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Value Capture Model

Porter's five forces, founded in the 1980's, is the classical framework used to understand and analyze competitive forces in an industry. In the 1990's, a new framework was formed, the Value Capture Model. The Value Capture Model extends on previous frameworks in two ways. One, it formally describes competition as a

Statistical Inference and Hypothesis Testing

Whenever we observe data, we are usually observing one or a few samples from a much larger population. For example, if we are looking at daily stock market returns for AAPL for last year, we are looking at only a small portion of the overall daily returns. More often than

Multivariate Regression and Interpreting Regression Results

Simple linear regression (univariate regression) is an important tool for understanding relationships between quantitative data, but it has its limitations. One obvious deficiency is the constraint of one independent variable, limiting models to one factor, such as the effect of the systematic risk of a stock on its expected returns.

Understanding Porter’s Five Forces

Porter's five forces is the most famous concept in strategy, and is a part of every business undergrad/MBA curriculum. The concept is a succinct yet brilliant way of describing the competitive forces in an industry. For banking, it is an immensely useful framework for industry analysis, a key part of

Modern Portfolio Theory and the Capital Allocation Line

In our Capital Asset Pricing Model post, we discussed risk and return for stocks. We also discussed the use of the relationship to value stocks, by interpolating what the return for a stock should be given a certain level of risk. We will build on these concepts and discuss how

Accounting Estimates: Managing Earnings

In our other accounting estimates articles, we talked about the discretion that management has in the income statement and the balance sheet. In this article, we will dive deeper into the incentives that management may have to manage these estimates. What is Earnings Management? Despite the discretionary nature of some of the

M&A Deal Case Study

M&A Transaction Case Studies are commonly seen in case competitions, and sometimes in actual investment banking work. They are a quick analysis of an M&A transaction, summarized in a few PowerPoint slides. They can be a great way to prepare for interviews, while learning about the details of a transaction. Slide

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