Budget 2013 “The Yearly event of India”

This is the most event full day in the country,continuing from my last post the India Budget 2013 , the expectations are imageshigh because the world biggest democracy has more challenges on every front be it from the basic amenities like toilets. India has more cell phones than toilets .

Yesterday the Economic survey 2013 came out and Economic Survey indicates : India lost 10% share in global BPO mkt to China,Brazil in 5 years .

As said by Raghuram Rajan – The Chief Economic Adviser of India we stand on cross roads were we need to develop a clear strategy for continued inclusive growth.

We are batting on a sticky wicket, but betting… Continue reading “Budget 2013 “The Yearly event of India””

Spin-offs and value creation

The straightforward strategy of buying companies that have recently been spun off from their parent has generated very

Embarrassing parents - swan duckling

good results. The forces of divestiture and conglomeratization eternally wrestling with each other like gravity and energy in the cosmos.

How about this for a rational explanation:

Spin-offs generally result in more “pure play” stocks which then become more accurately valued in the marketplace. When the pre-spun-off business are tied Continue reading “Spin-offs and value creation”

Theory of Asset Pricing

All valuation classes teach the equity market correlation method so it would be interesting to hear your views.images

Equity exists in many forms. In securitization, equity is the tranche that takes the first loss and controls the deal. In a mutual insurer/bank/thrift, etc., the book equity is held by the dividend-receiving policyholders. The real equity is held by management, who actually control the place, because the dividend-receiving policyholders will not vote them out. In a credit tenant lease, there is the guy that owns the property, and typically he puts up a teensy amount of equity, because there is a “credit tenant,” one that has an investment grade rating, and the mortgage is secured by: Continue reading “Theory of Asset Pricing”

Financial Services Industry where it has gone wrong

The Financial Services Industry as a whole have been facing criticism in somewhat or in different form. In the mean time

Bowled Over -- Michael Oriard (Big-Time Colleg...

we are trying to see the industry from the Behavioral prospective and trying to break the problems as follows:

Simplicity does not pay well: Investing should be relatively simple: Buy broad asset classes, hold them over long periods of time, re balance periodically, get off the tracks when the locomotive is bearing down on you. The problem is its easier in theory than is reality to execute. And, it is difficult to charge excessive fees for these services.

Confusion is not a bug, it’s a feature: Thus, the massive choice, Continue reading “Financial Services Industry where it has gone wrong”

Cognitive Biases in Behavioral Finance

Hindsight Bias

Guest Post:

Many concepts in finance and economics are predicated on markets behaving rationally. Unfortunately for economists everywhere, humans can often behave irrationally, thus ruining many predictive models. In response to this apparent failing in what is called the “efficient market hypothesis,” a segment of economics called behavioral finance has emerged in order to explain why irrational behavior happens. Behavioral finance is an intersection of psychology and economics that studies why people behave the way they do when it comes to finances, risk, and other topics. Continue reading “Cognitive Biases in Behavioral Finance”