On Financial Machines, Economic Robots & Financial AI
In the monetary sense, leverage is the procedure by which a company particular person, entrepreneur or investor is in a position to drastically increase the return on an investment by way of the use of borrowed cash.
Separately, ivansmi makes a good point about models. You want a model to reject EMH. But that only brings you so far. Let’s say we have a model of asset pricing that rejects EMH. Then the query is no matter whether EMH or the model is incorrect? That needs one more model. In short, it really is ultimately impossible to reject or accept EMH, unless of course you entirely trust a provided model. But that brings us back to square 1. Welcome to economics.
In my analysis I am not only working on credit and credit danger but I also concentrate on economic stability, efficiency measures, industrial microfinance, and market behavior in common. …
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In a previous post I discussed why the expense of debt has small influence on investments. What about the expense of equity? Firms normally use (much) much more equity than debt to finance their investments. So the expense of equity ought to matter more. In a current study , Murray Frank and Tao Shen investigate how the price of equity and the weighted typical expense of capital (WACC) influence investments of US firms. Remarkably, they uncover that the expense of equity and the WACC are positively related to corporate investments. Firms with a greater estimated expense of equity and WACC tend to invest considerably more. That is a very strange result. We would expect firms with a high expense of capital to invest much less, not more.