Musings on Markets

AUGUST 15, 2023

In every introductory finance class, you begin with the notion of a risk-free investment, and the rate on that investment becomes the base on which you build, to get to expected returns on risky assets and investments. What is a risk free investment?

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Musings on Markets

FEBRUARY 8, 2022

In fact, almost every investment scam in history, from the South Sea Bubble to Bernie Madoff, has offered investors the alluring combination of great opportunities with no or low danger, and induced by sweet talk, but made blind by greed, thousands have fallen prey. Let me use two illustrations to bring this home.

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Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

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CFO News Room

JANUARY 18, 2023

Income from financial holdings (including cash balances, investments in financial securities and minority holdings in other businesses) are added back, and interest expenses on debt are subtracted out to get to taxable income. Returns on Invested Capital (or Equity).

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Musings on Markets

FEBRUARY 27, 2022

Income from financial holdings (including cash balances, investments in financial securities and minority holdings in other businesses) are added back, and interest expenses on debt are subtracted out to get to taxable income.

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Musings on Markets

MARCH 5, 2025

It also follows that the investment, financing, and dividend decisions , at most firms, are interconnected, since for any given set of investments, borrowing more money will free up more cash flows to return to shareholders, and for any given financing, investing more back into the business will leave less in returnable cash flows.

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Musings on Markets

MARCH 8, 2023

The dividend principle, which is the focus of this post is built on a very simple principle, which is that if a company is unable to find investments that make returns that meet its hurdle rate thresholds, it should return cash back to the owners in that business.

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CFO News Room

JANUARY 7, 2023

That said, to use mean reversion in analysis or investing, you need to know what these averages are, either over time or across companies, and data can help in that pursuit. . Check rules of thumb : Investing and corporate finance are full of rules of thumb, many of long standing.

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Barry Ritholtz

MAY 9, 2023

He is the Chief Investment Officer of Asset and Wealth Management at Goldman Sachs. He co-chairs a number of the asset management investment committees. I thought this was an absolutely fascinating way to see the world of investment management. Investment banks were not really a known concept in the area where I grew up.

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Global Finance

FEBRUARY 4, 2025

MUFG says that clients who implement a dynamic discounting offering enjoy a typical average annualized yield of between 10% and 12% APR, significantly outperforming most internal investment hurdle rates or returns on short-term cash.

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Musings on Markets

JANUARY 5, 2024

In pursuit of an answer to that question, I used company-specific data from Value Line, one of the earliest entrants into the investment data business, to compute an industry average. Return on (invested) capital 2. Ratings & Spreads 2. Ratings & Spreads 2. Tax rates 4. Excess Returns on investments 4.

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PYMNTS

FEBRUARY 16, 2017

The weakest performers fell below the returns hurdle rate across regions and across segments, the report noted. “To stay viable, they need to understand the client journeys that matter most, invest in continual client-centric innovation, adopt agile ways of working and create more effective and collaborative sales cultures.”

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Barry Ritholtz

FEBRUARY 21, 2023

We have lowered the cost of investing, and we have improved the quality of those funds. It forced us to make some tough choices in that time in some big investments, whether we were building out our advice capabilities and building virtual teams to do it, or you know, tough choices in our retirement business. BUCKLEY: Yeah.

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Musings on Markets

FEBRUARY 15, 2023

It is to remedy this defect that analysts scale profits to invested capital, with equity and capital variants: In the equity version, you divide net income by book equity to estimate a return on equity, a measure of what equity investors are generating on the capital they have invested in a company.

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Musings on Markets

JANUARY 12, 2021

Thus, you and I can disagree about whether beta is a good measure of risk, but not on the principle that no matter what definition of risk you ultimately choose, riskier investments need higher hurdles than safer investments. That tells me three things.

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Musings on Markets

JANUARY 27, 2021

In this post, I will take a look at these other markets, starting with a way of dividing investments into assets, commodities, currencies and collectibles that I find useful in thinking about what I can (and cannot) do in those markets, and then reviewing how these markets performed during 2020.

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Musings on Markets

JANUARY 20, 2021

The Price of Risk The price of risk is what investors demand as a premium, an extra return over and above what they can make on a guaranteed investment (risk free), to invest in a risky asset. Intuitively, if you want to earn a higher risk premium on an investment, holding cash flows fixed, you will pay less for that investment today.

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Treasury Investments Valuation Marketing 52

Musings on Markets

JANUARY 6, 2023

That said, to use mean reversion in analysis or investing, you need to know what these averages are, either over time or across companies, and data can help in that pursuit. Check rules of thumb : Investing and corporate finance are full of rules of thumb, many of long standing. Return on Invested Capital 2. Return on Equity 1.

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Valuation Corporate Finance Financial Analysis Leverage 52

Barry Ritholtz

NOVEMBER 8, 2022

His latest book could not be more timely, “The Price of Time: The Real Story of Interest,” it’s all about the history of interest rates, money lending, investing speculation, funded by banks and loans and credit. You can imagine, you give a bearish message at a bullish investment conference, and no one listens to you.

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Musings on Markets

JANUARY 9, 2021

Put simply, I possess no exclusivity here, and staying consistent with my thesis, I don't expect to expect to make money by investing based upon this data. So, why bother? You would like those answers now, but stay tuned to the rest of my data updates and the data will speak for itself.)

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Musings on Markets

FEBRUARY 27, 2023

Debt's place in business To understand debt's role in a business, I will start with a big picture perspective, where you break a business down into assets-in-place, i.e., the value of investments it has already made and growth assets, the value of investments you expect it to make in the future. Do companies optimize financing mix?

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CFO News Room

NOVEMBER 8, 2022

” look at the Monte Carlo simulations, look at what is the hurdle rate. They were more on the relationship side, client-facing, whereas I was getting my CFA charter and was more on the investment side. Cean: I think I can remember back to when we had to make some investments in some software.

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Musings on Markets

JANUARY 28, 2024

In this post, I look at risk, a central theme in finance and investing, but one that is surprisingly misunderstood and misconstrued. Risk Measures There is almost no conversation or discussion that you can have about business or investing, where risk is not a part of that discussion. What is risk?

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Musings on Markets

JULY 25, 2023

To the extent that divide is not just descriptive, but also drives real world investment, both companies and investors may be misallocating their capital, and I will argue for finer delineations of risk. I have my reasons. I know that the currency choice is the source of angst for many analysts, and I think unnecessarily so.

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Musings on Markets

FEBRUARY 23, 2025

The first part of the statement, i.e., that borrowing money increases the expected return on equity in an investment, is true, for the most part, since you have to contribute less equity to get the deal done, and the net income you generate, even after interest payments, will be a higher percentage of the equity invested.

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Barry Ritholtz

MAY 21, 2024

She is one of the few people who combine quantitative investing with behavioral finance. No, I think that that’s the part of it that I find the most interesting is the idea that, you know, a stock price doesn’t really have a, you know, the fair value of an an investment instrument is somewhat arbitrary. Right, right.

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Barry Ritholtz

NOVEMBER 25, 2024

I, if you are at all interested in concepts of things like portable alpha or return stacking, or just want to know how a quant looks at the world of investing and tries to decide where there are opportunities. Quantitative investing was, was that the plan from the beginning? Let’s talk a little bit about your background.

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Leverage Investments Marketing Math 59

Barry Ritholtz

DECEMBER 26, 2023

You work at Capital Growth Financial and in former global markets before you join investing Giant Merrill Lynch in 2007, what was that transition like from smaller shops to a really, really big one? So it’s gonna take a little more confidence, you know, and equities to, because you get your, your hurdle rates higher, you know?

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Musings on Markets

JULY 24, 2024

Country Risk: Determinants At the risk of stating the obvious, investing and operating in some countries is much riskier than investing and operating in others, with variations in risk on multiple dimensions. Political Structure Would you rather invest/operate in a democracy than in an autocracy?

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