Efficient Market Hypothesis Vs Behavioural Finance

Efficient Market Hypothesis v’s Behavioural Finance An efficient market is one in which share prices quickly and fully reflect all available information, where investors are rational, and there are no frictions. Investors determine stock prices on the basis of expected cash flows to be received from a stock and the risk involved. Rational investors should use all the information they have available or can reasonably obtain, including both known information and beliefs about the future. In an efficient market there is â€Å"no free lunch†: no investment strategy can earn excess risk-adjusted average returns, or average returns greater than are warranted for its risk (Barberis, 2003). Market efficiency is assessed by determining how well†¦show more content†¦Thus as a result the mispricing can remain unchallenged leading to market inefficiency. The Size effect is the observed tendency for smaller firms to have higher stock returns than large firms. A study by Banz (1981) found that on average stocks of small NYSE firms earned higher risk-adjusted returns than the stocks of large NYSE firms. Although much of the differential performance is merely compensation for the extra risk of small firms, it has been argued that not all of it can be explained by risk differences. Keim (1983) presented evidence that most of the difference in performance occurs in the month of January. This, known as the January Effect is the observed tendency for returns to be higher in January than in other months. Keim (1983) studied the month to month stability of the size effect for all NYSE and AMEX firms with data for 1963-1979 and his findings again supported the existence of a significant size effect, with roughly half of the size effect occurring in January. The January effect poses a significant problem for the EMH since it seems to point to a simple opportunity for investors to make excess profits; that is to buy small company stocks towards the end of December and sell them at the end of January (Pilbeam, 2005, p.256). A number of papers have argued that equities with high book value to share price ratios and/or high earnings to

Stereotyping of Asian American Youth The Effects on...

Introduction: Throughout American history, the United States has been a cauldron where different diversities mix and mingle. In this hot pot of diversity, all of the ingredients (ethnicities) will not always conform to one and other; this could possibly lead to discrimination. This paper will be primarily focus on the discrimination towards Asian American youth of the 21st century and how it affects their academics. The research question guiding this investigation is â€Å"To what extent does the stereotyping of Asian American high school students as the model minority impact their performance on standardized tests such as ACT?† The focus will lead towards the stereotyping of Asian American students such as smart, math geniuses, or good at†¦show more content†¦Vincent Chin was a Chinese orphan who came to the United States with his adoptive parents. He went to college and graduated obtaining his Bachelors in engineering. At the age of 27, on track with the love of hi s life he was about to achieve the American dream, getting married and raising a family. Before his wedding, he went out with friends on a bachelors party at a bar. This was the scene where the two assailants, Ronald Ebens and his stepson Michael Nitz, targeted Mr.Chin and followed him to a Mcdonalds. The two men found and beat Vincent chin to death presuming he was Japanese. Due to Japan’s automotive invasion of the United States, Chin’s assailants were laid off from their careers at an automotive company which was the underlying cause of the resentment towards Asians. Ebens and Nitz blamed Japanese people for the economic downfall of the U.S automotive industry. This incident brought up the controversy American society has planted on the Asian race,â€Å"they all look the same.† These negative stereotypes casted upon Asian society brought the community together to rebel against the injustice and oppression. Ms.Chin ,Vincent Chins mother, became an activist ral lying support at Asian dinners and family restaurants continued the spread of the message and further united the Asian community. Due to theShow MoreRelatedAsian American Students : Combating The Effects Stereotypes And Cultural Differences1701 Words   |  7 PagesDevin Hong 75827376 Asian American Politics - ASAM 131 O Brien 11/13/14 Midterm - Research Dossier Asian American Students: Combating the Effects Stereotypes and Cultural Differences Introduction The population of Asian Americans and Asian immigrants in America doubled between 1980 and 1990, with the expectation to double again between 1990 and 2020. As such, Asian-Americans are one of the fastest growing ethnic groups in this country; yet their particular educational needs at the early childhoodRead MoreArgumentative Essay On Racism1710 Words   |  7 Pagesand many things pertaining to racism were made illegal but that doesn’t mean racism disappeared. 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Basel Iii, Solvency Ii Free Essays

Basel III Basel III is an international regulatory for banks. It consist a set of standards and practices for the bank to make sure the banks maintain the sufficient capital when there is an economic strain. Basel III formed after global financial crisis that happens in year 2008. We will write a custom essay sample on Basel Iii, Solvency Ii or any similar topic only for you Order Now It was first published in 2009 and will be start implement on 1 January 2013. To make sure the banks have sufficient capital, Basel III has some new regulatory on bank leverage and also its liquidity. Solvency II Solvency II is a basic review of adequacy of capital for the European insurance industry. It aims to revise a set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements. For instance, most European insurers are obliged to implement the full Solvency II requirements by January 2013. As such, it will be a major driver for the development and embedding of Enterprise Risk Management (ERM) for the insurance industry. Difference between Basel III and Basel I II Basel III varies from Basel I and Basel II. Basel I is create and used to strengthen the stability of global banking system while standardize capital requirement by using regulatory control. The weakness of Basel I is banks are expose to excessive risk because of the freedom in giving loan. Basel II develops from Basel I, it makes improvement on standardize the capital regulation and increase the risk management between the banks. Unlike Basel I, Basel II required banks to make analyze on the ability of corporate in pay back the loan before they decided to lending money out. Basel III replace for Basel II which the capital requirement is stricter, so that they can handle the capital fluctuate during financial crisis. Difference between Solvency I and Solvency II The difference between Solvency I and Solvency II is their fundamental based. Solvency II is principle based, whereas Solvency I is rule based. This means Solvency II knows less rules, instead of introduces principles which have to be adopted by the insurers, they all involved actions and decisions. They can no longer hide behind rules, nor is it easy to find holes in the law. Therefore, in order to process these principles into company will be tough therefore time is ticking since it is questionable when all is implemented sufficiently. While for the Solvency II is to protect customers from taking unacceptable risks. This is done by demanding insurers to manage their risks better and be transparent on their financial position and risk. Hence it shows more holistic approach in comparison to Solvency I. Who should comply to Basel III The Basel accords are a range of mutual agreements that are voluntarily given by various global banking authorities. The countries which have signed these agreements would have set it as a common standard. However, some countries which are not the member state may also implement these policies. Besides, in United States of America, the government set the Basel II as a mandatory standard for banks. The banks which have a higher-risk profiles are instead imposed higher and stricter standard under the same accords. Next, Basel III required banks must keep a minimum common equity of 7% of their assets and this percentage covers a capital conservation buffer of 2. %. The countries which have approved Basel III must impose and put the standard. Who should comply Solvency II Solvency II is needed for all the insurance companies and financial institution. Solvency II’s regulation will be control by the respective financial supervisor. Besides, the best practice for insurers is to embed qualitative and quantitative risk management throughout their organization. A process-based risk approach is the be st foundation for risk management of market, credit, liquidity, insurance and all operational risks. Solvency II regulates companies according to the risk inherent in the business. Every company must define that the risk profile is in line with the appropriate governance and risk management processes to meet this risk. Why Basel III is needed? Basel III is needed because it strengthens bank capital requirements by introduces new regulatory requirements on bank liquidity and bank leverage. It help the Bank directors to know the market liquidity conditions for major asset holdings and strengthen accountability for any major losses. Why Solvency II is needed? Solvency II is needed because it can supervise the insurance company and strengthen the power of group supervisor, in order to ensure the wide risks of the group are not overlooked. By having Solvency II, a greater cooperation between supervisors can be made. Besides, Solvency II plays an active role in the development in insurance, risk management, and financial reporting. Objective for Basel III There are three objective of Basel III. Firstly, Basel III enhance the ability of banking sectors in handle stress that arise during financial crisis and economic strain. Secondly, Basel III used to improve risk management and also its governance. Lastly, Basel III reinforces the transparency and exposure of the banks. Objective for Solvency II These are some objectives for Solvency II. Firstly, it improved consumer protection by standardized level of policyholder protection in EU. Secondly, Solvency II transfers compliance in supervise into making evaluation on insurers’ risk profiles and the quality of their risk management and also their controlling systems. Lastly, Solvency II used to raise the international competitiveness of EU insurers. What are the challenges that encounter by the Basel III and Solvency II? The challenges that encounter by the Basel III and Solvency II is there is a mutual relationship between the new capital and the liquidity rules for bank and insurance companies that set by Basel III and Solvency II. Besides that, Solvency II had changed the way of allocate the capital for insurance companies. In example, fair value will be calculated by the risk that insurer take on their investing activities. Solvency II also offered a privileged treatment to bond with short tenure. It impress stricter capital requirement for bond that determined by the investment’s maturity, and credit rating due to the volatility of investment. Lastly, there is an inverse relationship between Basel III and Solvency II. Basel III requires all the financial institution to establish more stable, long term source of funding. In example, Basel III require bank to place their funding in a more stable and long term investment, means they will issue more long term bond. While for the Solvency II, the regulation gives shorter preferential treatment to the bank bond. ? How to cite Basel Iii, Solvency Ii, Essay examples