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- Estimating Cost of Capital Using Bottom-up Betas
- "Every business must assess where to invest its funds and regularly reevaluate the quality and risk of its existing investments. Investment theory specifies that firms should invest in assets only if they expect them to earn more than their risk-adjusted hurdle rates. Knowing a business cost of capital allows a...
- White papers 2003-05-01
Additional Resources
- Make a date with Markowitz, the big daddy of risk theory.
- Byline: Barrie Dunstan Jul 31, 2005 (The Australian Financial Review - ABIX via COMTEX) -- Harry Markowitz, a pioneer of modern investment theory, will speak in Australia on 11 and 12...
- Research articles 2005-07-31
- Intellectual Property Rights, Imitation, And Foreign Direct Investment: Theory And Evidence
- What is the effect of a strengthening of Intellectual Property Rights IPR protection by developing countries on local imitation and inflows of Foreign Direct Investment FDI? This paper addresses this question both theoretically and empirically. On the theoretical side, a North-South product cycle model is developed in which Northern innovation,...
- White papers 2007-04-01
- Systemic Liquidity And The Composition Of Foreign Investment: Theory And Empirical Evidence
- This paper studies the impact of liquidity on investors' choice between FDI and FPI. As argued in Goldstein and Razin (2006), this choice could be influenced by the trade off between management efficiency and liquidity effects. Here we extend their model by assuming liquidity shocks to individual investors are triggered...
- White papers 2006-12-24
- The Q-Theory Of Mergers
- The Q-theory of investment says that a firm's investment rate should rise with its This paper argues that this theory also explains why some firms buy other firms. It discusses about that two distinct used-capital markets, mergers as used-capital trades and prior evidence. It induces the estimates of investment and...
- White papers 2002-01-01
- Stochastic Control Theory for Optimal Investment
- This paper illustrates the application of stochastic control methods in ruin theory. It presents concepts, such as the Hamilton-Jacobi-Bellman equation, and reviews recent results to illustrate their use in ruin theory. In particular, given an insurance business and a fixed amount for investment in a portfolio consisting of one riskless...
- White papers 2002-11-11
- An Assignment Theory of Foreign Direct Investment
- This paper develops an assignment theory to analyze the volume and composition of foreign direct investment FDI. Firms conduct FDI by either engaging in Greenfield investment or in cross-border acquisitions. Cross-border acquisitions involve firms trading heterogeneous corporate assets to exploit complementarities, while Greenfield FDI involves building a new plant in...
- White papers 2004-12-01
- Terry Theory Investment Prospective
- We will review some of the Terry Theory observations already detailed in other private publications, then look ahead to what Terry Theory sees in general for the primary goal of producing superior long term investment rate of returns, coupled of course, with minimum downside risk. Shiller valuation data suggests...
- White papers 2003-03-20
- Taking Risk Management Theory Seriously
- We study a firm that justifies its novel use of equity derivatives as a cash-flow hedging strategy. Our purpose is to understand the challenge of translating risk management theory into managerial action. Cephalon Inc., a biotech firm, bought a large block of call options on its own stock. If the...
- White papers 2003-11-01
- Modern Portfolio Theory - Introduction
- From the executive summary: ‘Modern portfolio theory is the philosophical opposite of traditional stock picking. It is the creation of economists, who try to understand the market as a whole, rather than business analysts, who look for what makes each investment opportunity unique. Investments are described statistically, in terms of...
- White papers 2003-01-01
- Modern Portfolio Theory
- This article tells us about Modern Portfolio Theory MPT. Over the following five decades, Markowitz and his followers have contributed enormously to our understanding of the behavior of capital markets and of the nature of risk and its relationship to investment returns. MPT has, in a broad way, allowed us...
- White papers 2002-01-01
- Thoughts on the Future: Theory and Practice in Investment Management
- This paper deals with suggesting some fruitful directions for putting existing finance theory into investment management practice. It takes the perspective of the client, or customer, and in detail explores a set of asset management issues for three groups?households, corporations (in particular, pension funds), and endowment funds. The basic intent...
- White papers 2003-01-28
- Infrastructure Investment as a Real Options Game: The Case of European Airport Expansion
- This article analyzes the optional and strategic features of infrastructure investment. Infrastructure investments generate other investment opportunities, and in so doing change the strategic position of the enterprise. A combination of real options theory and game theory can capture the elusive value of a strategic modification of a firm's position...
- White papers 2003-11-21
- The Contribution Of FDI Flows To Domestic Investment In Capacity, And Vice Versa
- This paper provides an empirical analysis of interactions between FDI Foreign Direct Investment flows and domestic investment in capacity. As a motivation for the empirical analysis, the author provides highlights of a new theory of FDI. The theory captures unique feature: hands-on management standards that enable investors to react in...
- White papers 2003-04-01
- WEIGHTY DECISIONS: Ruling holds portfolio theory as appropriate standard;1999 saw fiduciaries winning investment prudence lawsuits.(Brief Article)
- Several cases addressed the issue of investment prudence in 1999, and fiduciaries won many of them. One of the most significant, overlooked by many, was the 5th U.S. Circuit Court of Appeals decision in Laborers National Pension Fund vs. Northern Trust Quantitative Advisors Inc....
- Research articles 2000-01-24
- The Capital Asset Pricing Model: Theory and Evidence
- The capital asset pricing model CAPM of William Sharpe (1964) and John Lintner (1965) marks the birth of asset pricing theory (resulting in a Nobel Prize for Sharpe in 1990). Before their breakthrough, there were no asset pricing models built from first principles about the nature of tastes and investment...
- White papers 2003-08-01
- The Stock Market and Investment: Evidence From FDI Flows
- This paper outlines and tests two mispricing-based theories of Foreign Direct Investment. The "cheap assets" or fire-sale theory views FDI inflows as the purchase of undervalued host country assets, while the "cheap capital" theory views FDI outflows as a natural use of the relatively low-cost capital available to overvalued firms...
- White papers 2004-07-07
- Diagnosis at GM, Ford: Unbalanced portfolios.(Monday Morning)
- Byline: Mike Clowes What's wrong with General Motors Corp. and Ford Motor Co.? I'm no automotive expert, but I can provide a diagnosis of their current ills based on investment theory: Both companies have undiversified portfolios,...
- Research articles 2005-12-19
- Rydex Introduces Essential Portfolio Theory(SM), a Modern Approach to Investing
- Rydex Investments announced today the introduction of Essential Portfolio Theory EPT, an investment approach designed by Rydex to help investment advisors, brokers and investors understand the dynamic nature of modern markets and learn how to potentially increase portfolio diversification and manage risk. EPT advocates expanding traditional stock/bond/cash asset allocation menus...
- Research articles 2005-10-11
- The Theory of Corporate Finance: A Historical Overview
- Our purpose is to provide a review of the development of the modern theory of corporate finance. Through the early 1950s the finance literature consisted in large part of ad hoc theories. Dewing (1919; 1953) the major corporate finance textbook for a generation, contains...
- White papers 2003-01-01
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