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Full-Text Articles in Business
What Is The Riskfree Rate? A Search For The Basic Building Block, Aswath Damodaran
What Is The Riskfree Rate? A Search For The Basic Building Block, Aswath Damodaran
Journal of New Finance
In corporate finance and valuation, we start off with the presumption that the riskfree rate is given and easy to obtain and focus the bulk of our attention on estimating the risk parameters of individuals firms and risk premiums. But is the riskfree rate that simple to obtain? Both academics and practitioners have long used government security rates as riskfree rates, though there have been differences on whether to use short term or long- term rates. In this paper, we not only provide a framework for deciding whether to use short or long term rates in analysis but also a …
Saving Active Managers From The Market, Scott Vincent
Saving Active Managers From The Market, Scott Vincent
Journal of New Finance
Assets are leaving actively managed mutual funds at an unprecedented rate as investors have come to perceive that active management does not deliver value. Investor disappointment is generally attributed to the high fees and poor relative performance of the class, yet there is a deeper systemic issue at work. In the first part of this paper I argue that portfolio managers are unable to deliver value to investors because they generally do not consider the alpha-diluting opportunity costs of diversification (defined later) when constructing and managing their portfolios. In the second part of the paper I propose the introduction of …
Socially Useless? The Crucial Contribution Of Finance To Economic Life, Philip Booth, Diego Zuluaga
Socially Useless? The Crucial Contribution Of Finance To Economic Life, Philip Booth, Diego Zuluaga
Journal of New Finance
The value of financial markets is under-appreciated. Financial markets perform fundamental functions which are vital in reducing transactions costs in the economy for businesses and households. Without well-functioning financial markets, business would find if much more costly to raise capital and ordinary households would find retirement, protection against everyday risks and day-to-day transactions impossible. Those who criticise financial markets ignore the breadth of their functions and focus on a narrow range of activities. However, even activities such as trading, speculation and so on have social value. The evidence that they cause social problems appears more circumstantial when put under closer …