Theory Essay Example for Free

Theory Essay Explain what you understand by â€Å"theory†. Would you reject a theory of accounting on the basis that a particular research study found results that failed to support the theory? Explain your answer, with particular reference to Watts and Zimmerman’s Positive Accounting Theory, including a discussion of wether any theory can be proved or rejected. The theory is a set of assumptions, propositions, or attempts to provide a plausible or rational explanation of cause-and-effect relationships among a group of observed phenomenon. It is not helpful for improving the relationship between theorizing and qualitative empirical research in social science disciplines. It can be said that research study is established on the basic of theory. So the answer is â€Å"No†. According to Watts and Zimmerman’s Positive Accounting Theory, positive accounting is the branch of academic research in accounting that seeks to explain and predict actual accounting practices. It believes that it is just an object statement about what theory is and that contains no indication of approval or disapproval, instead of whether correct or wrong or being couched in terms of what should be or ought. Therefore, if the result of research failed to support its theory, it does not mean the theory and maybe the process is wrong. And I would not reject this theory. In addition, any others like PAT can also be proved such as agency theory and contracting theory. However, if it is a normative theory which against Watts and Zimmerman’s Theory, it should be rejected.

A MODEST PROPOSAL Essay -- essays research papers

In the nineteenth century, Ireland was marked by extensive personal suffering. Civilians, predominantly the catholic lower and middle-classes, were having a hard time finding jobs, paying rent, feeding their children, as well as putting up with overpopulation which contributed to the overall growing problem of poverty. During this time of suffering, many began to question whether Britain acted as hastily and as effectively as they could have, as well as believing that centuries of British rule and/or political oppression was a fundamental cause of the famine (which originated from a potato crop failure). Jonathan Swift, a poor-boy who found his niche as a social critic/spokesman for Irish rights, after analyzing the possible causes, he concludes that England should not be the sole one to blame and therefore proposes a rather straightforward solution to Ireland’s evident predicament by insisting that the abundance of children of the poor to be used as a food supply. Jonathan Swift blames the English Protestants for their cruel and inhumane treatment of the papists, or poor Irish Catholics, through both political and economic oppression. This is seen when the author’s â€Å"persona† believes that England would be more than willing to eat the Irish poor even if such a proposal had never been suggested, saying that, â€Å"†¦I could name a country which would be glad to eat up our whole nation without it.† Being a son of pauper parents, as well as having spent years in Ireland, he first han...

Haverwood Furniture Essay

Haverwood Furniture, Inc. Q1 How would you characterize the HH wood Furniture Industry? †¢Haverwood L Room & Bedroom †¢Haverwood has own sales force 10 sales/ 2 Reg †¢Upholstered 50%/ Wood 40% †¢Total Ind Sales 3 Mil †¢Top 10 Wood Manu = 1/3 of total sales †¢Asia imports driving down prices (BPuerto) †¢US Manu downsized – 100 Manu †¢$15 million sales = 6% mkt share †¢Hwood uses 1000 specialty style (Selective distribution) †¢Gallery concept prevalent †¢Do not have full line in all retailers †¢Do not have galleries in all retailers Q2 How do consumer buy? †¢94% enjoy shopping †¢Lack confidence about quality or evaluating price †¢95% get redecorating ideas from Mag. †¢84% believe higher price = higher quality †¢72% browse even when not buying †¢Rely on sales people for ideas but want to be left alone to shop †¢85% read ads before shopping †¢Difficult to select styles Attributes †¢Styling/Design (1) †¢Brand Name/Image (5) †¢Price (4) †¢Construction Quality/workmanship (2) †¢Store Quality/Image (3) Buying Decision †¢Joint decision †¢Difficult – guidance †¢Little Knowledge Q3 What is the role of Marketing Communications †¢Consumer advertising oinforms about styles, arrangements oEmphasize Quality oDevelops â€Å"share of mind† †¢Company Salespeople oSell thru as much of line as possible oSell-develop rapport oTraining retail sales people – product quality %& feature oBuild enthusiasm w/ RSP o100% sales time †¢Trade Advertising oPoint of purchase – anything that goes on at the time of sale oBrochure take away †¢Cooperative Advertising oGiven by the retailer but funded by the manufacturing †¢Builds bond between retailer and brand Q4 Objectives for 2008 †¢Broaden advertising incl online †¢Penetrating boomer demo (Buy hi-quality) †¢Lower ad budget if possible †¢Marketing many lines †¢Broaden full line penetration †¢More galleries †¢Reach consumers at critical decision points Q5 How might objectives be translated into budge? †¢Sales Increase oLast Year 75 M * 1.04% = $78000000 oSales person option $135000 (SALES) o5% of 78000000 = †¢3900000 †¢3675000 †¢225000 o1% = 780000 (AGENCY) †¢562000 †¢218000

Risk Management And Derivatives Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1480 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Dynamic asset allocation strategies are used by investors to hedge and insure their portfolio and thus, reduce their risk exposure. Each change in the value of assets in the portfolio will require from the investors to rebalance the asset allocation in order to keep the risk exposure constant. (Perold and Sharpe, 1995) In the European market, buying a put that we will exercise in order to make up for any decrease in the portfolio value is the most common method to hedge a portfolio. However, as European options are not available on listed exchanges in the U.S, investors have to find another way to insure their investments. A popular way to do so is to follow a dynamic asset allocation strategy. The most common one are: Buy-and-Hold strategies, Constant-Mix strategies, Constant-proportion portfolio insurance and Option-based portfolio insurance. Though, other authors identify different strategies that are not considered as being dynamic strategies. For exampl e: the Momentum strategies (Miccolis Goodman, 2012) or Stop-loss order strategies (Rubinstein, 1985). In an attempt to have a better understanding of these strategies and to be able to discuss them, the first part of this essay will be focused on the presentation of these strategies, showing their differences and similarities, while the second part will discuss the different factors that have to be taking into account when an investor choices a strategy. Different strategies to insure a portfolio When investing in US listed exchanges, investors cannot use protective put to insure their portfolio and then, they have to employ others techniques that are expected to give the same level of insurance than the traditional method. In their paper, Perold and Sharpe (1995) present and explain the main dynamic strategies that can be use on the US market. Buy-and-Hold strategy is a Do Nothing strategy because after the purchase of an initial mix of bonds and shares, this mix is he ld and does not required any rebalancing, even in the case of a change in the relative values of assets. Conversely, Constant-mix strategies are do something strategies because when the relative values change, the investor has to rebalance the portfolio in order to keep the desired mix constant. This strategy buy stocks as they fall and sell stocks as they rise. On the other hand, while constant mix strategies buy stocks as they fall, Constant-proportion portfolio insurance (CPPI) sells stocks as they fall and buys stocks as they rise. The main characteristic of this strategy is to keep the exposure to equities a constant multiple of the cushion (i.e. Asset- Floor). By maintaining this risk exposure constant, CPPI has a very limited downside risk (Cont Rama, 2009). Like CPPI strategy, Option-based portfolio insurance (OBPI) strategies sell stock as they fall and buy stocks as they rise. OBPI is also characterized by the realization of the same payoff at horizon as a portfo lio composed of bills and call options would do. These dynamic strategies are opposed to other strategies that can insure portfolio too. Miccolis Goodman (2012) present an example of Dynamic Asset Allocation: Momentum-based moving average (MA) strategies could aid to reduce the risk exposure of a portfolio and thus to achieve the goals of rebalancing. They identify different approaches insight these strategies. The first one involves the comparison of the MA value with the index; when the index is above the MA, the investor stays invested in the index; if the index is below the MA, he gets out. The second one is the Moving-Average-Crossover (MAC) strategy in which the investor uses two MAs (Short-term and Long-term) and when the short-term MA is greater than the long-term MA, he invests in assets. Unlike the first two approaches, the last one looks at the trend in the MA. When it is increasing, he has to invest in the asset, otherwise, he does not. In his paper, Rubinstein (1985) opposes dynamic strategies to Stop-loss orders that are one of the simplest techniques to insured a portfolio. The probability of experiencing any losses is zero and the investor does not need to look after the stocks performance every day. However, the market price can be different from the stop price as the value of the portfolio is not completely determined by the level of the SP 50 and then the insurance is not complete. Furthermore, in order to have a perfect portfolio insurance, Stop-loss order need to have a path-dependence equal to zero. Which one is the best? While comparing these different strategies, it appears that the choice of a specific strategy will depend of the degree of fit between a strategys exposure diagram and the investors risk tolerance. (Perold Sharpe, 1995) The type of market can also influence the choice of a strategy and the above strategies do not behave the same way in a volatile and not-so-volatile market. Volatile market and thus re versals will favor strategy that buys stocks as they fall and sells them as they rise (i.e. Constant-mix strategies) because the marginal decision will be good one as investors trade in a way that take advantage of the reversals. Conversely, the CPPI will perform well in a bull market because as its buying stocks as they rise, each marginal purchase will pay off substantially. A Buy-and-Hold strategy will perform well in a flat market while both CPPI and OBPI will poorly perform. Finally, investors are likely to prefer Constant-mix strategies to Buy-and-Hold strategies when the market ends up near its starting point and vice-versa (Perold Sharpe, 1995). When comparing CPPI with the OBPI, Bertrand Prigent (2002) found that there was no dominance between these two strategies when taking the mean-variance approach. They also found that CPPI are simple and flexible strategies to insure a portfolio because all the features can be chosen according to the own investors objective (i.e. Initial cushion, floor and multiple) and that OBPI can be considered as a generalized CPPI strategy. Miccolis Goodman (2012) compare the performance of the Momentum-based moving average (MA) strategies to the Buy-and-Hold one. They found that each of these strategies has different strengths and weaknesses, but no one was perfect. In order to call off these weaknesses, they prove that an investor may possibly use several momentum strategies that could be apply under specific market condition in which they perform well. A test has been realized and the results showed that this use of several momentum strategies at a different time period following the market condition perform similarly to a Buy-and-Hold strategy. However, Miccolis Goodman (2012) also remind that MA does not replace asset allocation and rebalancing but could be useful tool to provide in and out signals in order to improve the performance of a dynamic strategy. The need for resetting the characteristics of a st rategy could also influence the choice of the investor. For example, while for the most of the dynamic strategies the resetting is not mandatory and depends on the investors aim, the OBPI has to reset these parameters at horizon. These strategies can be implemented in perpetuity but if the investors want to reset the parameters it can modify their basic characteristics and a CPPI strategy can easily become a constant-mix strategy by keeping a constant fraction of assets into the CPPI formula. Finally, investors with long time horizons usually prefer strategies that can be implemented in perpetuity (i.e. CPPI, buy-and-hold and constant-mix approaches) (Perold and Sharpe, 1995). Rubinstein (1985) states that when investors are looking to replicate a protective put, they are likely to favor other dynamic strategies than the Stop-loss order because they insure almost perfectly the portfolio while the Stop-loss order strategies suffer from extreme path-dependence. Finally, the choi ce of a strategy will depend of the investors preferences and of the market conditions. Conclusion When investors want to insure their portfolio in order to reduce their risk exposure, different options can be chosen. Stop-loss orders are one of the simplest techniques to insured a portfolio but the investors could also choice to apply one of the traditional dynamic asset allocation strategy: Buy-and-Hold strategies, Constant-Mix strategies, Constant-proportion portfolio insurance and Option-based portfolio insurance. It is not possible to say that one strategy is best for an investor and his choice will depend of his risk profile and of the market characteristics. However, Perold and Sharpe (1995) argue that the only strategy that all investors can apply is the Buy-and-Hold strategy because of its simplicity. An investor that has zero tolerance for risk is likely to apply a Buy-and-Hold strategy or a CPPI strategy while the tolerance for risk with an OBPI strategy will var y according to the investors wealth. Moreover, these strategies do not perform the same way under different market conditions and an investor has to take into account these differences if he wants to have an efficient strategy. The choice of a strategy will then depend of how much risk and/or reward an investor is willing to bear. Don’t waste time! Our writers will create an original "Risk Management And Derivatives Finance Essay" essay for you Create order