17 Aug Investors and their perception of the value that a company adds to society changes instantaneously through time.

Part (1) 

After reviewing this week’s content, when you think about securities (i.e., stock and bond) valuation, you should be able to view securities from both an investor’s perspective as well as a corporation’s perspective. Explain how an investor’s expected rate of return on a stock and a bond is linked to an organization’s required rate of return on that stock and bond. In addition, provide an example of a company whose stock (Note: You could use Yahoo!Finance to search for companies and their historical performance) was affected when it released its earnings (i.e., 10K-Annual Report or 10Q-Quarterly Report) and indicate, from a business perspective, why the value of that company’s equity fell or rose as a result of a business outcome.  

Hint: One      way to find news about a particular company and its earnings is to use      Google Search and type the company’s name and the word ‘earnings’ into the      search bar.

Note,      that you are still required to provide two references for your response      and that they should be references to a scholarly article or a business      publication (i.e., Wall Street Journal, Forbes, Financial Times, Barron’s,      etc.)

Part (2) 

Investors and their perception of the value that a company adds to society changes instantaneously through time. The frequency of these changes and the speed at which new information affects the value of securities led Professor Eugene Fama to actually articulate the three forms of market efficiency, so that academics could test whether markets are efficient. There are some researchers who claim that although markets are efficient for the most part, there is some evidence that markets are not entirely efficient and that investors fall prey to certain behavioral biases which affect pricing in the markets (see Professor Richard Thaler’s research). The Capital Asset Pricing Model (CAPM) is a tool that financial practitioners use to relate the market’s perception of risk to an individual firm’s value and an investor’s required rate of return on a stock. For this discussion, you are required to first discuss the concept of market efficiency and its limitations and, second, provide an example of a publicly-traded company, its ‘beta’ (hint: go to https://finance.yahoo.com/lookup and type the symbol or ticker of the company that you are looking for), which is a proxy for its systemic risk,  explain what that beta implies in regards to other companies in its industry or the market as a whole, and note some of the limitations that are associated with that metric.