IFFM Blog

Capital Market  is a system in which investors transfer those funds to individuals, companies, and governments that have a need of fun ds. ( saylordotorg.github.io, n.d.)  It  carries ou t the desirable economic function of directing and driving funds in form of capital to productive uses. Capital markets can be accessed in either debt or equity. Market efficiency suggests that at any given time, prices fully reflect all available information on a particular market .  For it to become efficient, investors must have the  perception  that the market is inefficient and possible to beat. ( Heakal , 2013) In 1970, Eugene Fama hypothesised that there are 3 different forms of Market Efficiency (EMH): 1. Weak Form Efficiency Weak form is when available public information is used, mainly historical data, in attempts to determine the current share prices in the market. (open.edu, n.d.) There is fundamentally no mechanical trading rules based on historical move...

Modern Portfolio Theory (MPT) is an investing model where the investor tries to keep the market risk to the minimum in order to enjoy maximum returns for a given portfolio of investments. (Thune, 2017) It utilises mathematical tools assist investors to diversify, resulting in reduced risk. Markowitz (1952) theorised two concepts of MPT, whic h are (D'Alessio, n.d.): Any investor's goal is to maxmise return for any level of risk Risk can be reduced by creating a diversified portfolio of unrelated assets Markowitz (1952) also identified two further types of risks which could be affected by a strategy of investment diversification: Systematic Risk  which affects all types of investments and impossible to diversify away Unsystematic (or Specific Risk ) which can be diversified away Capital Asset Pricing Model (CAPM)  is a stock valuation model that displays the correlation between expected returns and expected risks, where the return on an asset ...

The Concept of Value Based Management (VBM) VBM is a management level concept which focuses on shareholder wealth creation. When examining VBM of a company, some questions need to be asked: "What is the investment that has been made or will be made?", "What rate of return will be generated for the investment?", "Is the value sufficient when compared to the cost of capital?" When value management is executed correctly, it allows critical decision making to be aligned with the company's aspirations for creating value. (Koller, 1994) Creating value would mean setting a high-performance culture, this can be done by opening communication and feedback channels which would allow a greater space for brainstorming, creativity, and investments of resources to better improve the company.  Importance of Value Creation It is imperative that companies arrive at the stage of value creation as this would allow a transformation their growth strategies to assis...