Risk
Risk & Return
Ideas on Risk and Return The ideas about risk and return belong to Harry Markowitz, who published his work back in 1952. It is said that it didn’t […]
EON Investment Insights
Understand stock price as a forecast
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines” - Charlie Munger
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Risk
Financial Risk
How is Portfolio Risk Calculated? In the previous entry, I discussed the essence of diversification. Now let’s take a look at specific formulas, as shown in the image. […]
Risk
Project vs Organizational Risk
Factors Influencing Systemic Risk of a Project and How It May Differ from an Organization’s Systemic Risk When a specific project differs from the core operations of an […]
Risk
Certainty Equivalent
Valuation models for derivative assets hold the same significance in finance as relativity theories do in physics… In this entry, I want to address the method of discounting […]
Risk
CAPM-Model
Why is Understanding the CAPM Model Crucial for Senior Management? Given that the main task of management, particularly strategic financial management, is to increase the value of the […]
Market Efficiency
CAPM Pitfalls-1
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 […]
Market Efficiency
CAPM Pitfalls-2
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 […]
Risk
Fama-French Model
The Fama-French three-factor model predicts the risk-return relationship better than CAPM.(Nobel Laureate Eugene Fama and researcher Kenneth French, former professors at the University of Chicago Booth School of […]
WACC, CoC, Structure
Leverage Strategy
The beauty of the Modigliani-Miller (M&M) Theorem on the Irrelevance of Capital Structure lies in its ability to clarify investment and financial decisions. The theorem consists of two […]
WACC, CoC, Structure
წონასწორობის თეორია დაფინანსების სტრუქტურაში
თქვენს კომპანიას ფინანსური ლევერეჯის სტრატეგია აქვს? იცით როგორია თქვენთვის ოპტიმალური D/E კვეთა? M&M თეორია ამბობს, რომ მნიშვნელობა არ აქვს ლევერეჯის დონეს, ორგანიზაციის ფასი რეალური აქტივების ღირებულებით განისაზღვრება. ინტუიციური […]
Market Efficiency
Management Incentives
One important reason why around 60% of global stock market capitalization is concentrated in the United States is well illustrated by the chart below. In the U.S., top […]
Market Efficiency
New Plant
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 […]
Market Efficiency
Dividend Irrelevance Theory
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 […]
Market Efficiency
Mister Market
Lessons from Mr. Market Derived from the “Efficient Market Hypothesis”: The Efficient Market Theory was developed by Nobel Prize-winning economist Eugene Fama. The theory is presented in three […]
Market Efficiency
Pecking Order Theory
რატომ უნდა მოერიდოთ აქციების ყიდვას კაპიტალ-ინტენსიურ კომპანიებში? Pecking Order Theory… თუ ფინანსური ლევერეჯის ოპტიმიზაციის თეორია (Trade-of Theory) პრაქტიკაში მუშაობს, მაშინ რატომ არ ცდილობენ მენეჯერები მიზნობრივი ლევერეჯის მიმართულებით სვლას? […]
WACC, CoC, Structure
WACC of a Project
Can the Same WACC Be Used for Evaluating a Specific Project as for the Entire Organization? First of all, it’s important to note that smart investors more often […]
Derivatives
Option Price Frames
Here, I will discuss the Call option, which grants the right to purchase a stock at a predetermined price in the future. What Determines the Price of a […]
Derivatives
Portfolio Replication Method
Transactions with options provide the opportunity to achieve higher returns with less investment because buying an option is akin to buying a stock largely using leverage… There are […]