Economics Stack Exchange
Economics Stack Exchange

Questions tagged [finance]

Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments.

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How could Greece-related worries drive US stocks down about 2% in a day?

Major US stock indices are down ~2% on Jun 29, and it's mostly associated with investor's worries related to the Greece crisis. I understand about possible "chain reaction" and that a lot of companies may be exposed indirectly to Greece debt. But…
user69715
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Trying to understand the notion of required return

I have been thinking about the notion of required return lately. I am not familiar with a formal definition, but I have tried to reason my way towards one. Please let me know if my approach makes sense and if it aligns itself with any mainstream…
Richard Hardy
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Basic question: why do markets grow?

I apologize if this is gonna be very basic, but I am a beginner. My question is: why do markets (expressed as indices) grow? Is it because money is constantly moved from the real economy into stock markets, but the ingoing flow surpasses the…
Alepr85
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How to find the present value of a perpetuity with a non-constant growth rate?

I've got a perpetuity problem where an organization pays out 50 equal valued grants each year in perpetuity, adding an additional 5 grants each year (i.e. 55 in year 2, 60 in year 3, etc.). We've only been shown how to do perpetuity problems with a…
bones_mccoy
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Models similar to CAPM

I'm using the capital asset pricing model (CAPM) to estimate the values of some assets. I'm curious if there are other (simple if possible) models similar to it. I want to apply as many models on my assets as possible.
o1ctav
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What is the difference between Margin and Markup?

Please clarify the difference in meaning behind markup and margin. Why would I use one or the other? Markup = (Price - Cost)/Cost useful for examining how much actual profit is made on each sale. Margin = (Price - Cost)/Price useful for helping…
Hans Vonn
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Difference between two ways of calculating real return

I've just learned the following way of calculating the real return rate $R$ of an investment: $$R=\frac{P(1+N)-P(1+I)}{P(1+I)}$$ Where $P$ is the initial value invested, $N$ is the nominal interest rate and $I$ is the inflation rate. However,…
Sasaki
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Net present value

I have a textbook which contains a question which is as follows. Conveniently, the textbook doesn't have an answer key: Calculate the net present value of the following cash flows: You invest \$2000 today and receive \$200 one year from now, \$800…
s7eqx9f74nc4
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Who has the unspent money?

I want to know why we don't talk about the money that people have saved because they are not going to restaurants, barbershops, flying, traveling, etc. I have heard the restaurant business is in the billions for revenue. Wouldn't that mean that…
James Warcken
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What drives the Idiosyncratic Volatility puzzle?

I am currently analyzing the IVOL puzzle and I find in a single sort that the higher the IVOL the lower the return. Additionally I do a double sort, first sorting on skew and then on IVOL. I find that after controlling for slew the IVOL puzzle…
user9259005
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Testing equality of betas of multiple assets in the Capital Asset Pricing Model

I am trying to understand how I can test whether the factor loadings (Beta) in CAPM for different stocks are statistically different between each other. I.e. I have 3 stocks with different CAPM betas. How can I test that those 3 betas are…
Marco
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Impact of US Monetary Policy on the Indian Economy

Why does an increase in the repo rate in the United States have an impact on the economy of India, even when India has raised its own repo rate? In other words, why is the monetary policy decision of the Federal Reserve in the USA relevant to the…
James Smith
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Hi there ask a short sale question

I know the proceeds (5175)and initial margin deposit (3105) But I don't know the total deposit with the broker Why it is 5175+3105 I was confused that the proceeds include the initial margin deposit, so why it is added twice? Thanks for answering!
Gavin
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Can banks "create" Bitcoin

I have a stupid question. Could a commercial bank creates Bitcoins the way it "creates" money if it was allowed to make loans in Bitcoins?
user40110
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Internal rate of return

Trying to finding the internal rate of return R: Net present value of costs is $\ Y(s)$ Net benefit is $\ Y(s+1)-Y(s)$ in every period t up to$\ \infty $ The answer is given as $\ R=\frac{Y(s+1)-Y(s)}{Y(s)} $ Is this the correct approach (NPV =…
user918814
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