Weekly Finance Tips

Archive for 2010

The title of this essay comes from a famous research paper in the Journal of Finance, July 1985 “Does the stock market overreact? The authors were Werner DeBondt and Richard Thaler. The work is very suitable for what is happening to world stock markets in the months of July and August 2007. The test gives us valuable information on the nature and behavior of markets, so a little research on its content.

Probably many of us have felt at some point, some over-reaction to market news or events. For example, after the attack on the Twin Towers in New York on September 11, 2001, markets were minimal scoring for six consecutive days after reopening to then bounce vigorously and take it all in just one calendar month.
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We can make a purist distinction in terminology between Capital Structure and Financial Structure.

Strictly speaking the Financial Structure includes all sources of financing, including short-term, while the Capital Structure is based solely on long-term instruments.

The problem that arises is that, in popular parlance, people referring to one or the other, but this is not entirely correct. Financiers must distinguish clearly between them.
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We have tried to give a formal definition of a Financier (see What is Finance?) But this time it proposes a definition of much greater practical significance.

Financier is basically an illusionist and this definition is what leads to the sympathetic character of Disney. Mickey once tried to imitate his master magician in “The Sorcerer’s Apprentice”, the Walt Disney film Fantasia, but we know that “he shot backfired.” The forces of the water he tried to dominate, almost drowning … Poor.
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The Model of Financial Asset Pricing (CAPM) provides the proportionality between risk and return, absolutely fundamental expression around the study of finance.

Either way, this concept has permeated the collective consciousness as to the worker knows that if you want higher returns, you must be willing to take much risk.
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Based strictly on responses expressed by you, I get to detect an apparent contradiction, that if confirmed, would be giving a heavy blow to the foundations of any Financial Theory and particularly to Modern Portfolio Theory.

Let’s see:
On the one hand and given the responses of the majority, you define risk through ex-ante proposition: it is a possibility of harm. This possibility is in the future and also devoid of certainty. The definition is therefore based on the notion of uncertainty (do not know what could happen) and therefore predates the facts (ex-ante).
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One of the biggest obstacles to the growth of small company s is access to working capital. The company s who have access to the financing of the company s, are often better positioned to seize the opportunities – and – in a better position to weather successfully the challenges that those who do not.

But getting working capital is a major challenge for most of the company s, especially small company s new business s. Furthermore, conventional business loans are offered to the company s that have long history of success and hard assets. Few enterprises and small business s meet these criteria.

However, business loans are not the only way to finance a business . There are some alternative ways of financing have begun to gain popularity in recent years. An alternative is called accounts receivable, also known as invoice factoring. Read the rest of this entry »