Small Firm Effect Essay Example

Small Firm Effect Essay Example Small Firm Effect Paper Small Firm Effect Paper At last, a conclusion about whether or not to use this anomaly earn profit will be provided. Explanation of small firm effect and its methodologies Small firm effect refers to a situation which the average risk adjusted returns of smaller firms are higher than the larger firms Band(1981). This situation shows the insufficient of CAMP in predicting the stock returns and counter-argues the efficient market hypothesis Band(1981). It was found by researching the relationship between the return and market value of common stocks in the New York Stock Exchange. The researchers build a generalized asset pricing model which adds the variable market value of security to the capital assets pricing model Band(1981). The constant measuring the contribution of market value of a stock to the expected return of the stock was found as a significantly negative number for the all-time period Band(1981). This indicates that the larger the market values the smaller the expected returns Band(1981). Supporting evidence There are several evidences support the small firm effect as an anomaly counter- argues the efficient market hypothesis in relate to the capital assets pricing model. Under the efficient market hypothesis, no persistent excess profits can be earned on a stock by using public available information. However, the research done by Band(1981) proves that about twenty percent risk-adjusted profits can be earned by using strategy of taking long positions in a portfolio of smaller firms and taking short position in a portfolio of larger firms in a year. Furthermore, the researches done by Brown, Klein and Marsh (1983) shows that excess returns can be earned in related to firm size but the effect is not stable over time. Moreover, the study done by Kim(1983) also proves that there is a size related anomaly and its seasonality. Kim(1983) founds around fifty percent of abnormal returns related to firm size are earned in January, twenty-six percent are earned during the first trading week in a year and around eleven percent are earned in the first trading day. Small firm effect in different equity market The study done by Reengaging (1990) found that the relative price behaviors of larger and smaller firms on ETC stocks are different. The costs of trading for small stocks are different in different markets (Reengaging 1990). Thus, an analysis of the evidence for small firm effect in different equity market is important. Small firm effect not only happens in USA but also in the other countries. It has been proved existence in Australia by Brown, Kim, Klein and Marsh (1983). Furthermore, a study done by Chemung, Lounge and Wong (1994) on Korean Stock Exchange also proves the existence of small firm effect. In mean return analysis, the study shows the portfolio with smallest firm size got the highest average monthly return (Chemung, Lounge and Wong 1994). In risk-adjusted return analysis, they use the Sharpe-Lintier version of the two parameter assets pricing model to examine the influence of firm size and E/P ratio on the risk-adjusted portfolio returns (Chemung, Lounge and Wong 1994). The result shows the portfolio of small firms get the highest and only positive risk-adjusted returns (Chemung, Lounge and Wong 1994). Moreover, the small firm effect also exists in Belgium, Ireland, Japan, Mexico, Spain, Switzerland and United Kingdom (Hawaiian and Kim 2000). However, there are no significant relationships between firms size and returns in Canada and France and the size premium significantly different in different markets (Hawaiian and Kim 2000). Small firm effect in different time The researches done by Brown, Klein and Marsh (2001) on U. S. Stock market shows hat excess returns can be earned in related to firm size but the effect is not stable over time. Damson and Marsh (2001) believe that market anomalies apply to Murphys Law which if things can go wrong, it will eventually go wrong. That is, the excess return of small companies will eventually move towards reverse. They compared the stock return of small firms in the U. K. Stock markets with that in the U. S. Stock markets from 1955 to 1997. The study shows the stock returns of small firms were 6% higher than large firms during 1955 to 1986 then many founds Management Company launched between 1987 and 1988, followed a reverse on stock returns of small firms were 6% lower than the large firms from 1989 to 1997 (Damson and Marsh 2001). This may also be contradicts for the small firm effect. Reasons for existence of small firm effect Misprinting Some researchers explained the small firm effect as misprinting from the measurement or method error of assets price model, but Roll (1983) finds this is not the case. He believed that the frequency of trading and holding period can affect the beta estimates. The risks of small firm were undervalued and returns were overvalued for small firms in short holding period (Roll 1983). Furthermore, as small firms are traded not often, the daily stock returns were delayed, the risk was undervalued (Roll 1983). However, Reengaging (1982) use the method of aggregated coefficients to estimate the stock risks and finds undervalue of risks for small firms is not a strong evidence for small firm effect. The study done by Fame and French (1992) also shows firm size is better at explaining the excess returns on small firm than stock risks. Transaction cost The transaction cost for small firms are usually higher than that for large firms. Transaction cost includes direct cost and indirect cost. Indirect cost includes brokerage fees and bid-ask spread. Indirect costs include fees generated by information searching and portfolio management. Amid and Mendelssohn (1986) regard the bid-ask spread as representative of stock trading frequency. Larger bid- ask spread means market thinness. Then they built three models to test the relationship among stock returns, risk of stocks and bid-ask spread. The result shows relationship between stock returns and bid-ask spread are significant stronger than allegations between stock returns and risk of stocks at explaining the small firm effect (Amid and Mendelssohn 1986). Furthermore, Amid (2002) believed that expected market liquidity has a positive influence on ex-ante excess stock returns and return on stock is negatively related over time to contemporaneous unexpected liquidity. Liquidity has stronger influence on small firms (Amid 2002). Amid proved his hypothesis by examine stock in NYSE from 1964 to 1997. Less available information The third reason of existence of small firm effect is small firm has less available information. Theoretical research has proved that firms with less available information should, other variable remain unchanged, get higher returns to make up estimation risk (Manhattans). Thus, less average available information for small firms may be the reason of small firm effect. Nathan (1996) proved this hypothesis in his article. Different fundamental structure Different fundamental structure between large firms and small firms may be one of the reasons for small firm effect. Small firms in NYSE are less efficiently run and have higher financial leverage and these kinds of risks are not easy to be captured by arrest index compare to large firms (Chain and Chem. 1991). Thus the small firm should get higher stock return to make up the estimation risk. Exploit ability and limitation of profit-earning strategy This essay believes that small firm effect is not exploitable now. Somebody may argue that profit can be earned by taking long positions in a portfolio of smaller firms and taking short position in a portfolio of larger firms. In fact, it is hard to keep a portfolio with small shares which long and short position can be held and traded quickly in the real world (Bradford, Haney and Billion 2011). Furthermore, the transaction cost of take short position is larger than take long position (Bradford, Haney and Billion 2011). Moreover, the article written by Damson and Marsh (2001) points out excess return of small companies will eventually move towards reverse and their study shows stock returns of small firms were 6% lower than the large firms from 1989 to 1997 which indicate the small firm effect already move towards reverse in U. K.. Conclusion In conclusion, this essay does not recommend the fund manager use strategy of taking long positions in a portfolio of smaller firms and taking short position in a oratorio of larger firms to exploit as loss may occur.

Marketing in Healthcare Industry Term Paper Example | Topics and Well Written Essays - 1000 words

Marketing in Healthcare Industry - Term Paper Example A marketing manager should understand the objectives of the firm in general and come up with a corporate marketing strategy which should address the product, distribution channels and tactics to be used. A strategic marketing plan begins by coming up with a strategic business unit that is independent based on management, access to resources, competition, customers and positioning strategy. The major elements that one focuses on include identification of the enterprise, situation analysis, coming up with strategies and control establishment all in a strategic business unit. A marketing plan in most cases involves a description of the product on the basis of any distinctive features presented, a budget for carrying out the awareness which includes the adverts and promotional activities, pricing strategies which depend on the cost of production, market segmentation and a full description of business location. Strategic marketing should also focus on the business environment which firstl y will concentrate on the economic variable which will assess whether the economy is in recession or in expansion (Berkowitz, 2011). Secondly, strategy will analyses the impacts of technological on the speed, processes, production and market and try to include this in marketing plan. The third factor is political intervention which focuses on regulations, taxes, reporting requirements and how these influence marketing strategies. Another factor to consider is the social cultural factors which relates to the perceptions of a certain product in different cultural diversities. These are psychological factors that alter the demand patters and the market dynamics bringing about a change in the profits of a firm. Finally, the strategic marketing should focus on internal review process. This checks the management and information systems, competition, budgets, distribution channels, market plan, sales projections, cost analysis and an overall snapshot of the marketing plan. Before a consume r can come up with a purchase, various factors both internal and external influence the decision making process. A person can choose to purchase a product not because it is needed but because of a perception that it is useful. The consumer behavior is determined by internal factors such as feelings, tastes and preferences, while external factors relate to commercials, the marketing abilities of the firm or coupons reflecting the product. However, initial intent must be created before a consumer can make a purchase. The choice made will be influenced by the cost of the product and on evaluation or observation on the quality of the item in question (Berkowitz, 2011). A person may also choose to buy a product out of previous satisfaction on the use of the item. Companies may be interested to ensure that goods being produced for selling should not create cognitive dissonance on the part of the consumer which determines purchase value. The marketing strategy to be adopted by a normal bus iness enterprise is different from that to be used by a health care industry. This is because the target population is different. Whilst the business focused on the overall consumer, the health care focused on a limited class such as the aged, the sick and those in need of medical attention. In this case, their approach is narrowed on that business

School uniform Research Paper Example | Topics and Well Written Essays - 1250 words

School uniform - Research Paper Example Furthermore, Wiseman and Hunt also cite an example on the successful program brought out by the imposition of school uniform to students in Long Beach, California where a dramatic decrease of student violence had occurred after a year it was imposed (200). Former U.S President Bill Clinton also suggests the use of school uniforms for public schools in order to lessen the cases of violence and gang wars to happen (qtd. in Brunsma). This initiated the introduction of school uniforms in the public schools in the U.S.   Ebert and Culyer note that the imposition of school uniforms lessens the unequivocal existence of financial disparity among students (213). Since the wealthy students will wear the same clothes as with the less privileged, the latter will not feel inferior, and thus, increasing their self esteem. Bullying cases will be lessened and prevented since the rich can no longer make fun of their classmates who cannot afford to buy branded and signature clothes.  The implement ation of school uniforms diminishes distractions of students from unnecessary contemplation of what to wear every day, thus, focusing their attention more to school academics (Ebert and Culyer 213). This would greatly improve the students’ academic performance since their attention will be focused more on their subjects rather than on the effort in looking good and being on fashion all the time. Peer pressure to be wearing what is in for fashion and to dress expensively will also lessen; thus, students focus their efforts. more in learning and studying (Larson 180). Performance at school will greatly improve, since they look good and smart in a school uniform; they tend to perform better at school. Oneil implies that when students put on a school uniform every day, this will give them a connotation that they have to take their education seriously (61). When they see their parents going to work wearing their business suits and attires every day, students will also get motivated to practice a business-like approach in dealing with their studies since they are wearing a uniform themselves to school. Not only that they look smart in a uniform, they also look proper and neat in a uniform. School uniforms are economical and practical as compared with buying fashionable clothes since students will just have to repeatedly wear their uniforms everyday (Oneil 61). Parents favor school uniforms more than not wearing one because they will not be pressured with their children to buy designer clothes for them to fit in the ostracizing crowd (Oneil 62). They will just have to buy a set of

Sony strategic management and leadership Essay Example | Topics and Well Written Essays - 2750 words

Sony strategic management and leadership - Essay Example According to Sony’s C.E.O, the company’s mission is to challenge the designers, producers and engineers in order to improve their software and hardware and eventually advance its differentiation process towards its competition (Badawy, 2009). Sony has renowned heritage of creativeness and innovativeness. Sony boasts of having products in the electronic, games, entertainment, and still participate in the provision of financial service sectors (Flugge, 2008). In this regard, this essay will delve on a critical analysis of Sony’s strategic management and leadership. More so, it will analyze Sony’s marketing advantage with supportive evidence. (1) - Sony corporation success Traditionally, Sony was known as a great innovator that managed to transform the entire categories of electronics with unique products like the PlayStation game console and Walkman music player. More so, Sony was in a position to command premium prices for its top-quality products (Gao, Men g, Steve, 2008). Therefore, Sony did not only the electronic industry but it also changed the world because Sony brought about smaller portable devices to the market, which is contrary to the old electronic devices that were bulky and inefficient. Sony has tremendously grown in market share and profitability (Ajami, 2006). Numerous evidence portrays this growth, for instance in the year 2006, Sony topped a Harris poll as the best brand which was the seventh time consecutively, while dell and coca- cola took the second and third positions. In 2004, Forbes ranked Sony as the 72nd largest company in the world. Recently, in January 2013, Sony scooped the So-net Entertainment Corporation award. According to Interbrand Top 100 Global Brand 2011, Sony emerged position thirty-six among other a hundred brands (Anonymous 2012). Prior to successful market share, Sony boasts of diverse and effective employees who in the year 2011 they were ranging at 168,200. On February 25, 2013, Sony sold a 6 .0% stake of a 55.8%-owned subsidiary (Minato-Ku, 2013). Factors that have contributed to Sony’s success Sony’s main contributor to its success is its unique variety of brands that match up the latest modern world. The company manufactures television screens and projector, cameras, home theatre systems, computer hardware, mobile phones, and car entertainment devices (Plunkett, 2008). Additionally, Sony manufactures home recording devices, storage media, and charging devices (Nargundkar, 2006). Ideally, Sony has further divided some of its products into other sub categories especially for the television products. This has made the company able to service its market through the innovation of tailor made products that suit their various clients. These customers include households, offices, and public gatherings. Hence, Sony’s success comes from due to the ability of the company to produce products that are able to meet the needs of their customers without financial constraints as their quality dictates the price (Ferrell & Hartline, 2011). Moreover, Sony also uses strategic marketing skills to the improvement in sales capacity. These marketing strategies include market mix, online marketing among many others. Ideally, Sony has managed to use its favorable public rapport to maintain significant relations with its employees, consumers and other relevant stakeholders (Shajahan, 2004). The use of its

Political Aspects of Wireless Electricity Essay Example for Free

Political Aspects of Wireless Electricity Essay It is no secret that politics plays a big role when it comes to the introduction of the wireless electricity. Some parties are for it, as it can allow for slightly greener ways of powering devices, new jobs, and easier access. But others are against it, seeing the change as a threat to old ways of doing things, as well as a way for people to access electricity for free. Though wireless transmissions and the idea of wireless electricity have existed for quite some time, the actual possibility of creating usable, accessible wireless electricity is just now starting to become a reality. With wireless electricity looming on the horizon, more and more politicians, civilians, and companies are beginning to stand behind the idea; but that has not always been the case. Politics first began working their way into wireless electricity in 1905, when J. P. Morgan pulled all of his funding from Nikola Tesla’s Wardenclyffe Tower project when he erroneously began to believe that it could lead to free electricity for all (Haliburton, 2006). It is that same type of thinking that has helped to keep wireless electricity out of the mainstream for so long. However, information and general knowledge about wireless electricity has come far, and that type of thinking is quickly disappearing. With the recent surge of environmental and financial awareness, people are quickly beginning to gravitate towards the idea of wireless electricity. Even power companies are getting behind the idea, seeing a way to expand their business. Though the idea of wireless electricity has just begun to reemerge, it will quickly become a hot political topic, just as other forms of alternative energy have. The question is this: Will the general public and politicians continue to gravitate towards this new concept? And if they do, how long will it be until wireless electricity becomes the norm?

Free Rider Problem Essay -- essays research papers

The Free Rider Problem   Ã‚  Ã‚  Ã‚  Ã‚  The free rider issue has become one of the most serious economic issues today. The free rider is a lazy type person who wants the benefits that others bring in without having to do the work. The free rider typically takes advantage of a public good. Living in a civilized society presents many opportunities for free riding, which we have yet to find a way to control. Economists regard the possibility for free riding as a problem for the free market, which usually leads to government intervention. Government intervention is not generally needed in a free market society but in this case if there were no government intervention this problem would not find a solution.   Ã‚  Ã‚  Ã‚  Ã‚  The free-rider issue is often seen as a serious problem because of the assumption that a free rider's best self-interest is that they interact with others by force and fraud. If they can get away with the fraud and begin to gain the benefits of others they have reached their first goal. Their next goal is to make some good money or get credit for someone else's hard work before they get caught. Then they get out and are long gone by the time anyone notices. Life in a civilized society allows each of us the opportunity to enjoy the benefits of the work of people with productive ability far greater than our own, but what happens when people begin doing this? They get used to not having to do much work and become lazy. In some cases people look at welfare in this way. If a person is able to get a good job and chooses not to, but instead, to live on our government, this would be considered free riding. This causes a fluctuation in our market and it can have a negative effect. When the benefits go away people do not want to go back to work and eventually will loose their jobs or quit and become a true free rider. Clearly there is an essential difference between cases in which one can't contribute to the benefits one enjoys and cases in which one chooses not to make a contribution that is within one's power. But apart from this distinction, we can differentiate between harmless free riding and the worthless free riding. The free rider wants anything he can get for free and will think nothing of it if he can get away with it. Free riders take advantage of public goods without having to contribute to them. For example, if s... ...o make up the difference. This difference we have to make up is usually a higher tax. In raising the tax the price of the good goes up and when price goes up demand tends to go down. As the demand keeps falling and the price keeps rising the product usually ends up off the market and filing a chapter eleven. It typically does not go that far but this is an example of what could happen. A free market is a privilege to have and it is a shame people have to take advantage of it because they do not feel the need to work hard or to go out of their way to do something for someone else.   Ã‚  Ã‚  Ã‚  Ã‚  The free rider is a menace in our society and we do not need to let him take our money and put it to his use. We have found ways such as government intervention and price lids to help control the problem but we have yet to find a solution. Once a solution is found we will have fewer worries and possibly a true free market. These are very difficult problems to stop and may never be stopped. It will take a long period of time to begin the process to bring it to an end, but it will be nice to maybe some day have a true free market without the problem of a free rider.

A Futile Task- the Catcher in the Rye Essay

The teenager stands on a hill in complete solitude, watching the nearby football game, and contemplating if he should say a final farewell to the school. Ambivalent, the melancholy teenager leaves himself in a confused and vulnerable position to the lonely and corrupt reality of the world. In an attempt to endure the vices that alter the blissful spirit, he feels the need to make things right by saving what little recognizable evidence of purity that the world has not already desecrated. All throughout the novel The Catcher in the Rye, author J. D. Salinger establishes Holden’s bizarre attraction toward particular places, objects, and experiences, past and present. The author concurrently sets out the subtle, tender concern that Holden has for the preservation of innocence and where life will ultimately end up. At essential points in the plot, Salinger embodies these two motifs, which metaphorically represent each other, in order to uncover the true sadness that lurks in an abandoned Holden. By doing this, the author reveals the greater theme that unlike artifacts of history, constrained the human spirit would severely stunt any opportunity of development for people. Salinger constantly highlights the motif of Holden’s endeavors to preserve innocence from being tainted by corruption. The author first presents this through the objects that Holden develops a bond with. To demonstrate that bond, Salinger produces a scene in which Holden visits his old teacher, Mr. Spencer, one of the few concerned about the boy. The teacher asks Holden to read his paper about Egyptian mummifying aloud. Salinger first demonstrates Holden’s obsession for the preservation of life when Holden divulges that â€Å"Modern science would still like to know what the secret ingredients were that the Egyptians used when they wrapped up dead people so that their faces would not rot for innumerable centuries† (Salinger 16). Implying the deep interest that Holden possesses for this subject, Salinger underscores that the teenager may have experienced a harrowing event relating to the matter. Because Holden would still dearly like to know the â€Å"secret† of maintaining life in such a state, the author also exposes Holden’s unawareness of the topic altogether. Leaving Holden in an unaware state, the author then inserts the minor motif of Holden’s younger brother’s baseball mitt to clear the confusion. When asked to write a composition for a classmate, of all the topics Holden decides to write about, the nostalgic adolescent distinguishes his younger brother’s baseball mitt. With this sacred object, Salinger links it to Holden’s goal for conserving the unharmed and the aesthetic, as the glove had poems scribed all over it in ink. The author represents the ink as the permanence in which the item endures. Similar to the beloved baseball mitt, Holden finds solidity in a Little Shirley Beans record that he purchases. Identifying the song eternally preserved on the record, the writer elucidates that Holden still preserves things in the state that they are left, never allowing them to change. Salinger also represents Holden’s remembrance of the innocence of childhood, the record reminding him of that period. In addition to the revered objects, the author exhibits a pattern in Holden’s experiences and anecdotes that motivate Holden in the direction of making events like those last for an eternity. One of Holden’s recollections that Salinger touches on briefly involves Holden playing checkers with a childhood friend, Jane Gallagher. At one point in the game, Jane cries, and sensing this, Holden drives his efforts to console with her, kissing her all over her face, avoiding her mouth. Symbolizing the need to protect Jane and her virginity, the author portrays Holden comforting her instead of violating her, revealing the tender empathy that Holden possesses. Prior to reflecting this memory, Holden underwent an instance of rejection at a bar, and seeing what little empathy people have, Holden tries to remember a positive memory to keep his motivation alive. One of Holden’s fondest memories stems from the remembrance of his younger brother. When given time to ruminate upon his past, Allie stands out as the ideal brother that Holden would never find in any other person. Salinger distinguishes Allie as â€Å"terrifically intelligent† and that â€Å"he was also the nicest†¦ he never got mad at anybody. People with red hair are supposed to get mad very easily, but Allie never did, and he had very red hair† (Salinger 50). Portraying Allie as the epitome of childhood innocence, the author juxtaposes this to Holden’s thoughts of preserving purity. Because his sibling passed away at an extremely young age, Holden’s sole coping strategy involves the thought of bringing back his brother, thinking that someone as magnanimous as Allie deserves to live on. Despite Holden’s naive point of view toward what troubles him, he finally begins to subtly realize something about his brother. Salinger weaves a scene of Holden conversing with Phoebe, his younger sister, and the teenager mentions that he loves Allie, thinking that he still exists. Following Phoebe’s comment that Allie is dead, Holden refuses to accept and reveals that â€Å"Just because somebody’s dead, you don’t just stop liking them, for God’s sake—especially if they were about a thousand times nicer than the people you know that’re alive an all† (Salinger 223). Salinger highlights a rare moment: someone offering guidance to Holden, accepting that he is stuck. By displaying Holden touching upon Allie, Salinger expresses the adolescent beginning to address the connection with Allie. However, Holden still possesses the unawareness to come to terms with this. Salinger effectively amplifies the essence of Holden’s being in a thought of the teenager. The author illustrates a dream of Holden desiring to catch children who accidentally fall off the ledge of a cliff in the rye field, the adolescent defining himself as a catcher in the rye. The author resembles Holden as a selfless martyr in this thought, leaving Holden in bliss that he can save people if they fall; the author makes clear that, for Holden, danger should be avoided by all means and at all costs. Salinger stems the implication from Holden’s own dealings with losses Perhaps the most important category that Holden associates with conservation and longing consists of the places that he visits. One of the first locations that Salinger introduces pertains to the museum, a site of never changing exhibits. The boy favors that all the displays stay the way they are and that things are kept in fixed positions. By symbolizing the museum as a place where nothing changes, Salinger mirrors the setting to Holden’s opposition to growing up and change. Salinger initiates the beginning of a epiphany for Holden when the teenager travels to his old elementary school to meet with Phoebe. The writer describes the school as familiar to Holden While appearing to give up hope on the world, Holden sees yet another instance of chicanery. The author depicts an obscenity on the wall that appalls Holden, and in the act he makes of rubbing it out, Salinger reiterates Holden as a savior figure and that combating all of evil can be accomplished. The author furthers the learning experience for Holden when the teenager returns to the museum. Although feeling tranquil while all alone in one of the showcases, Holden observes yet another contemptible obscenity, defacing one of the glass cases. By repeating the obscenity for Holden, Salinger starts to affirm in Holden that he cannot keep everything clean and pure but must accept events like these once in a while. Finally pivoting Holden’s vague realization to the last crucial place, Salinger fleshes out the epiphany. Accompanied by phoebe, Holden views one of the carousels nearby, his attraction to it brought on by the fact that the ride always plays the same song. Holden again clings to a familiar tangent and what comforts him. Yet, the teenager watches Phoebe go around on the carousel and sees her and other children trying to grab for the gold ring. Salinger depicts Holden as â€Å"afraid that she’d fall off† but he does not react, as Holden realizes that â€Å"If they fall off, they fall off, but it’s bad if you say anything to them† (Salinger 274). Paralleling and directing opportunity and danger close together, Salinger enables acceptance in Holden that if people stay the same way, there leaves no room for development, thus rendering them static, strayed from the dynamics of change, and this time, Holden does not deny Phoebe or himself the opportunity to mature.