< The Finance Professionals' Post: January 2012

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21 posts from January 2012

01/31/2012

Global Evaluation of a Company’s Nonfinancial Information: A Challenge for New XBRL Technology

WHAT IS XBRL?

eXtensible Business Reporting Language (XBRL), an XML-based language for describing financial reports, is a freely available, market-driven, open, and global standard for exchanging business information. In an XBRL file, all of the line-items of the financial statement are tagged, depending on their accounting definition. Analysts can use these tags to capture line-item data (e.g., total revenue, net income, etc.). In general, analysts still have to read all of the items and then select what they need for the evaluation. They will also have to input the selected data into their spreadsheets. To minimize their work loads, there are some information service providers who offer the normalized financial data as part of their service. However, companies are now able to provide original data as XBRL directly to select tags themselves.

Continue reading "Global Evaluation of a Company’s Nonfinancial Information: A Challenge for New XBRL Technology" »

01/30/2012

Majority of US Finance Professionals Expect the Global Economy to Stagnate or Deteriorate

EfinancialCareersIs it time to stop thinking globally, and to start focusing locally? That’s more or less the consensus among more than 3,700 professional accountants who believe not only has international trade continued to dry up, but that the global economy will continue to erode while those industries that focus domestically will inspire greater confidence.

Continue reading "Majority of US Finance Professionals Expect the Global Economy to Stagnate or Deteriorate" »

Wall Street in Widescreen: The Financial Crisis of '08 in Cinema

Wall-street-films

In the fall of 2008, as investment banks exploded and their debris cascaded upon the middle and lower classes, many Wall Street CEOs continued receiving bonuses worth millions. The Financial Crisis of 2008 fit Hollywood’s formula for profit—power, corruption, and lies equal ticket sales—so the recent spate of crisis-related films is not surprising. It is important to analyze the most noteworthy of the new films because they will, undoubtedly, become historical references in their own right in years to come as they help to define the Financial Crisis of 2008 for millions of moviegoers.

Continue reading "Wall Street in Widescreen: The Financial Crisis of '08 in Cinema" »

01/26/2012

Book Review: The Hedge Fund Mirage

Hedge-Fund-Mirage-Image

If you want the truth about hedge funds and how to invest in them, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True is a must read. An especially important picture of a major part of financial services, this book provides insight into a field of which little information is publicly available.

Despite the increased fortune hedge funds produce, their investors barely profit. As the book reads, “investors would have made more putting their money into treasury bills instead.” Currently risks and returns favor the hedge fund managers. Of course, this was not always the case. During the 1990s, there were fewer hedge fund investors, which, to some degree, allowed for greater profitability. Owing to this shocking truth, author and hedge fund expert Simon Lack provides an in-depth inside look into the world of hedge funds in an effort to help put the investors back on top.

Continue reading "Book Review: The Hedge Fund Mirage" »

Is the Quant Social Butterfly This Year’s Purple Squirrel?

EfinancialCareers

Each year a new “super candidate” emerges among executive recruiters panning the streams for that next “gold” standard among employer expectations. Those of us in the business of connecting job seekers to job openings refer to these rare and often “too good to be true” candidates with the perfect combination of skills, personalities, and knowledge as a “purple squirrel”—representing that difficult-to-find person who may only exist in the imagination.

Talking to recruiters and hiring managers, it appears this year’s purple squirrel could be what one headhunter called the “Quant Social Butterfly”—that candidate who can excel both in the mathematically challenging world of quantitative analysis and in the “real world,” where he or she can be personable, likeable, and able to communicate and relate easily to others in a variety of social situations, such as client dinners and events.

Continue reading "Is the Quant Social Butterfly This Year’s Purple Squirrel?" »

01/25/2012

Item Sets Define the Level II Exam

CFA Exam Prep

Multiple choice questions are used to test knowledge on both the Level I and II exams, but there is a significant difference in the formats of the two exams. The Level I exam is an onslaught of multiple choice questions grouped by subject, but not tied to another question in any way. Level II, on the other hand, groups questions in "item sets". This difference in exam format changes the way candidates need to prepare for the exam.

Continue reading "Item Sets Define the Level II Exam" »

01/24/2012

Nick Robins Provides Insight on the Climate Bonds Initiative

We spoke recently with HSBC’s Nick Robins to learn more about his participation as a member of the advisory panel to the Climate Bonds Initiative. In 2007 Robins launched HSBC’s Climate Change Center for Excellence, which analyzes the long-term commercial consequences of climate change for the HSBC Group and its clients.

The Climate Bonds Initiative is a not-for-profit collaboration among investors, policymakers, academics, and environmental NGOs seeking to support the development of a transparent global market for bonds issued to raise funding for climate-change mitigation and adaptation projects. This is the first in a series of articles about this rapidly evolving, critical initiative. Next month we will talk with Sean Kidney, Chair and co-founder of the Initiative, about standard setting and product development.

Continue reading "Nick Robins Provides Insight on the Climate Bonds Initiative" »

01/23/2012

Book Review: The Growth Map

The-Growth-Map

Ten years ago Jim O'Neill, chairman of Goldman Sachs Asset Management, changed the field of global investing by coining the now iconic phrase, “BRIC”—abbreviated for the four countries that he and his team predicted as the main emerging economies. Brazil, Russia, India, and China—countries that he said would eventually surpass the six largest Western economies, and changed the scope of emerging markets. In his new book, The Growth Map: Economic Opportunity in the BRICs and Beyond, O’Neill provides a firsthand account of the evolution of “BRIC,” and where these countries currently stand. He also introduces a new prediction: the "Next Eleven" countries: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam. These countries, according to O’Neill’s prediction, will offer great opportunities for investors over the next decade, similar to the BRICs.

Continue reading "Book Review: The Growth Map" »

01/19/2012

The “Altman Z-Score + App” for Assessing the Credit Risk of Companies

This smartphone App provides the client with timely assessments of the credit risk and probability of default of companies on a global basis based on the famed and well tested Altman Z-Score family of models. Business Compass LLC has teamed up with the creator of the Z-Score model, the international global expert on credit risk, Dr. Edward I. Altman, Max L. Heine Professor of Finance at the NYU Stern School of Business and Director of the NYU Salomon Center’s Credit and Debt Markets Program, to provide this important tool for corporate credit analysis.

Continue reading "The “Altman Z-Score + App” for Assessing the Credit Risk of Companies" »

01/18/2012

How Should I Study for the CFA Exam?

AskInstructorLogo

"How should I study for the CFA exams?"

-Anonymous

In my previous article, “When Should I Start Studying for the CFA® Exam?”, I outlined how a candidate should prepare for the CFA Level I, II, or III exams in June and the CFA Level I exam in December.

The most important point I raised in Part I is that you should have finished reading the curriculum readings and/or your prep provider’s materials by April 15th if studying for the June exam and October 15th if studying for the December exam.

This second article will help you understand what you should be doing from April 15th until the June exam day or from October 15th until the December exam day. If you have completed the CFAI curriculum readings or the prep provider’s materials by April 15th or October 15th, it is not time to kick back and relax. In my opinion, you have only completed 50% of the work if you are a Level I candidate, 40% of the work if you are a Level II candidate, and only 30% of the work if you are a Level III candidate that is needed to be prepared for the exam.

Continue reading "How Should I Study for the CFA Exam?" »

My CFA Experience: Vy Bui

CFA

No matter how prepared we are, we all tend to be nervous and worry a lot as the CFA exam day gets closer and closer. I remember a week before the exam; I was so stressed out from thinking that I didn’t have enough time to review all the material and about all the other things that could go wrong on exam day that I ended up getting sick. Being sick is never good and especially then, because that was the time I needed my energy and focus the most.

Even though I tried to go to bed early the night before the exam, somehow I couldn’t sleep. I slept about five hours and woke up at 5:30 a.m. That morning I did some exercise, stretched my body, and had a nutritious breakfast which helped me feel fresher after a night of little sleep. Many candidates I talked to had the same sort of experience. I think it's just because we worried too much about the exam.

Continue reading "My CFA Experience: Vy Bui" »

01/17/2012

Regaining Investor Confidence for US-Listed Chinese Companies

A number of high profile scandals such as Longtop Financial Technologies and Sino-Forest have given Chinese companies a bad name among US investors. Portfolio managers who previously held extensive investments in US-listed Chinese equities now avoid the sector and some of the previously largest underwriters of US-listed Chinese equities have exited this market.

Between 2006 and 2010, a total of 339 Chinese companies listed on the major US stock markets, 106 on NYSE and 233 on NASDAQ. During this period of high interest in investing in Chinese companies, few anticipated the coming scandals and delistings.

Continue reading "Regaining Investor Confidence for US-Listed Chinese Companies" »

01/16/2012

New Report Paints Optimistic Yet Challenging Picture for US Banks in 2012

EfinancialCareers CreditSights, an independent credit-focused research company, has issued a giant two-part report on what’s coming for US banks in 2012. Naturally, it’s credit-focused. Surprisingly, it’s also quite optimistic and suggests positive implications for jobs (in comparison to a more gloomy report also issued by JPMorgan Cazenove).

Continue reading "New Report Paints Optimistic Yet Challenging Picture for US Banks in 2012" »

01/12/2012

Costs of Hiring the Wrong Person Go Beyond the Financial

EfinancialCareers

If you ever wonder why companies take so long in deciding which candidate to hire for a particular position, consider this: the cost of selecting the wrong person can run into the hundreds of thousands or even millions of dollars, not to mention the potential negative impact to a company’s reputation, morale, and productivity.

Then there are those stories that grab media attention such as the alleged rogue trader who generated a $2.3-billion-dollar loss for UBS that also led to the resignation of the bank’s CEO who accepted responsibility for allowing it to happen on his watch.

Continue reading "Costs of Hiring the Wrong Person Go Beyond the Financial" »

01/11/2012

Recent Research: Highlights from January 2012

"Optimal Hedge Fund Allocation with Improved Estimates for Coskewness and Cokurtosis Parameters"
The Journal of Alternative Investments (Winter 2012)
Asmerilda Hitaj, Lionel Martellini, and Giovanni Zambruno

Since hedge fund returns are not normally distributed, mean–variance optimization techniques are not appropriate and should be replaced by optimization procedures incorporating higher-order moments of portfolio returns. In this context, optimal portfolio decisions involving hedge funds require not only estimates for covariance parameters but also estimates for coskewness and cokurtosis parameters. This is a formidable challenge that severely exacerbates the dimensionality problem already present with mean–variance analysis. This article presents an application of the improved estimators for higher-order co-moment parameters, in the context of hedge fund portfolio optimization. The authors find that the use of these enhanced estimates generates a significant improvement for investors in hedge funds. The authors also find that it is only when improved estimators are used and the sample size is sufficiently large that portfolio selection with higher-order moments consistently dominates mean–variance analysis from an out-of-sample perspective. Their results have important potential implications for hedge fund investors and hedge fund of funds managers who routinely use portfolio optimization procedures incorporating higher moments.

Continue reading "Recent Research: Highlights from January 2012" »

01/10/2012

Book Review: Grow Globally

Grow-Globally

An increasingly common company announcement is plans to expand in another part of the world. There are a variety of reasons given, including diversification and the seeking of additional resources. The most common, though, are lower costs and faster growth markets. Major companies like General Electric and Coca Cola are prime examples of successful globalization endeavors.

Continue reading "Book Review: Grow Globally" »

01/09/2012

The Hero or the Villain of the Euro

For more than two years, we have witnessed the demise of several European countries, starting with Greece’s shocking assertion in early 2009 that its deficit to GDP was more than double what had been presumed. Most investors and analysts were still not concerned since all major European countries enjoyed high investment grade ratings from the financial market’s watchdog—the major rating agencies. And, the traditional metrics for measuring sovereign debt performance, essentially all top-down macroeconomic indicators, were only just starting to signal a deteriorating scenario. The world’s financial community then began to systematically assess the health of several peripheral southern European countries (the so-called PIIGS [Portugal, Italy, Ireland, Greece and Spain]) leading to a spike in those nations’ required rates of returns on their Government’s debt. Finally, those lofty investment grade ratings began to tumble in 2010 and eventually the European Central Bank and its leading contributing countries were forced to set up rescue packages, first for Greece, then Ireland, now Portugal (still a work in progress).

Continue reading "The Hero or the Villain of the Euro" »

01/05/2012

Video: The Changing Landscape of Wall Street

The economic downturn and increased financial regulations are changing the landscape of the Wall Street job market. Several of the largest corporations are hiring financial professionals to do work in-house, previously done on Wall Street for a fee. This is sending jobs out of Wall Street and into new sectors. As a result, new industries are being created as well. Banks must now change the way they operate to continue to sustain profitability.

01/04/2012

My CFA Experience: Colin Mansfield

CFA

In retrospect, my CFA experience was one I wouldn’t have any other way. If asked while submerged for months in studying I certainly would have had a different answer. I experienced diverse circumstances for each of the exams; grasping Level I while a senior in college, scraping by Level II while working full time, and concentrating on Level III while unemployed. I was charged with having to overcome many challenges throughout the program which never allowed me to settle for a study routine that I found comfortable. However, I was compelled to make it all worthwhile, and passed all three exams on the first attempt. I consider this a product of rigorous study habits, motivation and some luck when it came to the actual material on each exam. I was relieved to find questions about the topics I knew well which, for many, can be the difference between success and failure.

Continue reading "My CFA Experience: Colin Mansfield" »

01/03/2012

The Famous Five

EfinancialCareers

You may not be able to predict what questions you will be asked at an interview, but you can know the types of questions to expect. The questions banks ask will generally come from 1 of 5 categories.

COMPETENCY QUESTIONS

Loved by graduate recruiters and human resources interviewers everywhere, the aim of this type of question is to establish your behavior in a given situation. This type of question allows us to focus on what the candidate brings to the table beyond their technical skill set, confirms Keisha Smith, global head of recruiting, Morgan Stanley. We want to determine whether candidates have the personal attributes to succeed. Do they have good judgment, are they self-starters, are they influential, and can they lead?

Continue reading "The Famous Five" »

01/02/2012

Top Five Articles of 2011

Articles of 2011 spanned the gamut of topics, from banking and current affairs, to behavioral finance and worldview. But, the most viewed articles centered around the same topic: the CFA® designation. Below are the top five articles of 2011, from least to most viewed.

Continue reading "Top Five Articles of 2011" »

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