AI Basics Flashcards
Which types of financial market are there?
Capital markets
Money markets
Alternatives
Capital markets
Stock market, bond market
Three components of market efficiency
- operating efficiency: conduct operations at minimum possible costs
- information efficiency: all relevant information impacting on value is immediately and fully impounded into share prices in an unbiased way
- allocation efficiency: allocate the economy’s savings to their highest value uses
types of market efficiency
weak form: security prices reflect all historical price information
semi-strong form: sec. prices reflect all publicly available information
strong form: sec. prices reflect all information (public and private)
How to measure investment performance?
Sharpe ratio
Comparison with a benchmark
CAPM
Downside of Sharpe ratio
- does not price a direct comparison with alternative strategies or benchmark
Comparison with a benchmark
- comparing with a benchmark is what a fund manager does.
How is a fund manager evaluated?
- based on the information ratio
= average active returns/ active risk
average active returns
average percentage difference in return between a strategy and benchmark
active risk
SD of active return
What is alpha
- the strategy that provides higher returns than a passive benchmark
Two Fama and French factors
SMB and HML
SMB (returns of firms)
the return on a portfolio of small firms minus the return on a portfolio of large firms
HML (return portfolio of firms with high BM-value of p. with low BM-value)
return on a portfolio of firms with a high ratio of book-to-market value minus the return of a portfolio with low book-to-market value
feasibility analysis
- provides guidance for decision-makers
- aim: min. risk and max. opportunity to developer and investors
- economic and financial feasibility.
- regulatory requirements and attitudes of neighbors and public officials
Four basic questions to be answered in a market analysis
- Will there be clients to rent or buy the property?
- To what rent price while the project be valued in the market?
- How can it be marketed?
- Stakeholder analysis which have an influence on the realization of the project.
How is the real estate market segmented?
- by location and product
trade areas for each property?
- customers
- employees
- competitors
Segmentation in retail
primary: the geographical area from which the site will derive its target share of potential users 70%)
- secondary: infrequent users, (20%)
- tertiary: occasional users (10%)
Capture rate
- how much of future new demand should be yours?
Absorption rates:
- the pace at which the property is sold
two opposing views when making a new project in real estate
- investor: for profit, short term
- public sectors: area development, public interest, long term
