These risks emerge due to the uncertainties associated with the future. Therefore, investment basically is a risk-inclusive undertaking, and individuals’ levels of risk taking vary depending on investment instruments and the expected returns. Successful investments must take into account relevant strategies that should aid the realization of the investment objectives. A number of investment strategies in the UK investable universe are evaluated and assessed for their performance: Small Cap vs. Large Cap Portfolios Volatility of returns is the principle determinant of whether a portfolio is a small cap or a large cap. The size of a company is determined by its market capitalization, a situation that further defines that company’s market cap. A small cap portfolio is defined by a market capitalization that is between 300 million and 2 billion. An amount less than this will enter the portfolio into a lesser marker cap, normally referred to as the micro-cap. Small cap portfolio is characterized by high volatility in the market, and the price of the stock keeps fluctuations due to the underlying market uncertainties. Large cap portfolios on the other hand are the direct opposite of small cap portfolios. Large cap portfolios are less volatile in the market, and the prices of these stocks are therefore relatively constant over time (Fama and French, 2011, p.46). Investors that prefer less volatile portfolio often opt for the large cap portfolios. However, this does not rule out risk prevalence in investment. Large cap portfolios are characterized by market capitalization of about 10 billion and above. This kind of portfolio experiences hardships in in and out trade activities. As a result, price swings are minimized, leading to the realization of consistency in its price. Value vs. Growth Portfolios Investors have different motives for investment. While some opt to invest in value stocks, others prefer growth stocks. These stocks share some common characteristics, but their distinguishing features outline the outstanding difference between the two stocks. The valuing of stocks is done with regard to market trends, incorporating risks and benefits to the value of the stocks. Investors prefer undervalued stocks, so that once the prices of the stocks changes, they are in a position to reap huge investment returns. Value stocks are depict the flowing features: less than 10 % price earnings ratio, less than 1 price to earnings growth, current assets that are twice the current liabilities, matching debt and equity and share prices that are at par with the tangible book value or even less (Fama and French, 2011, p.53). Growth stocks are defined by their outstanding feature of expansion and ability to generate more and more returns with time. They are referred to as growth stocks because they have the ability to diversify the underlying portfolio. Growth stocks are characterized by a growth rate that is strong and reliable. This is to say that the portfolio remains vibrant and beneficial over a long period of time. It is important to account for the fact that different companies grow at different speeds and rates, and it essential that an investor be accommodative in regard to growth portfolios. Equity returns are also strong with growth stocks. Company-industry comparison is used to determine the strength of the stock returns. Growth stocks are characterized by per share earnings that surpass the industry’
Topic: Empirical Finance Coursework Institution Affiliation: Date: Investment is an essential activity in the economy. It is one of the key drivers of economic welfare. On the same note, it contributes to investor welfare from the expected returns on investment…
In order to achieve this purpose, it is imperative that these statements possess certain qualities which can ensure their usefulness for the various users of financial information (Epstein et al, 2010). In this paper, I have made an attempt to first briefly discuss what constitutes financial statements and what implications these statements possess for their users, and then analyze some of the essential characteristics of financial information in detail along with the problems that affect the qualitative characteristics of materiality, prudence, neutrality, relevance and reliability In addition to that, this paper also focuses on the various ways in which these qualities may come into confli
It can also be technically defined as the possible direct loss or indirect loss in the corporation’s cash ?ows, assets and liabilities, net pro?t and, in turn, its stock market value following a move in exchange rate. For example, if money must be converted into a different currency to make a certain investment, changes in the value of the currency will affect the total loss or gain on the investment when the money is converted back.
rences 9 Overview of Tulip mania (of the 17th century) Tulip mania of Holland is considered as one of the most important events in the history of market uncertainty which had occurred during 17th century. Tulip mania was the first major economic bubble faced by the global investors where the costs of tulips had increased to an unprecedented level.
The company’s operations range from manufacturing, marketing and selling of soft drinks in the markets of UK since 1875. The company has launched various brands of soft drinks in the UK market that is aimed to satisfy the changing needs of their customers.
ed under Chapters 1 to 5 (Tirole, 1996) in on Corporate Governance particularly on the debate between shareholder value and stakeholder society while the finance media article is about investing in China under the title: “Legal View: Employers face tougher rules.” by Lauffs
of economic elements/ characteristics above which the trade-off gets better and makes opening of the capital account significantly important and risky for a developing country.
Financial sector development, trade openness, institutional quality, and the microeconomic policies
3 pages (750 words)Essay
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