Commercial Real Estate Valuation: Cap Rate Approach Real Estate 101 by Karl - April 1, 2019April 1, 20190 Fundamental valuation of commercial real estate is similar to fundamental valuation of a stock, the intrinsic value of the property depends on the cash flows that it generates. This is known broadly as the income approach to valuation, which can be further broken down into 3 variations: Cap rate approach
Economic Calendar Economics 101 Sales & Trading by Matt - February 19, 20190 Major Economic Data Releases Economists and analysts at major sell side and buy side institutions will prognosticate on where these numbers end up. Theoretically, current asset prices reflect these expectations. If numbers are better than expected, this will be a positive for affected assets and vice versa. Country specific data will lead
APV Method: Adjusted Present Value Analysis Finance 101 by Karl - February 18, 20191 The standard Discounted Cash Flow (DCF) method is the typical tool used to value firms, but one drawback its inability to handle changing debt to equity levels. As we know, higher debt offers a higher tax shield, which in turn increases both firm value and equity value. To explicitly account
Introduction to Capital Structure Finance 101 by Karl - February 17, 2019March 3, 20190 Firms can choose to finance themselves with a number of securities: shares, bonds, preferred shares, convertible bonds, etc. These securities can be classified into two broad categories, debt and equity, and each comes with its own cost. Capital structure describes the way a firm finances itself. Data from Statistics Canada, 2009 Capital
Value Capture Model Finance 101 by Karl - January 20, 20190 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 Statistics 101 by Karl - December 9, 2018December 31, 20180 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 Statistics 101 by Karl - December 3, 2018December 31, 20180 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 Finance 101 by Karl - December 3, 2018December 31, 20180 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 Finance 101 by Karl - November 19, 2018March 3, 20190 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 Accounting 101 by Karl - November 11, 2018December 31, 20180 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