International Trade Theory & Policy Essay Example | Topics and Well Written Essays - 1000 words

International Trade Theory & Policy - Essay Example The model further assumes that all markets conducting trade are perfectly competitive; hence goods are priced according to costs within the countries that produce them where there is a competitive wage in each country. Another assumption is that labor is present in fixed supply in both countries and is static between countries yet perfectly mobile within each country. Modern formulations of the Ricardian model specify for both countries utility functions that the consumers represented maximize on the basis of budget constraints. According to the model, each country specializes in producing goods for which it has comparative advantage. This allows both countries to export goods for which it can gain profits (Bowen, Hollander & Viane, 1998). With such specialization, productivities and labor endowments determine food outputs; hence world prices are dictated by the countries’ demands, which is equal to the supply amount of one country in free and frictionless trade. Both countrie s gain from such trade as trade allows for the expansion of exports production and labor is reallocated to exports from importing industries. Additionally, trade under the Ricardian model increases the relative price of both countries’ exports. ... The model assumes that both trading countries have similar production technologies, thus producing identical output of any commodity can be attained with an equal capital and labor level in both countries (Suranovic, 2010). The model also assumes that output product has constant return to scale in order to produce equilibrium. Additionally, technologies utilized in the production of both commodities differ substantially and labor is costless in terms of mobility within countries. The model also assumes that commodities produced in the countries have similar prices everywhere and countries operate in perfectly competitive markets internally thus labor and capital do not affect prices or production factors. It also assumes that trade is free of government interference in market functioning. When labor becomes more expensive than capital, labor-intensive products are at a disadvantage and become quite expensive compared to products that are not labor-intensive. Under free trade, assumed in the Heckscher- Ohlin model of trade the price of goods in both countries is similar; hence the wage-rent ratio is also the same in both countries. However, when labor becomes expensive, more capital in needed to produce products that are labor intensive and those that are not (Krugman & Obstfeld, 1988). When machine use per worker is similar in both countries, these factors will falsify the equality of wage-rent ratio. Effects of tariffs imposed by â€Å"small† countries A small country refers to a country whose trading partner is big enough to meet its imports supply. Tariffs imposed by small countries increase the price of imports above world prices by the value of the tariff (Jonathan & Kortum, 2002). This

Culture, Technology & Ware Essay Example | Topics and Well Written Essays - 500 words

Culture, Technology & Ware - Essay Example This war led to a division in America. Political and ideological thinking of Americans were also defined by this war. According to Bourque (2010), â€Å"for political and ideological reasons, many today  do  identify all who  willingly engage in sympathy for the Confederate cause,  such as supporting the flying of the Confederate flag, to be engaged in an insult to the United States, an insult to African-Americans, an insult to the human race, an insult to civilized values, close to seditious activity, and close to hate crimes activity.† How people view and think today, can be said to have been rooted to their history. There are many benefits and consequences of wars. One of the most significant effects of wars is its influence to economic institutions and trade patterns (Goldstein, n.d.). War also influenced technological developments. But the despite these influences, chronic wars has drained wealth, disrupted markets and depressed economic growths as well as multiple deaths(Goldstein, n.d.). Across time, changes in the art of war and weaponry occur. Technological advancement often follows necessity in military. According to Professor Goldstein (n.d.), â€Å"governments can coordinate research and development to produce technologies for war that also sometimes find civilian uses (such as radar in World War II).† Developments in communications technology, surveillance, and target acquisitions systems help improve the means of command and control of the military (Anand, n.d). As of right now, we have new advances in biotechnology and nano-technology which have great impact on human health. The conduct in warfare is changing over time. These advances in technology changed the processes in our military and the efficiency of doing their responsibilities. Future warfare may utilize advanced technology and weaponry. Because of these developments, it is just very easy to start a war between one place and

Evaluate Kodaks Position In Traditional Photography Media Essay

Evaluate Kodaks Position In Traditional Photography Media Essay In 1880, George Eastman invented the first camera which uses a dry-plate formula and also a machine to make these plates (Gavetti et al, 2005). George established Eastman Kodak Company in Rochester, New York. The dry plate technology was later replaced by film rolls named as Kodak. In 1888, Kodak Company introduced the camera with the tag line, You press the button we do the rest'(Gavetti et al, 2005). The main goals of company to be successful were to mass produce at low cost, worldwide distribution, aggressive advertising, customers need oriented and continuous RD. In the article Kodak and the digital revolution by G. Gavetti, R. Henderson and S. Georgi, Eastman quoted that, Nothing is more important than the value of our name and the quality it stands for. We must make quality our fighting argument. Kodak used the razor blade model for the business and sold out cameras at cheaper price, while the cost of film and developing was higher. Kodak developed color films in 1921 and was first introduced for consumers in 1963. By the end of 1967, Kodak holds 90% of film making and 85% of camera sales (Gavetti et al, 2005). In 1981, Sony Corporation introduced the first digital camera named Mavica. Kodak had this technology before Sony launched it, but they were afraid of cannibalization of the silver halide technology. Fuji Film came in to market with a 400 speed color film and low cost photographic papers. It was the official sponsor of Olympics 1984. By the end of 1993, Fuji acquired 21% of worldwide market (Gavetti et al, 2005). In 1993, Kodak hired Fisher as the new CEO of the Company. Fisher changed the razor blade business model to network and consumables model. Fisher tried to change the way of thinking at Kodak Company but it did not worked. Later, Fisher was replaced by Former General Manager of Kodak Canada, Daniel Carp. Carp resumed with the same business model. Kodak now excelled in cameras, online services and image printing at kiosk or inkjet printers. Evaluate Kodaks position in traditional photography. Why has the company historically been so successful? In 1885, Eastman established Kodak with the aim of producing a user friendly product. The slogan did the thing of marketing for the company, i.e. You click the button we do the rest.'(Gavetti et al, 2005). The company was very successful and there were literary no competitors to them. Kodak believed in quality and customer need satisfaction. Kodaks marketing strategy kept the customers away from switching to other cheaper brands. The razor blade model helped the company to fetch profits from films and image processing. The introduction of color imaging lagged the competitors far behind. To conclude, during 1970s, Kodak was very successful because of continuous innovation, customer satisfaction and aggressive marketing. This allowed Kodak to setup a standard barrier for other companies to enter the market. Compare traditional and digital imaging. What are the main structural differences? How have value creation and appropriation changed in digital relative to traditional photography. Traditional imaging used silver halide technology while digital imaging used electronic image sensors. Both these technologies are different from the technological point and also in structure and organization of company. In the traditional imaging, films were the only means of storage and Kodak had mastered in that field. While in the digital technology, as the barriers can be easily overcome, there were many new entrants in the market like Fuji and Sony. Digital imaging led to a fast change in the market. The prices fall drastically and customers now need more complementary resources. This new technology was more based on horizontal structure of the company rather than vertical. This led to a complete change in the organization of the company. Companies developed the habit of first mover policy for a particular segment of supply chain. Customers were provided with different complementary resource and continuous improvement in the technology created appropriate value for the company. Thus, digital imaging has led to segmentation of customers based on prices, quality of images, user friendliness and type of storage. Each company should focus on a particular segment and try to maximize its appropriation and thereby the profit margins. Evaluate Kodaks response to Sonys introduction of Mavica in 1981. Kodak used the Razor Blade model in the business of cameras and image processing. They sold cameras at cheaper price and obtained high profits for films and image processing. Kodak earned its profits from film and not from cameras. This model was successful for Kodak and they earned $1 billion in 1962 and captured 85% of the USA camera market(Gavetti et al, 2005). Kodak was recognized for its quality and people preferred Kodak over low cost other brands. In 1981, Sony introduced Mavica, a filmless camera. It stored images in a floppy disk and these images can be seen directly on TV sets. Kodak was afraid of cannibalism of its silver halide technology. The profit margin of silver halide technology was at least 50% more compared to digital imaging. So Kodak decided to continue with the traditional photography. Later Kodak was threatened by the digital photography and so they decided to diversify their business in fields like pharmaceutics, clinical diagnostics and mass storage. This led Kodak away from its core business of photography. Kodak also invested in the digital imaging technology but majority of business was still focused on film photography. Kodaks response to Sonys introduction of Mavica was inappropriate. Kodak management was very much engaged in the traditional photography that they ignored the threat of digital imaging. According to Porters five forces, 1) Rivals like Fuji and Sony were increasing market share by introducing cheap and differentiated products from Kodak. Rivalry is the biggest threat to any company. 2) Other substitutes like mobile phones with camera and camcorders were introduced by other companies. 3) Consumers were moving towards digital cameras were they can save money on printing. Instead of continuing with the traditional photography and looking for higher profits, Kodak should have moved on with new technologies to gain an edge over rivals as they were already holding a large amount of market share. Fisherss Attempt to transform Kodak. In 1993, Kodak replaced Whitmore by hiring George Fisher. Fisher was former CEO of Motorola. Fisher misjudged Kodak as an imaging company and not a film making company. Fisher wanted Kodak to focus on imaging rather than diversified business. Fisher closed most of the diversified business like pharmaceuticals and chemical industry. Fisher helped Kodak to reduce the cost of production by developing joint ventures in China. Fisher also tried to re organize the company and rethink how to expand Kodaks market. Fisher wanted Kodak to make profits in hardware like Motorola and so he developed costly digital cameras which were unsuccessful due to high competition. Fisher had worked in an environment where people argue with each other and make the decision more effective. While Kodak was the company where people were trained to take orders from top management and never argue about it. Thus fishers attempt to make Kodak like Motorola has failed as Kodak is not a hardware company but a service company. Moreover, employees of Kodak were not accustomed to argue with the top management in making decisions. Kodaks current position in Digital imaging. Initially when Kodak entered the market in 1888, their business model was razor blade model. They started selling cameras at cheaper price and earned profits from films and image development. During the era of traditional photography, Kodak earned huge profits from making films and chemicals for image development. After the development of 1st digital camera by Sony in 1981, the market for traditional film photography started shrinking. Kodak took long time before they entered in the digital imaging market. Thats the reason they came down to position 3 in the industry behind Fuji and Nikon (plunkett). Today, Kodaks business is divided in 3 major segments namely, Graphic communication group (GCG), consumer digital imaging group (CDG) and film, photofinishing and entertainment group (FPEG). Sales of 2009 have decreased compared to 2008 due to economic slowdown. Over 2008, Kodaks 2009 GCG sales decreased by 18%, CDG by 15% and FPEG by 25%. Position of Kodak, had they adopted digital imaging strategy in 80s and 90s. The digital imaging era began in 1981, when Sony launched the 1st filmless camera to the market. During this period, Kodak ignored the change in the market and kept on going with the traditional imaging. The company was looking for profits and forgot to consider the future trends. During 1980s, Whitmore tried to diversify the company to various unrelated business. If they had not invested in all those industries and invested in digital imaging, the scenario would be completely different. Kodaks view of digital imaging in 1980s as photo CD was also a disaster. They spend millions of dollars in developing this project and finally end up distributing to the wrong segment of customers. Fishers idea of concentrating on core business was good, and he paid off debts by selling the unrelated business. But he failed to restructure the company as digital imaging company. His idea of Kodak as hardware Company was a blunder as Kodak was good at services rather than hardware production. All this events led Kodak away from the core profitable business of imaging. It allowed rival industries to get ahead in terms of sales and market share. Fuji is making out profits by developing large number of minilabs across the world.

hindu :: essays research papers

  Ã‚  Ã‚  Ã‚  Ã‚  The sixth century B.C., the Hindu religion and the caste system had become a way of life in India. They believed that the only way to gain salvation was by obeying caste rules and following complex ritual. The people taught these ritual were to strict, and did not meet the needs of the common people. So they started to listen to other religions.   Ã‚  Ã‚  Ã‚  Ã‚  Buddhism is a religion founded in India, that share some comparison with Hinduism. Buddhism was founded by an Indian prince born about 563 B.C. His father, a wealthy noble, wanted to protect his son from the harsh realites of the world. But his father couldn’t protect him forever, and when he was about 29 years old he saw a dying man, a sick man in pain and a religious beggar. After seeing these things the prince worried, why was so much sorrow in the world. Then when he was about 35, Siddhartha Guatama decided to sit under a fig until he found answers. He was there for forty-nine days, and that day he saw the reason for life suffering and a way to overcome them.   Ã‚  Ã‚  Ã‚  Ã‚  Gautama started to speak of Four Noble Truths. The first was, sorrow and suffering are part of life. Second, people suffer because they try to get things they can’t have. Next, you had to reach a state of â€Å"not wanting†. The fourth they should have neither too much nor too little pleasure.   Ã‚  Ã‚  Ã‚  Ã‚  Both Hinduism and Buddhism shared some of their beliefs. But there are some differences. Buddhism placed most importance on one’s life, than one caste and they saw little value in complex rituals. He taught that a person could get enlightenment in one lifetime. As Buddhism spread, disagreements grew up about some of its teachings and beliefs. At first Buddha was saw as a guideline for living. His followers saw him only as a teacher. Then a philosopher named Menius taught that the welfare of the people were the main concerns of a ruler. And if that wasn’t the rulers main affair, he should be overthrown. Confucius a traveling bureaucrat named K’ung Fu-tzu, was regarded as China’s greatest thinker and teacher. He was not really concern with the soul, the afterlife nor the worship of gods. He was more concern with questions of morality. Confucius had five basic relationships. They are: between ruler and subjects, father and son, husband and wife, older and

Study of Behavioural Finance: A Critical Evaluation

Behavioural Finance is a relatively new and popular subject in the area of finance which is being widely used in the stock markets world over. Behavioural finance is the study of the psychology of the investors in connection with their financial decisions. It is usual that the investors fall prey to the mistakes committed by their own decisions or due to the advise of others by using their emotions in the investment decisions.The study of behavioural finance tries to explain the action of the people in forgetting the fundamental principles of financial decision making and making investments on the basis of emotions. 2. 0 Fundamentals of Market Efficiency: An efficient stock market is one in which stock prices fully reflect available information. According to Andrei Shleifer (2000) there are three determinants of market efficiency. They are (1) Rationality, (2) independent deviations from rationality, (3) arbitrage. 2. 1 Rationality:Under the conditions of rationality, it is assumed t hat when new information is released in the market place, all investors will adjust their estimates of stock prices in a rational way, without heeding to their emotions. This is one of the foremost assumption and condition basic to classify the stock market as efficient. (Ross Wasterfield Jaffe) 2. 2 Independent Deviations from Rationality: Due to emotional resistance it may so happen that some investors could just as easily react to the new information in a pessimistic manner.If the investors are primarily of this type the stock market prices are likely to rise less than the expectations of an efficient market conditions. On the other hand if a proportion of the investors was irrationally optimistic and reacts positively to the new market information then there is the likelihood of an increase in the stock market prices. Since the stock market will consists of investors of both kinds always the stock market would remain efficient. Thus this condition also leads to an efficient stoc k market. (Ross Wasterfield Jaffe) 2. 3 Arbitrage:The stock market consists of both irrational amateurs and rational professional investors. Based on their irrational thinking some times the amateurs may carry the stocks either above or below their efficient prices. This irrational thinking comes as a result of their emotions about the valuation of the stocks. The professionals on the other hand do not react on the basis of their emotions but evaluate the market information coolly and clearly and make their investment decisions. This way the professionals have more confidence than that of the amateurs.This enables the professional to take larger risks on certain stocks even knowing that such stocks are mispriced, while the amateurs might take risk for a smaller sum. Here ‘Arbitrage’ comes into place. Arbitrage generates profit from the simultaneous purchase and sale of different but substitute securities. If the arbitrage of professionals dominates the speculation of am ateurs markets would still be efficient. This is one of the determinants of market efficiency. (Ross Wasterfield Jaffe) 3. 0 Behavioural Challenge to Market Efficiency:According to Prof. Shleifer any of the above three conditions would will lead to market efficiency. Normally it is assumed that at lease one of the conditions would be prevalent in the real world. But many academicians argue that none of these conditions would hold good in reality. This point of view is based on what is called the ‘behavioural finance’. According to this theory there are several factors that influence the investment decisions of the individuals like tax planning as well as profit maximization.By their trading the investors create commissions as well as taxation. This naturally brings irrationality into their investment decisions. However the behavioural theory states that ‘not all investors are irrational; rather it is that some perhaps many investors are’. On the question of deviations from rationality there are two principles of psychology namely ‘representativeness’ and ‘conservatism’ that can be applied to finance and market efficiency where people deviate from rationality.Under the condition of representativeness people act and draw conclusions from too little data. This principle when applied to stock market, in a market dominated by representativeness there is every chance that the market may move toward a bubble. It may so happen that people see a sector of the market, for instance internet stocks having a short history of high revenue growth may attract more investors in the hope that the revenue growth would continue for ever. When the growth inevitably stalls the stock prices have naturally to come down.Under the second principle of ‘conservatism’ people are considered too slow in adjusting their beliefs to new information. The stock prices seem to adjust slowly to the information contained in the earnin gs announcements due to slow reaction of the investors to adjust their belies to the new information under conditions of conservatism. (Bernard and Thomas, 1990) Under ‘arbitrage’ concept of efficient market it is suggested that the professional investors, even though they know certain securities are mispriced they could buy them by selling the correct priced or over priced substitutes.This might result in undoing of the mispricing caused by the emotional amateurs. But the behavioural finance theory claims that trading of this sort is likely to be more risk. There is a possibility of this correction only when the amateurs act in opposite way to the way in which the professionals act. Moreover the volume handled by the amateurs should be relatively small for the professional investors’ actions to take effect. There is also a possibility that the amateurs make further mispricing of the securities.This risk of further mispricing even when there is no new market info rmation might demand the professionals to cut back their arbitrage position. Thus the near term risk would reduce the size of arbitrage strategies. In conclusion the arguments presented here suggested the determinants or conditions leading to efficient markets in reality do not exist. The behavioural finance theorists suggest that the investors may be irrational, irrationality may be related across investors rather than cancelling out across investors and arbitrage strategies may involve too much risk to eliminate market efficiencies.` 4. 0 Behavioural Finance and Keynesian Approach: â€Å"A conventional valuation which is established as the outcome of the mass psychology of a large number of ignorant individuals is liable to change violently as a result of the sudden fluctuation of opinion due to factors which do not really make much difference to the prospective yield; Since there will be no strong roots of conviction to hold it steady. † (Keynes, 1936)Thus it may be noted that the relevance of the psychological factors to the operation of the stock market and the relative changes in the prices and their impact on the economic development is not entirely confined to the review by behavioural economic theories or financial theories. The origin of this phenomenon can be traced back to the works of Keynes with his remarks of ‘animal spirits’ and the part played by uncertainty and confidence in contributing to the growth of the economy and creation of employment opportunities.According to Keynes the psychology of the economic agents is susceptible to disturbances and manipulation. It is viewed that psychology is one of the key elements in shaping up the economy which is in quite contrast with the view of the main stream where the emphasis is always placed on the rational behaviour of various economic agents. Hence there may arise an argument that the approaches of behavioural finance in describing the impact of the psychological factors are m ostly the justification of the Keynesian ideas.Kindleberger (1978) has provided a description of the behavioural aspects of the financial markets closely resembling the ideas of Keynes. According to Livio Stracca (2004) â€Å"the behavioral finance literature, however, contains some important innovative elements compared with the Keynesian approach, namely the stronger focus on experimental – and in general empirical – evidence and the larger use of formal models, which may lead to sharper predictions.So, one might conclude that while behavioral finance is close in spirit to the Keynesian tradition, it makes use of a different methodology and analytical framework. † 5. 0 Objectives of Behavioural Finance: Though subjected to severe criticism the contribution by behavioural finance to modern finance is considerable. The main objective of behavioural finance is to understand and report on the implications of the investors’ psychological reactions on the sys tematic market behaviour.It is important to consider the impact of such psychological reactions on the markets from an economic perspective especially on those markets which are large and does not have nay strategic interactions. (Mas-Colell, 1999) The existing theories of behavioural finance are not matured enough to provide a coherent and unified explanation for human behaviour in the context of market transactions as is expected in the main stream economics and modern finance have provided through the expected utility theories.However there are certain studies like the ‘cumulative prospect theory’ contributed by Starmer and Sugden (1989) and Tversky and Kahneman (1992) provide better alternative theories on the behaviour of market agents acting under risk which may be considered as superior to the expected utility theory. The economic perspective of the behaviour of the agents on the basis of maximization of the expected utility is not accepted by the behavioural fin ance.The ground on which such rejection is attempted relates to the evidences available to point out that market agents do not behave according to the axioms of expected utility both under circumstances of controlled experiments as well as in real life situations. (Starmer, 2000) According to Livio Stracca (2004) the focus of the behavioural finance is to describe the human behaviour in a positive way under conditions of risk and uncertainty instead of a normative approach of such behaviour which is typical under the mainstream approach. 6.0 Conflict between Modern Finance and Behavioural Finance: The concept of behavioural finance has always been subject to criticism. Ball (1996) and Fama (1998) have contributed much in this direction. Apart from this there had been continued conflicts between the Modern Finance (also described as ‘Financial Economics’) and the behavioural finance theories. The modern finance has always tried to overrule the behavioural finance theory by adding its own methods and models on the latter without any major changes in its own methodology.In other word the modern finance has marginalized the behavioural finance by converting it to an ‘anomalies literature’ as conceived by Frankfurter and McGoun, (2000) The results and findings of various studies in the area of Efficient Market Hypothesis and Capital Asset Pricing Model combination have cast serious doubts on the ability of these concepts in establishing any acceptable finance theories on the stock market behaviour in the modern finance area. This has also resulted in a â€Å"potentially precipitating crisis† for the modern finance theory.However instead of understanding and appreciating the seriousness of these problems, the theorists named them ‘anomalies’ and accepted them to denote an acceptable group of aberrations against common beliefs rather than viewing them as serious challenges to the whole beliefs themselves. The theorists li ke Fama (1998) also suggested that such anomalies can be made to disappear by gathering more data with more diligence and putting the data so collected to rigourous statistical tests. However there were conflicting views to this approach and this formed the basis for the behavioural finance theory. 7.0 Role of Anomalies in Behavioural Finance: The word ‘anomaly’ has gained a substantial recognition and prominence in the literature relating to finance as a branch of economics. The word also denotes a complete set of studies that have brought out evidences which are in contrast to the theory of efficient market hypothesis and/or the Capital Asset Pricing Model (CAPM) The conceptual purpose of anomalies has two dimensions in the study by These dimensions relate to the identification of the significance of the term in the area of finance and the role of anomalies in the growth of scientific knowledge in the financial world.The word ‘anomaly’ has been defined di fferently by different scholars. But the word ‘anomaly’ in financial economics focuses on the irregularity, or a deviation from the common or natural order, specifying an exceptional condition. In order to provide a meaning to these terms Thomas Kuhn (1970) states â€Å"Discovery commences with the awareness of anomaly, i. e. , with the recognition that nature has somehow violated the paradigm-induced expectations that govern normal science. It then continues with a more or less extended exploration of the area of anomaly.And it closes only when the paradigm theory has been adjusted so that the anomalous has become the expected. †(Kuhn, 1970) An extensive study of the anomalies would result in a scientific approach to the whole issue of the behavioural finance aspects. 7. 1 Post –Earnings Announcement Drift and Behavioural Finance: Most of the studies show that the stock returns are highly predictable after the announcement of the earnings. It so happens t hat the stock prices react instantly to the announcements about the earnings and will continue to change during the first three quarters in the same direction.The prices will reverse the direction partially in the last quarter. Chan et al (1996) have illustrated that the changes after the post-earnings announcements do not have any relation to the price momentum. It has also been established that the post-earnings announcement changes is closely correlated to the behavioural model in the same way as the prices react very slowly to the market information . Bernard and Thomas (1990) present a model in which the investors do not have any knowledge about the potential for the future earnings. 8. 0 Financial Anomalies and Behavioural Finance:A financial anomaly can be explained as a documented pattern or price behaviour which is not consistent with the â€Å"prediction of traditional efficient markets, rational expectations asset pricing theory† (Alon Brav and J B Heaton, 2002) Th is theory comprises of two characteristic features. The first one is that the investors have a through knowledge of the basic structure of the economy and the second one is that the investors are expected to be â€Å"rational information processors† who are capable of arriving at statistical decisions that are optimal.According to the Freidman (1979) the investors in the benchmark theory are able to possess knowledge and are able to â€Å"access both to the correct specification of the ‘true’ economic model and to unbiased estimators of its coefficients†. However in view of the increased evidences against the traditional models, competing theories of financial anomalies have been evolved. On the evolution of these theories certain relaxations have been made to the two assumptions of ‘full knowledge of the economy’ and the ‘rational information processing capabilities’. The second assumption has the relaxation backed by the behavio ural explanation.The behavioural theory suggests that the investors due to the impact of the cognitive bias may not have the capacity to process the information rationally (Thaler, 1993). The results of the experiments conducted to study the behavioural finance theories provide the basis for many other behavioural theories that though the investors possess a sound knowledge of the basic structure of the economy the investors tend to act irrationally. Thus the irrationality found in the behavioural finance forms the basis for several theories that explain the financial anomalies.According to Shiller (1981) there are evidences to show that the stock prices vary to a large extent in close relation to news about future dividends etc. due to the financial anomalies emanating from irrationality. Here again it can be seen that the behavioural finance theory provides the basis for the financial anomalies. 8. 1 Behavioural Finance and Asset Pricing: While the behavioural finance is considere d to have identified the financial anomalies there are chances that these anomalies may affect the market prices of securities.On a survey these anomalies have been grouped under different categories by Livio Stracca (2003) in the paper ‘Behavioural finance and asset prices: Where do we stand? ’ and the study extends further to assess how these anomalies may affect the stock market prices. The anomalies can be explained as the qualities of the behaviour of the economic agents that do not come under the purview of the expected utility model of the main stream economics. There are quite a number of anomalies identified by the behavioural finance based on the experimental evidences. Some of the anomalies are discussed hereunder: Decision Heuristics:One of the major anomalies identified by the behavioural finance theory is the action of the representative agents in using available short cut methods and rules of thumb while considering various alternatives since he may not h ave the ability to solve the problems that are complex in nature in view of the costs involved in deliberating and optimizing the revenues. Emotions and Visceral Factors: These factors do have a role in the decision making process of the agents (Loewenstein, 2000) Choice Bracketing: This denotes the general tendency of the agents to narrow down the choices due to the complexities involved in the alternatives.One of the examples is the shorter time available for decision making. Stochastic and Context-dependent Preferences: The theory has identified the presence of stochastic and context dependent preferences in the place of ‘well defined and deterministic’ preferences which are a rarity. (Loomes & Sugden, 1995) Reference Dependent Models: In the review of anomalies by the behavioural finance there is no precise and abstract definition of the preferences of the consumers in terms of consumption or other variables as has been dealt with in the standard approach; rather th ere are reference points identified to denote the preferences.However, it must be noted that till date there is no precise behavioural finance model which has considered all the anomalies and made an analysis there of (Shleifer, 2000). 9. 0 Accounting Anomalies and Stock Market Efficiency: Some part of the trading in securities which are subjected to behavioural aspects of human beings relate to the trading on the basis of the balance sheet data and opinions expressed by the statutory auditors of the listed companies. Hirshleifer et al.(2004) and Taffler, Lu and Kausar (2004) have documented the impact of trading on the basis of accounting results and audit opinions and the abnormal returns resulting there from. However Sudipta Basu (2004) opines that the study has not taken into account the high transaction costs involved especially in selling transactions which would prove that the trading strategies on the basis of accounting results might become unprofitable. Sudipta Basu (2004) further argues that though the study of Hirshleifer et al.and Taffler et al cite the behavioural finance theories to explain the reasons for the abnormal returns, market inefficiencies may arise due to â€Å"poor market designs, poor benchmark models, regulatory interferences, test misspecification or other joint hypothesis violations† (Sudipta Basu, 2004) He is of the opinion that there are some other factors other than behavioural finance theory that will explain the abnormal returns and the reaction of the stock market while trading merely on the basis of the accounting data and the audit reports of the listed companies.10. 0 Behavioural Finance Theory – Impact of Gender Differences: The individual investor behaviour had been studied extensively by Odean (1998) and Barber and Odean (1999). The studies have provided normative and empirical results about the various investor behaviours. The studies have proved the basic facts that the investors trade in securities to a great extent and the trading largely reduce the net gains of investors. It has also been proved that the investors are reluctant to realize that they are making losses in such trading.The studies also show that there is more number of men dealing in securities than women. In the United States 80 percent of the investors are males while women constitute only 20 percent of the investing public. Barber and Odean (2001) show â€Å"that men trade 45 percent more than women. Trading reduces men's net returns by 2. 65 percentage points a year as opposed to 1. 72 percentage points for women. † As a part of the behavioural finance L. Feng, M. S. Seasholes (2007) conducted a study on the participation of men and women in the securities trading in the Peoples Republic of China.The results of the study was in stark contrast to the existing studies in which it was found that both male and female investors take part almost equally in the stock trading in China. The study also reports th at men have slightly larger portfolios and take greater risks than women. But the investment behaviour of both men and women are more or less similar in the following respects: ? Both males and females suffer from an equal home bias. ? It is the tendency of the men to invest in stocks with higher betas and mostly the stocks women buy over-perform the stocks bought by men.Similarly the prices of stocks that are being sold by men go down to a larger extent than those being sold by women. In sum the performance of both genders remain more or less same on a statistical base. ? The trading intensity among both the genders remain the same though men tend to trade more before controlling the factors like the number of share and the ability to trade on the stocks over telephone. After giving effect to these factors the trading intensity of men and women remain the same.The study also revealed that the gender differences do play a role in the stock trading in China to the extent the faciliti es for remote trading through telephone and compute are available. This is understandable due to the fact most of the people trading in stocks are youngsters and the young women who have other occupations may not have the chance of trading by physically visiting the stock exchange. They need the support of the trading through telephone or computer and this affects their trading tendency.This interpretation of trading by young investors is corroborated by Barber and Odean (2002) by their study on the young men representing the active investors. This study goes to prove the application of the behavioural finance theory on the investment behaviour of the different genders and it is proved that both men and women behave in the same way as the behavioural finance theory assumes with irrationality and deviations from rationality depending on the circumstances. It can be observed that the gender makes no difference in the application of the behavioural finance theory with respect to the st ock market trading.11. 0 Behavioural Portfolio Theory: Hersh Shefrin and Meir Statman (2000) have developed a Behavioural Portfolio Theory (BPT) based on the lines of the work by Friedman and Savage (1948). The authors have developed the theory on the foundation of the prospect theory advocated by (Kahneman and Tversky (1979) which in turn was developed on the work of Friedman and Savage (1948). The BPT also suggests an efficient frontier which is not equivalent to the mean variance coefficient frontier.In mean-variance investors select the portfolios on the basis of the mean and variance where as the BPT investors take the anticipated wealth, their intention to ensure security and the potential aspiration levels that the investors want to reach as the base for their investment decisions. The optimal portfolio decided by the BPT investors is also different from that of the CAPM investors. The optimal portfolio of the investors under CAPM prefers a combination of a market portfolio a nd the risk factors associated with the securities. In the case of BPT the optimal portfolio mostly looks like a combination of bonds and lottery tickets.12. 0 Criticisms on Behavioural Finance Theory: The important people among the theorists who raised sever criticisms against behavioural finance are Ball (1996) and Fama (1998). Ball (1996) adopted a direct approach in leveling his arguments by saying that the Efficient Market Hypothesis has to be continued to be adopted because 1. There was no alterative theories available which can better explain the stock market behaviour 2. The Efficient Market Hypothesis was considered sufficient at that point of time taking into consideration the application of the principles of the theory and3. The Efficient Market Hypothesis had been accepted by everyone. Ball (1996) considered the contribution of DeBondt and Thaler (1985, 1987) to the behavioural finance as the only alternative to the Efficient Market Hypothesis and dismissed it by describ ing it as the investors’ myopia developed by DeBondt and Thaler (1985, 1987). He also found the work of these authors as ‘grossly inconsistent’ with the possible notions of the modern stock markets which are highly competitive and also that the behavioural finance is also ineffective with its anomalies.The approach of Fama (1998) in criticizing the behavioural finance is different from that of Ball (1996) in which he made a comparison of the contributions by 20 different authors and formulated his own views and opinions to discredit the concepts of behavioural finance. Fama (1998) made a thorough screening of the papers selected and followed a systematic approach to discredit the empirical evidences in support of the behavioural finance. Based on this analysis he argues that since the evidences on the behavioural finance are only random and conflicting the behavioural finance itself presupposes the efficient market hypothesis.Fama (1998) selected the papers for s tudy from the domain of ‘post-event studies’. By a study of these papers he arrived at the view that behavioural finance is nothing but a synonymous representation of the anomalies encountered in the event studies. Fama (1998) thus makes the point that â€Å"in short, BF is nothing more than an aggregation of so-far inexplicable phenomena encountered in testing the EMH/CAPM. It has no independent existence; it is not a methodology in its own right; it has been assimilated. † 13. 0 Conclusion:Form the foregoing discussion it is observed that the behavioural finance opposes the existence of the three determinants namely rationality, deviation from rationality and arbitrage decisions which form the basis of an efficient stock market. The behavioural finance theory thus aims at studying the psychological behaviour of the investors in their investment decisions. The theory encompasses views that are contradicting the concepts promoted by the efficient market hypothesi s and also the capital asset pricing model.The theory has made an analysis of various financial anomalies in order to report the impact of such anomalies on the stock market operations and the stock prices. The behavioural finance theory can be regarded as an extension of the Keynesian views on psychology as it affects the economic development. It has been observed that there are certain accounting anomalies which also affect the behavioural pattern of the investors. It has also been observed that gender differences do not affect the concepts of the behavioural finance. There are different financial anomalies identified by the behavioural finance theory.The theory was also subject to severe criticism on its applicability to varying market situations. References: Alon Brav and J. B. Heaton (2002) ‘Competing Theories of Financial Anomalies’ The Review of Financial Studies, Vol. 15, No. 2, Special Issue: Conference on Market Frictions and Behavioral Finance. (2002), pp. 57 5-606 Andrei Shleifier (2000) ‘Inefficient Markets: An Introduction to Behavioural Finance’ Oxford United Kingdom Ball, R. , 1996. The theory of stock market efficiency: accomplishments and limitations. Journal of Financial Education 22, 1–13. Bernard, V. , Thomas, J.(1990) ‘Evidence that stock prices do not fully reflect the implications of current earnings for future earnings’ Journal of Accounting and Economics 13, 305–340. Chan, L. , Jegadeesh, N. , Lakonishok, J. , 1996. Momentum strategies. Journal of Finance 51, 1681–1713. Fama, E. , (1998) ‘Market efficiency, long-term returns, and behavioral finance’ Journal of Financial Economics 49, 283–306 Frankfurter, G. M. , McGoun, E. G. , 2000. Market efficiency and behavioral finance: the nature of the debate, The Journal of Psychology and Financial Markets 1, 200–210. Hirshleifer, D. , Hou, K. , Teoh, S. H. , Zhang, Y., (2004) ‘Do investors overvalue fi rms with bloated Balance sheets? ’ Journal of Accounting and Economics Vol. 38 p 1–3 Keynes, J. M. (1936). The general theory of employment, interest and money Available: http://cepa. newschool. edu/het/essays/keynes/gtcont. htm. Kuhn, T. S. (1970). The structure of scientific revolutions Chicago: The University of Chicago Press. Kindleberger, C. P. (1978). ‘Manias, panics, and crashes’ Wiley Livio Stracca (2004) ‘Behavioral finance and asset prices: Where do we stand? ’ Journal of Economic Psychology Vol. 25 p 373–405 Mas-Colell, A. (1999). The future of general equilibrium.Spanish Economic Review, 1, 207–214. Ross A. Stephen, Westerfield A. Tandolph Jaffe Jaffrey ‘Corporate Finance’ Edition VII Tata-McGrawhill Publishing Company Ltd Shiller, R. J. (1987). Comments on Miller and Kleidon In: R. M. Hogarth, & M. W. Reder Eds. ), Rational choice: the contrast between economics and psychology ( pp. 317–321). Chic ago: University of Chicago Press. The Oxford English dictionary (2nd ed). Oxford: Clarendon Press. Starmer, C. (2000). Developments in non-expected utility theory: The hunt for a descriptive theory of choice under risk. Journal of Economic Literature, 37, 332–382. Starmer, C., & Sugden, R. (1989) Violations of the independence axiom in common ratio problems: An experimental test of some competing hypotheses. Annals of Operational Research, 19, 79–102. Sudipta Bsau (2004) ‘What do we learn from two new accounting based stock market anomalies? ’ Journal of Accounting and Economics Vol. 38 p 331–348 Taffler, R. J. , Lu, J. , Kausar, A. , 2004. ‘In denial? Market under reaction to going-concern audit report disclosures’ Journal of Accounting and Economics Vol. 38 p 1–3 Tversky, A. , & Kahneman, D. (1992) Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Unc

When Dealing with International Markets, It’s Also Imperative

There is no doubt that if you deal with international markets, you should be familiar with their laws and regulation as they pertain to marketing. This is imperative and you should take it seriously. It must be god understanding in the law of the country where you launch a campaign. But it is not always possible to know all the nuances. So, what is right in this situation? On the one hand, some people consider that marketers must know and observe the regulations and laws of the country in which they operate.To my mind, it is the obvious facts. All advertising should be legal, decent, honest and truthful. Before launching a campaign in international markets, you should learn all the prohibitions and laws of this country, so you do not have problems with complaints about your advertising or marketing actions. On the other hand, some people believe that there should be common standards, rules and regulations for the global market.It is obvious that in order to learn the laws and prohibi tions of the country where you launch a campaign, it is necessary to spend a lot of time and effort to get it right. In conclusion I would like to say that there is one rule you should pay attention to is to think local. Because now is the era of globalization and we live in a very localized world. To determine international advertising standards, you must be aware of the advertising laws, rules and regulations of each nation.

Machines essays

Machines essays Subject: English Commonwealth Essay Machinery has always been an indispensable part of our lives. Originating as simple machines such as pulleys and levers, machines first came into existence thousands of years ago. These simple machines were to enable the application of force more efficiently. Over the centuries, man combined simple machines to come up with complex ones. Ever since the Industrial Revolution, which began in the late 17th century, more efficient and complicated machines have surfaced, the sewing machine, typewriter and telephone, just to name a few. At the turn of the last century, technology has advanced at such a rapid pace that our lives literally revolve around and depend most heavily on machines. We have rice cookers and microwave ovens to cook our food. We have dishwashers to wash our dishes. Also, almost all of our work is done on computers. Everyday when we commute from one place to another, we almost always depend virtually on vehicles. Indeed, machinery has brought a lot of convenience to our lives. We have vending machines to provide us packaged food twenty-four hours a day. Not only do we have telephones to communicate, we even have mobile phones. Besides personal computers, we have laptops and palmtops which can fit easily into a briefcase or a pocket. Just recently, the invention of robots has emerged. There is even talk that robotic devices could become a member of the household, alongside the washing machine and the vacuum cleaner! The invention of automobiles has led to an even bigger invention aeroplanes. Aeroplanes, ranging from private planes to jumbo jets, can transport up to hundreds of passengers from one continent to another within hours. This not only brings the world closer, but also connects one to the most inaccessible and remotest places on earth. The revolution of the amazing computer has paved the way for the Internet. The Internet enables us to send electronic mails,...