Equity Flashcards
Direct Markets
A type of market where the buyer and seller must contact one another directly.
Broker Markets
A broker facilitates the transaction by bringing the buyer and seller together.
commission
The broker will help you establish a fair offering price, give you ideas on how to improve, and act as a go between to earn commission on the sales.
Dealer Market
takes ownership of the product before reselling it to the final user.
Money Markets and Capital Markets
Are primarily broker and dealer markets. Buy or sell orders are placed with a broker, who takes the orders to the marketplace and tries to find a willing party to take the opposite side of the transaction.
Porters Five Forces
- Competition
- Substitutes
- Supplier Power
- Buyer Power
- New Entrants
Difference between bills, notes, and bonds
- T-bill: Maturity of one year or less, is sold at a discount
- Note: Maturity of two, three, five, and ten years, interest is paid semi-annually
- Bond: Maturity of ten years or more, interest is paid semi-annually
Money Vs. Time-Weighted Return
Money-weighted: IRR
Time-weighted: HPR = ((MV1 - MV0 + D1 - CF1)/MV0)
Where: MV0 = beginning market value, MV1 = ending market value,
D1 = dividend/interest inflows, CF1 = cash flow received at period end (deposits subtracted, withdrawals added back)
ex ante
forward-looking
ex post
based on actual results
Ibbotson and Chen model abbr.
EINFL: expected inflation
EGREPS: expected growth rate in real earnings
EGPE: expected growth rate in the P/E ratio
EINC: expected income component
- Operating Income
- g
- Capital expenditure (Capex)
- Net PPE
- EBIT
- ROE x b
- FCInv
- Net Property Plant and Equipment
Public Investment Bankers
Tombstone Ad
Underwriting Syndicate
Underwritten
underwriter spread
flotation costs
s=econdary market
Investors buy and sell securities that have already been issued by firms
private placement
long position
short position
hedgers
Short Sale
the short seller (1) simulaneously borrows an sells securities through a broker, (2) must return the securities at the request of the lender or when the short Sale is close out, and (3) must keep a portion of the proceeds of the short sale on the deposit with the broker.
payments-in-lieu (of dividends or interest)
In a short sale the short seller must pay all dividens or interest that the lender would have received from the security that has been loaded to the short seller.
short rebate rate
Short rebate rate is the % of the total value of a borrowed share that a broker charges rent
Shor
