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CHALLENGES to BUSINESS in the TWENTY-FIRST CENTURY Challenges to Business in the Twenty-First Century AM ERICAN ACADEMY of ARTS & SCIENCES
CHALLENGES TO BUSINESS IN THE TWENTY-FIRST CENTURY CHALLENGES TO BUSINESS IN THE TWENTY-FIRST Challenges to Business in the Twenty-First Century AM ERICAN ACADEMY OF ARTS & SCIENCES ERICAN ACADEMY OF ARTS Edited by Gerald Rosenfeld, Jay W. Lorsch, and Rakesh Khurana AMERICAN ACADEMY OF ARTS & SCIENCES AMERICAN ACADEMY OF ARTS & SCIENCES Challenges to Business in the Twenty-First Century Please direct inquiries to: American Academy of Arts and Sciences 136 Irving Street Cambridge, MA 02138-1996 Telephone: 617-576-5000 Fax: 617-576-5050 Email: [email protected] Web: www.amacad.org Challenges to Business in the Twenty-First Century Edited by Gerald Rosenfeld, Jay W. Lorsch, and Rakesh Khurana © 2011 by the American Academy of Arts and Sciences “Long-Term Financial Security” © 2011 by Roger W. Ferguson, Jr. “Challenges of Financial Innovation” © 2011 by Myron S. Scholes “Reversing the Null: Regulation, Deregulation, and the Power of Ideas” © 2011 by David A. Moss All rights reserved. Copies of this publication can be downloaded from: http://www.amacad.org/publications/Challenges.aspx. Suggested citation: Gerald Rosenfeld, Jay W. Lorsch, and Rakesh Khurana, eds., Challenges to Business in the Twenty-First Century (Cambridge, Mass.: American Academy of Arts and Sciences, 2011). Cover image © Adam Gault/Getty Images. ISBN#: 0-87724-089-2 The statements made and views expressed in this publication are solely the responsibility of the authors and are not necessarily those of the Officers and Fellows of the American Academy of Arts and Sciences. Contents 1 Introduction Gerald Rosenfeld and Leslie Cohen Berlowitz 3 Chapter 1 Long-Term Financial Security Roger W. -
A Primer on U.S. Stock Price Indices
A Primer on U.S. Stock Price Indices he measurement of the “average” price of common stocks is a matter of widespread interest. Investors want to know how “the Tmarket” is doing, and to be able to compare their returns with a meaningful benchmark. Money managers often have their compensation tied to performance, typically measured by comparing their results to a benchmark portfolio, so they and their clients are interested in the benchmark portfolio’s returns. And policymakers want to judge the potential for sudden adjustments in stock prices when differences from “fundamental value” emerge. The most widely quoted stock price index, the Dow Jones Industrial Average, has been supplemented by other popular indices that are constructed in a different way and pose fewer problems as a measure of stock prices. At present, a number of stock price indices are reported by the few companies that we will consider in this paper. Each of these indices is intended to be a benchmark portfolio for a different segment of the universe of common stocks. This paper discusses some of the issues in constructing and interpreting stock price indices. It focuses on the most widely used indices: the Dow Jones Industrial Average, the Stan- dard & Poor’s 500, the Russell 2000, the NASDAQ Composite, and the Wilshire 5000. The first section of this study addresses issues of construction and interpretation of stock price indices. The second section compares the movements of the five indices in the last two decades and investigates the Peter Fortune relationship between the returns on the reported indices and the return on “the market.” Our results suggest that the Dow Jones Industrial Average (Dow 30) The author is a Senior Economist and has inherent problems in its construction. -
Vanguard Total Stock Market Index Fund
Fact sheet | June 30, 2021 Vanguard® Vanguard Total Stock Market Index Fund Domestic stock fund | Institutional Shares Fund facts Risk level Total net Expense ratio Ticker Turnover Inception Fund Low High assets as of 04/29/21 symbol rate date number 1 2 3 4 5 $227,984 MM 0.03% VITSX 8.0% 07/07/97 0855 Investment objective Benchmark Vanguard Total Stock Market Index Fund seeks Spliced Total Stock Market Index to track the performance of a benchmark index that measures the investment return of the Growth of a $10,000 investment : January 31, 2011—D ecember 31, 2020 overall stock market. $35,603 Investment strategy Fund as of 12/31/20 The fund employs an indexing investment $35,628 approach designed to track the performance of Benchmark the CRSP US Total Market Index, which as of 12/31/20 represents approximately 100% of the 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Annual returns Nasdaq. The fund invests by sampling the index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as Annual returns 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 price/earnings ratio and dividend yield. Fund 1.09 16.42 33.49 12.56 0.42 12.67 21.17 -5.16 30.81 21.00 For the most up-to-date fund data, Benchmark 1.08 16.44 33.51 12.58 0.40 12.68 21.19 -5.17 30.84 20.99 please scan the QR code below. -
Background Paper on the Market Structure for Thinly Traded Securities
Division of Trading and Markets: Background Paper on the Market Structure for Thinly Traded Securities I. Introduction The staff in the Division of Trading and Markets of the Securities and Exchange Commission is issuing this background paper1 in relation to the Commission Statement on Market Structure Innovation for Thinly Traded Securities to provide information regarding the trading challenges and characteristics of those national market system (“NMS”) stocks that trade in lower volume (“thinly traded securities”).2 We summarize a variety of materials regarding secondary market trading of thinly traded securities, including a 2018 market analysis by the Division of Trading and Markets’ Office of Analytics and Research (“OAR”) and the U.S. Department of the Treasury’s 2017 report on the regulation of the U.S. capital markets (“Capital Markets Report”).3 In addition, we discuss the Commission staff Roundtable on Market Structure for Thinly-Traded Securities (“Roundtable”),4 where the dialogue among market participants and the comments submitted centered on the unique trading characteristics of thinly traded securities. Finally, we discuss the current regulatory framework for thinly traded securities. II. Trading Characteristics of Secondary Market Trading for Thinly Traded Securities A. SEC Staff Study The data in a recent study prepared by OAR5 indicated that approximately one-half of all NMS stocks have an average daily trading volume (“ADV”) of less than 100,000 shares and constitute less than two percent of all daily share volume. 1 This background paper represents the views of staff of the Division of Trading and Markets. It is not a rule, regulation, or statement of the Commission. -
Market Cap: In-Depth Guide of Stock Market Capitalization Analysis
Market Cap: In-Depth Guide of Stock Market Capitalization Analysis What Does Market Cap Mean? “Market capitalization refers to the total dollar market value of a company’s outstanding shares. Commonly referred to as ‘market cap,’ it is calculated by multiplying a company’s shares outstanding by the current market price of one share. The investment community uses this figure to determine a company’s size, as opposed to using sales or total asset figures.” What is a Stock’s Market Value? An important aspect of determining a stock’s worth is looking at its market value. The market value is the price that an asset would command. Figuring out the general market value of stocks and some other financial instruments like futures is pretty simple, since the market rates are extremely easy to find. A company’s true market value requires more than just the market cap. For the most accurate snapshot, you need to consider things like the P/E Ratio (Price to Earnings Ratio), the return on equity, and the EPS (Earnings Per Share) of the company in question. Market Cap vs. Market Value Both market cap and market value can be used to review the value of a company. They sound similar, and sometimes people use the terms interchangeably. The market cap is a metric that is based on the stock price. To determine a company’s market cap, all you have to do is multiply the current share price by the number of shares outstanding. With that in mind, it’s kind of understandable why the term market value is used interchangeably with market cap. -
No. 2 Newsmaker of 2016 Was City Manager Change Rodgers Christmas Basket Fund Are Still Being Accepted
FRIDAY 162nd YEAR • No. 208 DECEMBER 30, 2016 CLEVELAND, TN 22 PAGES • 50¢ Basket Fund Donations to the William Hall No. 2 Newsmaker of 2016 was city manager change Rodgers Christmas Basket Fund are still being accepted. Each By LARRY C. BOWERS Service informed Council members of year, the fund supplies boxes of Banner Staff Writer the search process they faced. food staples to needy families TOP 10 MTAS provided assistance free of during the holiday season. The The Cleveland City Council started charge, and Norris recommended the fund, which is a 501(c)(3) charity, the 2016 calendar year with a huge city hire a consultant. This was prior is a volunteer-suppported effort. challenge — an ordeal which devel- NEWSMAKERS to the Council’s decision to hire Any funds over what is needed to oped into the No. 2 news story of the Wallace, who had also assisted with pay for food bought this year will year as voted by Cleveland Daily the city’s hiring of Police Chief Mark be used next Christmas. Banner staff writers and editors — The huge field of applicants was Gibson. Donations may be mailed to First when the city celebrated the retire- vetted by city consultant and former Council explored the possibility of Tennessee Bank, P.O. Box 3566, ment of City Manager Janice Casteel Tennessee Bureau of Investigation using MTAS and a recruiting agency, Cleveland TN 37320-3566 or and announced the hiring of new City Director Larry Wallace, of Athens, as but Norris told them she had never dropped off at First Tennessee Manager Joe Fivas. -
The Role of Stockbrokers
The Role of Stockbrokers • Stockbrokers • Act as intermediaries between buyers and sellers of securities • Typically paid by commissions • Must be licensed by SEC and securities exchanges where they place orders • Client places order, stockbroker sends order to brokerage firms, who executes order on the exchanges where firm owns seats Types of Brokerage Firms • Full-Service Broker • Offers broad range of services and products • Provides research and investment advice • Examples: Merrill Lynch, A.G. Edwards • Premium Discount Broker • Low commissions • Limited research or investment advice • Examples: Charles Schwab Types of Brokerage Firms (cont’d) • Basic Discount Brokers • Main focus is executing trades electronically online • No research or investment advice • Commissions are at deep-discount Selecting a Stockbroker • Find someone who understands your investment goals • Consider the investing style and goals of your stockbroker • Be prepared to pay higher fees for advice and help from full-service brokers • Ask for referrals from friends or business associates • Beware of churning: increasing commissions by causing excessive trading of clients’ accounts Table 3.5 Major Full-Service, Premium Discount, and Basic Discount Brokers Types of Brokerage Accounts • Custodial Account: brokerage account for a minor that requires parent or guardian to handle transactions • Cash Account: brokerage account that can only make cash transactions • Margin Account: brokerage account in which the brokerage firms extends borrowing privileges • Wrap Account: -
Frequently Asked Questions About Initial Public Offerings
FREQUENTLY ASKED QUESTIONS ABOUT INITIAL PUBLIC OFFERINGS Initial public offerings (“IPOs”) are complex, time-consuming and implicate many different areas of the law and market practices. The following FAQs address important issues but are not likely to answer all of your questions. • Public companies have greater visibility. The media understanding IPOS has greater economic incentive to cover a public company than a private company because of the number of investors seeking information about their What is an IPO? investment. An “IPO” is the initial public offering by a company • Going public allows a company’s employees to of its securities, most often its common stock. In the share in its growth and success through stock united States, these offerings are generally registered options and other equity-based compensation under the Securities Act of 1933, as amended (the structures that benefit from a more liquid stock with “Securities Act”), and the shares are often but not an independently determined fair market value. A always listed on a national securities exchange such public company may also use its equity to attract as the new York Stock exchange (the “nYSe”), the and retain management and key personnel. nYSe American LLC or one of the nasdaq markets (“nasdaq” and, collectively, the “exchanges”). The What are disadvantages of going public? process of “going public” is complex and expensive. • The IPO process is expensive. The legal, accounting upon the completion of an IPO, a company becomes and printing costs are significant and these costs a “public company,” subject to all of the regulations will have to be paid regardless of whether an IPO is applicable to public companies, including those of successful. -
Financial Market Data for R/Rmetrics
Financial Market Data for R/Rmetrics Diethelm Würtz Andrew Ellis Yohan Chalabi Rmetrics Association & Finance Online R/Rmetrics eBook Series R/Rmetrics eBooks is a series of electronic books and user guides aimed at students and practitioner who use R/Rmetrics to analyze financial markets. A Discussion of Time Series Objects for R in Finance (2009) Diethelm Würtz, Yohan Chalabi, Andrew Ellis R/Rmetrics Meielisalp 2009 Proceedings of the Meielisalp Workshop 2011 Editor Diethelm Würtz Basic R for Finance (2010), Diethelm Würtz, Yohan Chalabi, Longhow Lam, Andrew Ellis Chronological Objects with Rmetrics (2010), Diethelm Würtz, Yohan Chalabi, Andrew Ellis Portfolio Optimization with R/Rmetrics (2010), Diethelm Würtz, William Chen, Yohan Chalabi, Andrew Ellis Financial Market Data for R/Rmetrics (2010) Diethelm W?rtz, Andrew Ellis, Yohan Chalabi Indian Financial Market Data for R/Rmetrics (2010) Diethelm Würtz, Mahendra Mehta, Andrew Ellis, Yohan Chalabi Asian Option Pricing with R/Rmetrics (2010) Diethelm Würtz R/Rmetrics Singapore 2010 Proceedings of the Singapore Workshop 2010 Editors Diethelm Würtz, Mahendra Mehta, David Scott, Juri Hinz R/Rmetrics Meielisalp 2011 Proceedings of the Meielisalp Summer School and Workshop 2011 Editor Diethelm Würtz III tinn-R Editor (2010) José Cláudio Faria, Philippe Grosjean, Enio Galinkin Jelihovschi and Ri- cardo Pietrobon R/Rmetrics Meielisalp 2011 Proceedings of the Meielisalp Summer Scholl and Workshop 2011 Editor Diethelm Würtz R/Rmetrics Meielisalp 2012 Proceedings of the Meielisalp Summer Scholl and Workshop 2012 Editor Diethelm Würtz Topics in Empirical Finance with R and Rmetrics (2013), Patrick Hénaff FINANCIAL MARKET DATA FOR R/RMETRICS DIETHELM WÜRTZ ANDREW ELLIS YOHAN CHALABI RMETRICS ASSOCIATION &FINANCE ONLINE Series Editors: Prof. -
Capital Formation Market Trends: Ipos and Follow-On Offerings
Professional Perspective Capital Formation Market Trends: IPOs and Follow-On Offerings Anna Pinedo and Carlos Juarez, Mayer Brown LLP Reproduced with permission. Published February 2020. Copyright © 2020 The Bureau of National Affairs, Inc. 800.372.1033. For further use, please visit: http://bna.com/copyright-permission-request/ Capital Formation Market Trends: IPOs and Follow-On Offerings Contributed by Anna Pinedo and Carlos Juarez, Mayer Brown LLP The capital formation environment has significantly changed in the last two decades and, in particular, following the global financial crisis of 2008. The number of initial public offerings has declined, and M&A exits have become a more attractive option for many promising companies. This article reviews trends in the initial public offering market, notable alternatives to IPOs, and follow-on offering activity. A Changing Environment While completing an IPO used to be seen as a principal objective of and signifier of success for entrepreneurs—and the venture capital and other institutional investors who financed emerging companies—this is no longer the case. Market structure and regulatory developments have changed capital-raising dynamics following the dot-com bust and financial crisis. At the same time, private capital alternatives also have become more varied and more significant. The number of IPOs drastically declined after 2000 compared to prior historic levels. After a brief increase in the number of IPOs following the aftermath of the dotcom bust, the number of IPOs declined again, partly as a result of the financial crisis. Changes in the regulation of research, enhanced corporate governance requirements, decimalization, a decline in the liquidity of small and mid-cap stocks, and other developments have been identified as contributing to the decline in the number of IPOs. -
Brexit Shadow Across EU
Stocks DOW NASDAQ S&P 500 10-YR T-NOTE 30-YR T-BOND CRUDE OIL GOLD EURO p 25,063.89 +64.22 q 7,263.87 -17.87 p 2,706.53 +2.43 p 2.69% +.06 p 3.03% +.03 p $55.26 +1.47 q $1,316.90 -2.80 p $1.1461 +.0017 Spotlight on Mickey Downshifting in Detroit Buy now, pay later DIS $111.30 Consumer credit $120 Walt Disney serves up its latest General Motors struggled The Federal Reserve seasonally adjusted change quarterly report card Tuesday. $108.67 through much of 2018, largely issues its monthly tally of 25.0 $25 billion Wall Street expects the 105 due to declining sales in the U.S. consumer borrowing 22.2 entertainment giant will report U.S. and China. Thursday. 21.0 20 est. that its fiscal first-quarter earn- ’18 In November, the automak- The tally, which excludes 90 15.1 16.0 ings and revenue declined er launched a restructuring mortgages and other loans 15 from a year earlier. Beyond its plan that called for the elimina- secured by real estate, is Operating $1.89 est. October-December results, $1.55 tion of five North American expected to show consumer 10 9.6 eek Ahead EPS investors will be keen for an Q1 ’18 Q1 ’19 factories and 14,000 jobs. In- borrowing increased by update on the company’s plans vestors will be listening for an $16 billion in December, 5 Price-earnings ratio: 13 to roll out video streaming ser- update on how the strategy is below November’s $22.2 0 The W based on past 12-month results vices and its acquisition of 21st working on Wednesday, when billion gain. -
New York Stock Exchange LLC; Notice of Filing
SECURITIES AND EXCHANGE COMMISSION (Release No. 34-88441; File No. SR-NYSE-2020-21) March 20, 2020 Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Suspend Until June 30, 2020 the Application of Its Continued Listing Requirement With Respect to Global Market Capitalization Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)1 and Rule 19b-4 thereunder,2 notice is hereby given that on March 19, 2020, New York Stock Exchange LLC (“NYSE” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to suspend until June 30, 2020 the application of its continued listing requirement that companies must maintain an average global market capitalization over a consecutive 30 trading-day period of at least $15 million (the “Market Capitalization Standard”). The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change.