the decisions of agents in investing scarce resource like time and money into developing their product/service/offering in the presence of competition. I need to know what kind ...
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401k vs stock investments when it comes to taxes

I'm a bit confused about what makes more economical sense when it comes to investing and taxes: 401k investments vs investments on your own. I'll try to formulate my questions as a simple example. ...
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Are that models that explain how companies become more efficient?

I'm trying to model/understand the following intuition: Company makes a product Product gets sold, company makes a profit Company does something with the profit to become "better" at what they do: ...
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23 views

Tax Cuts Affect on Economy?

If we look at the equation for national Savings = S(priv) + S(pub) = [Y-C+Tran-T] + [T-G-Tran] = Y - C - G . We see that Tax falls out of the equation. Therefore, does that mean changes in taxation ...
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Open offer made by companies to take over [closed]

What is open offer in simple terms? What is its meaning in cases of taking over the major stakes in other company?
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Why tax investment?

I assume that investing is more useful than consuming for society as a whole, at least in the long run. But then why isn't the government taxing consumption more and investment less? This would create ...
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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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Investor sentiments in large open economy under Mundell Fleming Model

So I have been studying the Mundell Fleming Model, I fail to understand the impact of investment sentiments in a large open economy. This is what I think : Positive investment sentiments will ...
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Why do riskier investments pay more?

I'm talking about bonds, stocks, and the sort. I understand that an individual investor that's planning to invest, say, 50% of his savings, may require a higher expected gain to go for a riskier ...
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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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Estimation of investment adjustment costs

Hi I am working on a problem set in my macroeconomics course. I have a hard time figuring out how to get started on one of the problems. The set-up is the following. A price-taking firm maximizes: $\...
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Hypothetical price of a city (e.g. Munich) [closed]

At lunch we pondered, how much a hypothetical investor would have to pay for a whole city. What would the combined value of all real estate in a large city (like Munich) be? Is there a way to ...
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Measuring the capacity of an investment strategy

From talking to people, an investment strategies capacity seems to have a major effect on performance once it becomes popular. XIV seems to be a good example. But, what I have yet to hear is how ...
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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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How do government purchases crowd out the private sector?

I am curious about how government purchases crowd out the private sector (if it does). If we look at a graph of the composition of US GDP, it seems that government purchases and investment are ...
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How much precious metals prices come from their use as investement vs practical use

Some precious metal price come almost exclusively from their value as an investement, as gold, while some others like palladium or osmium have important uses in industries. But lately those metals ...
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log returns in finance

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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Bank Runs During the 1930s

Why were there numerous banks run right after the stock market crash of 1929? Why would a bank fail because the stock market crashes?
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Why do we consider purchase of house by households as investment?

According to what I have read, investment is the expenditure on creation of capital goods, which means that it is done by producers. Then why do we treat buying of house by households as investment ...
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Do consumers also invest?

Definition of Investment that I have found: Investment is the expenditure incurred on the procurement of such capital assets that would help in further production . According to this, it means that ...
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Is the definition of Investment variable in Economics?

I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services. And mainly consists of Fixed and Inventory Investment ...
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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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What is the Canonical Metric for Investment? (U.S.)

I'm currently taking a run-of-the-mill Intermediate Macro class and have coursework which asks to produce a vis that tracks U.S. Investment from 1970-2014. What is the salient/canonical National ...
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Fixed-income investment in a low interest-rate environment

From an investment perspective, it seems to me that a low interest-rate environment can yield to some relatively "un-risky" profits. As the interest-rate can barely go lower, we now it should rise ...
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The connection between risk and the quality of investment decision

Is there any psychological model that suggests that for optimum quality of investment decision, there has to be some risk involved?
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320 views

Can't a country grow its GDP without foreign investment?

Whenever various developing countries around the world talk about growing their economies, they talk about facilitating foreign investments and they put so much emphasis on it as if a country's ...
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Investor's optimization problem with risk aversion

Consider an investor with initial wealth $w$ and has to decide how to invest it. There is a riskless asset with rate of return $r$. The risky asset has return $x_i$ with probability $\pi_i$ for $i=1,2,...
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Why wouldn't an arbitrageur who shorts an overpriced security, and longs a substitute company, break even?

A Random Walk Down Wall Street (2015 11 ed, but an 2019 ed. is upcoming). p. 249 Top.   Suppose irrational investors cause an oil company security to become overpriced relative to both its ...
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When to invest into additional products?

This is a very applied question so I hope it's the correct adress here for it: I'm running a small entertaining business for virtual reality experiences. Investment was about 120 k. I now build it ...