Market Efficiency
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We are setting up Executive KPIs in a company, and during the process, the task arose of calculating WACC and assessing its impact on the organization’s value. Typically, the WACC formula includes the tax rate, which is taken as the effective tax rate in the minimal sufficient case and as the operational cash tax rate…
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Does it matter if you purchase an Income stock or a Growth stock? Does a company’s decision to distribute dividends or reinvest earnings impact the stock price? The price of a stock, like any other asset, is derived from the expected future cash flows it will generate. These cash flows are essentially divided into two…
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If you plan to profit from investing in stocks, take a close look at this graph. The graph highlights two significant phenomena that the Capital Asset Pricing Model (CAPM) fails to explain. First, high Book-to-Market stocks (Value Stocks) yield higher returns compared to low Book-to-Market stocks (Growth Stocks), and small companies yield higher returns compared…
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Regardless of the level of diversification, why is it more rational to invest in a low β portfolio than a high β one? The issue is that CAPM’s predictions and actual statistics diverge. As the graph shows, low β portfolios generate higher returns than CAPM predicts, and vice versa. Although high β portfolios generate higher…
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რას უნდა ეყრდნობოდეს ტოპ მენეჯმენტის სამოტივაციო სისტემა? ერთ-ერთი მნიშვნელოვანი მიზეზი, რატომაც პლანეტის საფონდო ბაზრების 60% მოდის შტატებზე კარგად აღიქმება ქვემოთ მოცემულ გრაფიკზე. შტატებში, მენეჯმენტში უფრო მეტს იხდიან ვიდრე სხვაგან, და გრძელვადიანი ინიციატივების (აქციების და ოფციების) წილი ანაზღაურებაში უფრო მეტია ვიდრე სხვაგან. თუმცა ეს მთელი ისტორია არ არის. ოფციებით და აქციებით ანაზღაურებას აქვს თავისი უარყოფითი მხარეები:…
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Why Do Established Business Models Often Get Disrupted by Newcomers Rather than Market Leaders? Nokia had the idea and even a tested prototype for a touchscreen long before it hit the market, but it was someone else who launched it into production. Do you think Mercedes was unaware of the potential of electric cars? Why…
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The Dividend Irrelevance Theory (Franco Modigliani and Merton Miller, 1961) is one of the fundamental models that every investor should know. The theory states that it does not matter whether an organization distributes dividends or not; the dividend distribution policy does not affect the stock price. Mathematically, this holds true (if we disregard taxes). When…