RISK AND RETURN

Financial risk refers to the threat that is associated with financing due to elements of loan that is linked to the default. Return is referred to either the gain or loss of security within a particular period of time. When an individual makes an investment risk they expect some return in the future from the investment (Shim & Siegel, 2008). The return expected is usually uncertain due to factors that surround the project. The variation from the expected and the actual return identifies the level of risk. Systematic risk affects the organization varying degrees as it affects social, economic and political systems. Unsystematic risk is affected by factors such as labor strikes, scarcity of raw material and inefficient management. This type of risk is unique as it varies from one organization to another. Returns from an investment are determined by the periodic cash flows referred as capital gains or loss.  Risk tolerance is important when creating an asset portfolio as it varies from one investor to another due to elements such as future earnings and the size of the portfolio (Shim & Siegel, 2008).

There is a relationship between risk and return of positive correlation. This is because less levels of risk are associated with minimal possible returns while higher intensity of risks are connected with high potential returns (Brigham & Ehrhardt, 2008). However, there is no guarantee that high risks will yield high returns. Eventually, a high risk may result in great loss of capital amount. It is correct to say that the positive correlation may indicate the connection between risk and return but due to the unsystematic risk and systematic risk higher risk investment may fail and result in greater losses (Brigham & Ehrhardt, 2008).

Reference

Brigham, E. F., & Ehrhardt, M. C. (2008). Financial management: Theory & practice. Mason, Ohio: Thomson Business and Economics.

Shim, J. K., & Siegel, J. G. (2008). Financial management. Hauppauge, N.Y: Barron's Educational Series.

The relationship of the Economic Liberalism in historical context

Introduction

Economic liberalism entails having a liberal economy where individuals produce goods on their own, make decision on how goods are to be supplied and through which means the goods are to get manufactured and eventually distributed. Such important decisions are to be made regardless of whether the economic system is democratic or dictatorial. Economic systems are distinguished from each other in regard to the capability of individuals to make decisions. In a liberal economy, individuals have the authority to make decisions regarding the market and what is carried out within the market. Economic liberalism means that individuals have the authority to direct the government according to the decisions they have come up with. The individuals however may delegate to the state and give it authority to make some decisions. The individuals have the authority to ask the government to carry out decisions they have come up with. Therefore if the economic is liberal, individuals are entitled to come up with economic decisions and ensure the government follows those decisions. Therefore this paper will discuss economic liberalism and its relationship in the historical context.

In an economic that is liberal; decisions are made by individuals and followed by the government in order to ensure that the market is free (Baldwin, 77). Individuals are able to make decisions that affect the market but cooperatives, nongovernmental organizations, private organizations and unions contribute much to the liberal economy. Individuals rule the entire economy thus the national government does as per the suggestions of the individuals and follow decisions made by the individuals. In the history of liberalism and more so the economic liberalism three groups have been considered which include the government, individuals and the voluntary groups. There should exist a good relationship between the decisions made by individuals that should be followed by the government and voluntary groups. The government however has economic powers which it exercises since it cannot fully support the decisions made by voluntary groups and individuals. Economic liberalism was and is important since it ensures that government alone does not make important economic decisions since it should remain democratic and allow other individuals make important decisions that govern the market (Baldwin, 77). In the period 1500-1800 the government was able to do what people wanted to be done and what it was supposed to do. The economic policy was not limited to the decisions made by the state and individuals since the economic policy is influenced by both decisions made by the state and the individuals too.

The state should do what it is supposed to do that what is right instead of doing what it is able to do which are two different things. The state should do what it is supposed to do since this is what liberalism is all about. The economic policy to be followed should be the one that engages decisions of individuals rather than the government controlling the market. Economic liberalism entails the freedom of the people in ruling their own economy rather than the government coming up with restrictions (Baldwin, 79). Individuals should ensure that they lead a free life and ensure their actions are free from government’s restrictions especially looking at an economic perspective. By 1500 individual decisions had not yet become implemented since the state made major decisions that all people were asked to follow. Most writers saw and wrote about the relationship between economic problems and economic policies since most people thought that economic problems were experienced because of the policies that existed before. People were advocating for a change in economic policies which would in turn deal with the economic problems. The state decisions influenced policies since the state came up with major polices without considering decisions of individuals which was wrong (Baldwin, 77). People wanted a policy whereby they would come up with their own decisions influencing the market and come up with processes of distributing their products without necessarily involving the state.

Most people believe in the economic freedom rather than the political freedom since they believe in free trade as well as nationalism. All people are working hard to ensure they gain riches which happened in that early period 1500-1800. People worked hard to ensure they gained material possession which indicated the wealth of an individual. Individuals worked to ensure they were stable both economically and politically (Baldwin, 78). All people were fighting to gain economic stability since the economic goods were useful in the lives of the individuals. Governments however came up with polices that government and determined possessions of individuals and therefore people were not for the idea of government intervention in their economic ways of life. They wanted to remain free thus have economic freedom to gain whatever they wanted, manufacture goods and distribute the goods and earn wealth. Freedom was important since it ensured that individuals came up with policies that ensured economic freedom was possible and that individuals made their own decisions.

Economic freedom gave rise to some problems such as inequality since individuals owned wealth while some had nothing. This inequality problem would later give rise to some social problems such as crimes since people who did not have anything would later steal from those who had. Equality was encouraged in the 18^th century where people believed in wealth more than any other thing (Baldwin, 78). Wealth came hand in hand with power since powerful people were wealthier compared to other people. This made people believed that wealth influenced power and many people worked hard to earn wealth and later become powerful. During this period of 1500-1800 which was well known as the early modern period people believed in wealth and wanted the state to restrict its control on the wealth of individuals. Economic morality was advocated for since people wanted a Christian economy where people acquired wealth in the right manner without getting restrictions from the state. They wanted a policy whereby they would make major economic decisions without including the state.

Conclusion

From the above discussion, it is important to learn that economic freedom was the biggest issue people advocated for in the early modern period. People wanted the government to remain out in matters concerning the economy since the government had full authority in making both political and economic decisions. People advocated for a change in the economic polices where they wanted a free market where trade would be free without the government interfering with the policies. The individuals would decide whether or not to include the state thought the state was allowed to do whatever it was supposed to do. Therefore economic liberalism is was important during the early modern period since it ensured the existence of a free trade and economy.

Work cited

Baldwin, David A. Economic Statecraft. Princeton, N.J: Princeton University Press, 1985. Print.

Macro-economic policy

The ideas presented by Keynes and Hayek have informed the landscape of global economy since the end of the World War II. These ideas were very distinct in regard to economic freedom as each one of them had different propositions on the manner in which management of macro economy should be managed.  This includes the role of the government in the economy of a country.   Keynes analysis was founded on treating the economy as a whole and involves the use of government’s fiscal policy, tax and deficits in the management of aggregate demand and therefore, ensuring full employment (Paul, 114). Keynes identified errors in the post war free market and hypothesized that government regulation can be used to regulate the economy. His idea emphasized the need for the government to control the ‘commanding heights’, and this is actually what many nations have been able to do after the war (Yergin, 1). In addition, Keynes held that full employment could not be attained by making wages to be low. The economies are formed of aggregate output quantities come from aggregate expenditure streams. In his view unemployment results from failure of people to spend money that is sufficient.  Keynes was of the view that more government expenditures combined with low taxes can induce demand and thus help the global economy to recover from depression. Hence highest economic performance can be attained and any economic slump prevented through if aggregate demand is influenced government policies that aimed at economic intervention and stabilization. He refuted the classical theory which held that constant swings in economic output and employment would be self-adjusting and thus modest.   Specific features of market economies and structural rigidities can weaken the economy and lead to lowering of aggregate demand (Paul, 114).

Hayek on the other hand opposed the Keynesian policies; especially on the view that unemployment would eventually lead to inflation and that to maintain low unemployment, the central bank would need to raise money supply faster leading to increased inflation.  His view was that rather than government control, free market could provide the solution (Yergin, 1). As the idea presented by Keynes became accepted more, Hayek propositions become unaccepted and unpopular. After the Keynes’s theory on macro-economy led to the stagflation, the Keynesian system dominance was over. To Hayek reduced policy intervention by the government means that there will be more freedom in the economy. When people have freedom to chose, the efficiency of a running economy is high.  Hayek shows a connection between capital theory, business cycles and the monetary theory. According to his argument, his main problem facing any economy is the way actions of people in the economy are coordinated. The free market played a critical role in coordination of these actions even though the coordination was not intentional. The market is a spontaneous order where it is not designed by anybody but came about due to these human actions (Sandra and Levy, 159). He asserted that what causes a failure in coordination of peoples plan is the increase in money supply through the central bank. The increase makes credit cheap artificially and thus driving down the interest rates. Interest rates that are artificially low make investments to be artificially high but also lead to malinvestment – where there is a lot of investment in the long-term projects   as compared to short-term projects and this boom turns out to be a bust.  Rather than government readjustments through controls, he saw these readjustments as being necessary and health to the economy.  Avoiding the bust would be achieved through the prevention of the busts. Hayek believed that policies proposed by Keynes for the purpose of dealing with unemployment would lead to inflation.  He also argued that socialist planning could not be applicable and that the reason for socialists’ economists to propose central planning was the thinking that central planners could consider economic data in the allocation of resources. In his view, such data is not available and cannot exist in a single mind but everyone has knowledge about specific resources and the available opportunities for using them which the central planner cannot have (Sandra and Levy, 159). The free market virtue is that it provides maximum liberty for individuals to use the only information they are having.  

The US economic policies should lean more on the Hayek’s idea of market liberalism, where the economy is organized on individual lines so that  most of the economic decisions are made by households or individuals and no the government institutions. This should offer more support for free market with little regulation by the government. The policies should not intervene in the free market if such policies prevent open competition and free trade. The policies should also focus on reducing the government spending and any regulations aimed at controlling the markets (Gwartney, Stroup, Russell Sobel & David 16). The U.S government should adopt a free and liberal trade policy where the trade barriers and other tariffs are reduced so that to induce high economic growth, especially through economic growth. Where government should consider market control should involve keeping monopoly under check. 

Works cited

Yergin, Daniel (2016).Commanding Heights Episode 3- Rules of the Game (Official Video) 1.Available at: https://www.youtube.com/watch?v=bSGAJTJzgLA

Gwartney, James D, Richard L. Stroup, Russell S. Sobel, and David A. Macpherson. Macroeconomics: Private and Public Choice. Australia: South-Western Cengage Learning, 2013.16 Print.

Peart, Sandra J, and David M. Levy. F.a. Hayek and the Modern Economy: Economic Organization and Activity. , 2013.159 Print.

Davidson, Paul. Post Keynesian Macroeconomic Theory: A Foundation for Successful Economic Policies for the Twenty-First Century. Cheltenham: Edward Elgar, 2011. 114

Finance / Accounting

The results of the analysis of leading countries especially in Europe countries shows that there is a wide variation for the working capital performances, with the accounts receivables management being fairer than accounts payable management in some areas.   The stronger working capital performance experienced in some areas can be attributed to the low amount of accounts payables with the billing system seeming to be quite effective. There seems to be stronger payables performances given that the net outstanding receivables are greater than the net outstanding payables. The analysis shows significant evidence that there is a wide variation of the means of working capital management aspects. It shows that the strategies used by the telecom firm with respect to the days for the outstanding payables vary with customers located in various countries. The analysis further shows that the efficiency of working capital management is improved by reducing the working capital days , which could lead to improved profitability of this firm in regard to profit margin. Where there is seen a non-existence of unbilled revenue can be said to lead to large proportion of the accounts receivables. Performance of the working capital in individual countries also vary widely and the collection strategies utilized by the firms may be wanting given that the large amount of receivables shows a poor aspect of the working capital management.

The dynamic telecommunications market normally experiences unprecedented degree of customer delinquency. There is always pressure for growth and retention of the subscriber base and higher bills which results from the convergence of services and this may make the telecommunications operators to face increasing amount of write-offs. There can, therefore, be an increased pressure on the management of debt to recover any amounts that are outstanding (Clements, Donnellan & Read, 2004). The telecom collections remain one of the largest drivers of the delinquent accounts that are normally placed with collection agencies.  A strategy that can be used for this collection is a telecom collection segment. Such a good collection strategy should in place so as to create a sustainable and profitable model of revenue collection, so that it addresses various main items which consist of segmentation, dialing strategy, skip tracing and letters (Scholey,2008). The aspect of segmentation is important in the collecting telecom accounts given the larger placed volume that comes with them (Schaeffer, 2002).

The first step relating to this strategy involves the identification of contactable accounts, the amounts in which the phone numbers contained in the file have the highest possibility of reaching the customer.  This is important considering that a telecom organization will be operating in an environment that is highly competitive. It is easy for customers to shift between suppliers and behind significant debts and managing customer relationship in the collection process is very important to ensure there is continued retention (Scholey, 2008). An effective working capital management in the telecommunication industry puts the customer segmentation at the centre of the activities and process aimed at driving dynamic and collection strategy for every delinquent customer. The segmentation is therefore aimed at creating a customer profile with every customer being given a risk score. This will help in learning the customers’ behavior and identifying customers who are likely to slip into arrears. Such can be put into the same segment.   After segmentation, the next step will involve focusing on the delinquent customers so as to assist the customers to pay their arrears and make their accounts to be up to date. The other step in the strategy is to identify high value customers so that a firm can generate future revenue from usage and purchase of additional services and products.  The segmentation strategy can combine the behavioral scoring with risk based prioritization and specialized collection system. The collection system will assist in profiling the aforementioned customer base including those in arrears. This will make it possible for the collection manager to have a wide range of payment information and behavioral information from the internal sources especially the billing system (Schaeffer, 2002). The behavioral scoring will segment the customer portfolio and assign collections priority and thus predict the future trends accurately. The recovery score based on customer behavior will forecast the percentage of outstanding debt in an account that is highly delinquent and which is likely to be repaid in a specified duration. A scorecard that uses previous behavior that is combined with the current arrears will assist in determination of the of the priority customers. It is also helpful in prioritizing accounts and assigning priority to specified collections.  Hence, the segmentation strategy lays the ground for determining the accounts receivables that are to be prioritized and assigning periods or durations when such collections are to be made. It also assists in adopting the appropriate billing systems for the telecommunication organizations (Schaeffer, 2002).  

The organization of billing organizations, and specifically the data or vice carrier should be centered on a good analysis of the financial ratios with key metrics in combination with operational processes and profitability. The organization should consider the most essential operational and financial goals, and the key issues that may affect the revenue and the productivity performance of the billing department. This means that there should be a defined set of desired outcomes based on a system that ensures the checking and acting on data is done effectively (Bragg, 2010).  This ensures that the billing firm is able to recognize the sources of data and whether the industry benchmarks are followed at the practice level and the organizational level. The attainment of such goals would be possible if a billing organization is able to adopt an ongoing analysis and measurement of the appropriate key performance indicators (Bragg, 2010). This would be a sure way of understanding of the happenings in the industry and how the performance can be improved.

The tactics for keeping such performance indicators vary in a big way depending on the metrics specifics of a firm and metrics to be assessed. Such would include assessing the performance indicators by payer, specialty and ranges for best practices to find out the specific areas for improvement. The data could be reviewed regularly in reports or custom dashboards and could reflect daily, monthly, quarterly and annual performances (Behl, 2009). Such would require consistency in gathering performance data over a period of time. The best industrial practices for the billing organizations would relate to how strategic the billing process is. They would include making the billing process o be consistent in terms of information, feel and look, accuracy of customers’ master data and the correct itemization of all charges that are maintained up to date. They would also include matching the billing cycles with cycles of client cash flow and process so that to avert any pointless repetitive effort and follow up (Behl, 2009).

References

Scholey, D. (2008).The strategic approach to debt management in the telecommunications sector. Retrived from: http://www.experian.nl/assets/documentatie/white-papers/strategic-approach-to-debtmanagement-in-the-telecom-mei-2008.pdf

Clements, S. R., Donnellan, M., & Read, C. (2004). CFO insights: Achieving high performance through finance business process outsourcing. Chichester, West Sussex: Wiley. 56-59

Schaeffer, M. S. (2002). Essentials of credit, collections, and accounts receivable. Hoboken, N.J: John Wiley & Sons. Inc.110-113

Bragg, S. M. (2010). Accounting best practices. Hoboken, N.J: John Wiley.

Behl, R. (2009). Information technology for management. New Delhi, India: Tata McGraw-Hill. 313-316

Far term outcomes and impacts in a logic model

1. By looking at impacts and far term outcomes of a program, an observer can tell if

you are doing the right thing.

The outcomes of a program can be affected by other outside forces. This means that even if someone is doing the right thing, other forces that are beyond his control can also have significant influence. This is because the longer the outcomes the less direct effects the program can have over what is to be achieved (Taylor, Jones &Henert, 2003).

2. Unintended outcomes are results of the program which you did not plan for or expect.

Unintended outcomes are the results or consequences that one did not expect. Such outcomes are normally hard to anticipate or even plan for. This is because it is hard for one to envision the unexpected although it is important for one to consider all the possibilities. The unintended outcomes relate to what might come about apart from what is intended, how the differently the program might unfold and how the external environment may affect the outcomes or who might be affected either negatively and/or unintentionally (Taylor et. al 2003).

3. The outcome itself may be dangerous or damaging.

 Outcomes may not always be positive and cannot always be anticipated. This is the reason why one should be careful in their consideration so that they expect any negative consequences that the program can have.  Such outcomes can be negative to the participants, the environment and the whole community (Taylor et. al 2003).

4. A fair goer signs up with a government program for subsidies to plan and implement one of the technologies'

This choice would provide the necessary resources that would go a long way in ensuring that outcomes are realized in the soonest time possible. The results would also have immediate chain outcomes due to availability of resources.      

Reference

Taylor E., Jones, L., Henert, E. (2003).Enhancing Program Performance with Logic Models.

Iceland's Economic Troubles In 2008

            This financial crisis was one of the main economic and political conditions in Iceland that were based on the default of the three of the country's major privately owned commercial banks in 2008.  This was due to them having problems in refinancing their short-term debt and the deposits on Netherlands and the U.K.  According to the size of the Iceland's economy, this was the largest banking collapse that was ever experienced by the country in the economic history.  This economic crisis led to the economic despair and a huge political turbulence.   The financial crisis happened because the banks were able to form a lot of cash and too fast where they used the money to increase house rents and use it on the financial markets.  Each time the bank made any loan, they formed new money.  In the financial crisis, the banks formed a lot of money which they derived from making loans.  Due to the amount of cash that was doubled in the past seven years, the debt in the economy also doubled (Boyes, 2010). 

            As the banks used the money they had to increase the prices on houses and gambled them on the fiscal markets, a little of their cash was invested in the businesses that were around the financial sector.  Some were used in the residential property which was used to increase the house prices more than the wages. Others were used in the commercial real estate for building offices and other business locations.  Others were used for buying credit cards and individual loans.  AS the banks lend a lot of money in the residential sector so as to push the market prices together with the individual debts, the interests were to be paid on the bank loans and this led to the increase in debts.  The debts rose more than the incomes where some of the people were unable to pay their loans. This made them stop paying their loans and got themselves bankrupt.    The financial crisis happened because there was a failure to oblige the financial system, creation of the private cards and cash (Boyes, 2010). 

            Iceland has been recovering from the financial crisis since 2011.  Their gross domestic products have been increasing at about 2%.  This has led to the increase in salaries making the depreciation of the federal debt as the government had already paid much of their debts which it got from the Global monetary funds.  By the whole country's population maintaining its lowest risk of poverty and the social elimination in Europe, this has led to the depreciation of unemployment rates (Eiríkur, 2014). 

            The lessons that are learned from the Iceland crisis is that if each country is able to have capitalism substitute so as to find solutions to such crisis, there would be the clarity and a state direction from the capitalist economic activity.  The crisis remains to be a huge account in Europe but the Iceland population forced their political leaders who were responsible for the neoliberal programs to resign.  This made the country to become the most Europe's most quick economic recoveries. The ruling families in Iceland were becoming dissatisfied with their economic condition as the country's small size placed boundaries to their   profit chances.  As the economic and political crisis increased, the Oddsson's leadership of the Independence party got more attracted to the population (Eiríkur, 2014). 

Reference

Boyes, R. (2010). Meltdown Iceland: How the global financial crisis bankrupted an entire country. London: Bloomsbury.

Eiríkur, B. E. (2014). Iceland and the international financial crisis: Boom, bust, and recovery. Houndsmills, Basingstoke: Palgrave Macmillan.

WEALTH CREATION USING PRINCIPLES OF ECONOMICS

There is a difference between prosperous and pitiable nations. Wealthy countries are more developed in trade and industry. This implies that the countries are able to generate more wealth and the citizens have enough wealth to spend on schooling, foodstuff, health and extravagance. The people in these nations earn substantial amount of salaries which enables them to seek more finance in order to buy houses and own cars (Mankiw, 2014). The countries also have good service businesses which mean that they assist people like doctors and teachers. Poor countries mean that they are less economically developed. These countries make less money and they can only spend less on schooling, foodstuff, health and other extras. Citizens in these nations cultivate their personal uses which mean that they are farmers (Mankiw, 2014).

Firms and markets can increase the wealth of the poor countries through various practices. Principles of economics play an important role in creating and maximizing the country’s wealth. People response to incentives make the people decide based on the benefits which make them desire to work more. Competitive market economies are a good way of creating efficiency resulting to increased value to the country (Immerfall & Therbron, 2010). Government policy is most useful when the market fails. This is because the government will come up with strategies that will generate market power. Firms in the country can create wealth for the country by their ability to produce goods and services which will improve the standards of living for the people. An increase in operating firms in the country will create many job opportunities which will offer employment to the people translating to more money for the country as the people can be able to spend more on food, education, health and luxuries as well as being able to buy houses and cars (Immerfall & Therbron, 2010).

Reference

Mankiw, G. (2014). Principles of Economics. Cengage Learning

            Immerfall, S., & Therbron, G. (2010). Handbook of European societies: Social transformation in the 21st century. New York: Springer

Local and Foreign Investments

Ding_Guedhami_Ni_Pittman_2016

1. How can foreign institutional investors invest in China A-share market? Why do they have a greater disadvantage investing in state-owned enterprises (SOEs) than in non-state-owned enterprises (non-SOEs)?

Institutional investors can invest in China through joining the Qualified Foreign Institutional Investors (QFFI), a program which allows foreign investors invest in the A-share market of China. The program allows foreigners to invest in any State Owned Enterprises (SOE), and also protects them from any problems that they may be likely to face (Xiaoya et al, 2016). This consequently enables foreigners to own shares in different SOE in China without any problem whatsoever. Foreign investors have a disadvantage in investing in SOE, simply because the QFFI program does not allow a single investor to own more than 10% of a company’s total share. This consequently implies that, all share owned by foreign investors should exceed 30% of A-shares in a company’s total shares. On the other hand, of foreign investors are free to invest in non-state owned enterprises and they can be able to own more than 50% of the total shares in the company.

2. How does effective monitoring measured as board independence and auditor quality play a role on the relative informational advantage of foreign and local investors?

Effective monitoring helps in regulating the types of investments that both locals and foreigners make, hence making it easy for both local and foreign investors to be able to enjoy the privileges that they are supposed to enjoy without favoritism (Xiaoya et al, 2016). Moreover, investors’ rights are guaranteed be it in SOE OR non-SOE. Thus both local and foreign investors conduct free investments at ease without having to affect each other in one way or the other.

Ding_Ni_Rahman_Saadi_2015

1. What is the channel through which growth in housing prices relates to firms’ cost of equity capital? Please explain.

Capital budgeting is the channel through which growth in housing prices reflects the cost of equity capital. When the capital is budgeted for according to the economic effects of a country, it helps in balancing the cost of equity capital, and hence impacting the company positively (Xiaoya et al, 2016).

2. In the paper the authors use a different model to estimate the cost of equity than CAPM. What is the new model? Why is it chosen over CAPM that relies on ex-post realized returns?

The new model used by the author is the GLS model, GLS model is used simply because values do not need to be assigned to the risk free rate of return, the market returns and the premium equity risk (Xiaoya et al, 2016). This consequently made it easy for the author to be able to understand the effects that the economy has on the growth in housing prices, moreover, the model also accounted for the effects of stock repurchases.

Ding_Ni_Zhong_2016

1. What is free float? What is liquidity? What is the primary liquidity measure in this study? Why is higher level free float associated with higher liquidity?

Free float is the amount of remaining shares which are accessible by the public through trade. On the other hand, liquidity is the ability to trade huge amounts of quantities at a lower price, without having to alter the prices (Xiaoya, Yang & Ligang, 2015). Primary liquidity measure in this study is the returns realized after the sale of huge amounts of quantities at a lower price without altering the prices. Higher levels of free float lead to less demand, which in turn makes the company to decrease the prices of the shares and thus making most people to buy the shares, hence leading to higher liquidity.

2. Economic development and legal system vary substantially across developed and emerging markets. How does country level governance play a mediating role on the relationship between free float and liquidity and why?

Countries which are better governed, possess a stronger investor protection rights and hence lead to the reduction of discounts, thus creating a stronger relationship between liquidity and free float in the country (Xiaoya, Yang & Ligang, 2015). On the other hand, in countries with poor levels of governance, it makes it hard for the investors to be able to operate freely hence, investors only work with the clients who have been informed. This move leads to decrease in free float which in turn leads to low levels of liquidity.

Reference

Xiaoya, D. Yang N. & Ligang Zhong. (2015). Free Float and Market Liquidity Around the World: Journal of Empirical Finance.

Xiaoya, D. Yang N. Omrane G. & Jeffrey A Pittman. (2016). Where do Local and Foreign Investors Lose their Edge?  The Mediating Role of State Ownership in Shaping Investors Relative Information Advantage.

Xiaoya, D. Yang N. Abdul Rahman. & Samir Saadi. (2013). Housing Price Growth and the Cost of Equity Capital: Journal of Banking and Finance.

Countries and economic

Poor countries are somehow different than wealthy countries because poor countries have small income into their countries as it is compared with rich countries. Poor countries do not perform better in Global Peace Index as it is compared with wealthy countries which make poor countries be somehow different (Schweitzer, 2007). Firms and the market can increase the wealth of poor countries for instance firms can minimize investments which will allow firms to make profit hence increase the level of product which tend to bring profit in the poor countries. The market can improve the wealth of poor countries by exporting goods from poor countries to other countries which will increase the level of income in the poor countries, therefore, making poor countries rich (Freund, 2016).

Goals and decisions are required in trading so as to know what one have to give up on in order to get the thing is reasonable which is implied by people tradeoffs the first principle of economic. Get it is the second principle which helps an economist to understand the best option to make over the option selected. The marginal benefit of the marginal cost help to exceeds the action in a rational decision which is implied by the third principle that is rational people think at the margin. People respond to incentives is the fourth principle that helps an economist to understand the benefits and the cost changes behavior. These are the first four principles that help an economist to make a decision. Trade can make work better off is the fifth principle that helps an economist to understand how to communicates with clients using his or her variety in order to increase the profit in the market. Interaction in the market allows an economist to understand how to allocate the recourses effectively which is the sixth principle of the market are usually a good way to organize economic activity. The government can help economist to create more income in the country by minimizing monopolies when the market fails to allocate resources effectively which is implied by the seventh principle of government can sometimes improve market outcomes. These are the three principles that help an economist to know how the economy works as a whole (Mankiw, 2014).

 A country’s standard of living depends on goods produced and services are the eighth principle that explains how large product or low products increase and decreases the income in the countries. When the government increases the value of money it makes the prices of quantities raise which is implied by the ninth principle of economic that is prices rise when the government prints much money. Government spending, taxes, and monetary increase the short-run effects which later increase the level of unemployment due to the reduction of inflation which is implied by the tenth principle of the tradeoff between inflation and employment. These are the last three principles help an economist to know how people interact (Mankiw, 2014).

References

Top of Form

Mankiw, N. G. (2012). Principles of macroeconomics. Mason, OH: South-Western Cengage        Learning.

Bottom of Form

Freund, C. (2016). Rich People Poor Countries. Washington: Peterson Institute for International Economics.

Schweitzer, S. O. (2007). Pharmaceutical economics and policy. New York [u.a.: Oxford Univ.   Press

ECONOMICS

Mutual Incomprehension

Americans who work in the private sector have been very cautions with their retirement benefits in the recent past. According to The Economist (2016), the notion of depending on employers has huge payment consequences. Relying on your employer to cater for your pension would mean your final would be incorporated salary and such are too expensive to the common citizen. Again, in other situation employees are promised what is now famously known as defined contribution pension (DC). In the real sense, it is not actually a pension but just a mere plan having tax recompenses. William Birdthistle an academic lawyer encourages small investors to be well informed when it comes to their mutual funds, actually, not all investor s are treated equally. DC schemes just like any other small investors pay the most compared to well establish investors. Individuals ought to know that, how to proportionate those fees are levied on their assets hence following how the overall market performs. Notably, The Economy (2016) stated that not all corporate managers in the economy have the capability to have a plausible control with investor’s portfolio especially if the market rises above twenty percent.

What is even funny is how pooling of more clients does not help in any way the existing investors and instead it ends up in the pockets of the fund managers. In fact, as The Economy (2016) the question should be why already existing investor pay yet the rise in fund size should reap them nothing. This is not the only problem investors face, mutual endowment prospects have other expenses such as brokers charge which later subtracted from investors earning hence adding more injury. This might not seem to keep away investors but remarkably it is one of the contributing factors. One might dispute that the cost incurred are inexorable of which it might be the truth and fair enough, mutual-fund managers would be a bit cheap compared to investors doing on their own. Even though in certain scenarios soft dollar occurs when brokers deal directly with fund managers hence having the full potential of choosing which shares are preferable. However, According to The Economist (2016), such unscrupulous act has significantly dropped owing to the reforming of the industry. Furthermore, the mutual funds have now diversified in help small investors’ access at low cost.

The people of America need a better pension scheme would cater all their demands bearing in mind this a plan for the future and it would involve unforeseen circumstance thus stern planning need to be made. As we all know, the economy keeps on changing and the industry need to catch up with this very changes lest trouble would be unavoidable. The issue of conflicting interest should not be entertained in this present day since such would amount to damages which are could be avoidable. What the people of America desire so much, for now, is retirement security in addition to reforming of pension schemes which would, in turn, earn favors in terms of tax. The last thing to anticipate is the continued court cases with the unions which are a complete waste of precious time that demotes our economy. Finally, the scale of pension outcry has been on the rise and seemingly no one seems to be capable of thwarting any future crisis in the system; accordingly members of the public should play a role in deciding where to put their funds so as to avoid making bad decisions. Having to start fixing all over again will bring a serious amount of repercussion to retirees, employees and of course the taxpayers.

Reference

The effects supply and demand have on market equilibrium and determination of price.

In the economics demand and supply is one of the key elements used by the economics to determine the best price in the market by use of market equilibrium. The equilibrium point is a situation where the demand curve and supply curve intersect.  By interacting supply and demand the price of a product is arrived at and it’s called equilibrium price. There are some components in the market which prices depend on. The customer willingness to buy and sellers to an ability to sell is a determinant of price in the market.  Where there is an exchange of good and service a certain price must be agreed.

Determinant of oil global price by China

According to the author (Boqiang Lin1,2 and Jianglong Li2) China imports on oil have increased and this affects the future of oil pricing due to demand of oil. The price of the oil price determined by the producers and they use demand and supply curve to come up with final oil price. The demand of China has increased at a very high rate due to its level of industrialization and this has made China to be a determinant factor in the global oil market. The oil prices were determined by the forces of demand and supply for example 4.6 percent change have resulted in a big impact on oil pricing the China have the high influence on oil supply because the targeted revenue by oil producing countries needs to respond to the price of oil immediately. In most oil producing countries rely heavily on it in their budget so by China importing a lot of oil it will affect the oil producing country depending on where China is importing from. Some economics argue that global oil price has increased from the year 2003 and 2008 due to China demand rising very rapidly as compared with supply (Lin, 2015).

The reduction of supply of oil can affect China on its output due to inflation and other economic factors. The rise of demand for oil globally has positive results on output and rate of inflation (Lin, 2015). In short period the impact of oil price will be very small but in long run, it will be noticeable because China triggers oil price by 12.5 percent and this is more than 15.1 percent of all the increase in price which takes place, then it will contribute like 46percent after the financial crisis.

It is argued that in a market which is competitive the price of a certain product will vary as demand and supplies vary and will come in a position called equilibrium price that is a point where consumer demand quantity is equal to producers or suppliers supply quantity. If the demand for a certain commodity rises but the supply remain the same it will lead to equilibrium price to be higher. If the demand reduces but the supply remains the same it will lead to equilibrium price to below. If the supply of a commodity rises but demand remains static it will lead to high quantity and hence equilibrium price will be low. If the supply reduces but demand does not change the equilibrium price will rise and quantity will be lowered.

The economics argues that the consumers are the determinant as he has the collect information. For example, if the price of a given commodity rises and the consumer get that information his demand of that commodity will reduce and if price reduces demand goes up. If a supplier price is changed or lowered his or her product will be attractive, financial resources use will target a large number of customers hence can lead to expanding of item marketing. When the prices are lower the buyers will shift from competitors if a competitor cannot accommodate reduced price. If the prices reduction does not lead to increased demand the revenue will be reduced and this may cause a loss. The price can also be influenced by large company’s structure, if a firm operates in a very competitive environment it will use price reduction as a strategy so as to acquire big market share and if competition is less price reduction strategy will not be used in most cases.