Home Page Icon
Home Page
Table of Contents for
Financial Statement Analysis
Close
Financial Statement Analysis
by Frank J. Fabozzi
Encyclopedia of Financial Models II
Cover
Title Page
Copyright
About the Editor
Contributors
Preface
TOPIC CATEGORIES
Guide to the Encyclopedia of Financial Models
ORGANIZATION
Equity Models and Valuation
Dividend Discount Models
DIVIDEND MEASURES
DIVIDENDS AND STOCK PRICES
BASIC DIVIDEND DISCOUNT MODELS
THE FINITE LIFE GENERAL DIVIDEND DISCOUNT MODEL
CONSTANT GROWTH DIVIDEND DISCOUNT MODEL
MULTIPHASE DIVIDEND DISCOUNT MODELS
STOCHASTIC DIVIDEND DISCOUNT MODELS
EXPECTED RETURNS AND DIVIDEND DISCOUNT MODELS
KEY POINTS
REFERENCES
Discounted Cash Flow Methods for Equity Valuation
DIVIDEND DISCOUNT MODEL
CONSTANT-GROWTH DDM
NONCONSTANT-GROWTH DDM
INTUITION BEHIND THE DDM
COMPLICATIONS IN IMPLEMENTING THE DDM IN THE REAL WORLD
ADAPTING TO THE COMPLICATIONS: THE EARNINGS PER SHARE APPROACH
FREE CASH FLOW DCF MODEL—TOTAL FIRM VALUATION
CALCULATING FCF
USING THE CASH-FLOW STATEMENT TO ARRIVE AT OCF AND FCF
VALUING THE TOTAL FIRM
ESTIMATING TOTAL FIRM VALUE USING THE FCF MODEL
KEY POINTS
REFERENCES
Relative Valuation Methods for Equity Analysis
BASIC PRINCIPLES OF RELATIVE VALUATION
HYPOTHETICAL EXAMPLE
KEY POINTS
NOTES
REFERENCES
Equity Analysis in a Complex Market
AN INTEGRATED APPROACH TO A SEGMENTED MARKET
DISENTANGLING
CONSTRUCTING, TRADING, AND EVALUATING PORTFOLIOS
PROFITING FROM COMPLEXITY
KEY POINTS
NOTES
REFERENCES
Equity Portfolio Selection Models in Practice
PORTFOLIO CONSTRAINTS COMMONLY USED IN PRACTICE
BENCHMARK EXPOSURE AND TRACKING ERROR MINIMIZATION
INCORPORATING TRANSACTION COSTS
INCORPORATING TAXES
MULTIACCOUNT OPTIMIZATION
ROBUST PARAMETER ESTIMATION
PORTFOLIO RESAMPLING
ROBUST PORTFOLIO OPTIMIZATION
KEY POINTS
NOTES
REFERENCES
Basics of Quantitative Equity Investing
EQUITY INVESTING
FUNDAMENTAL VS. QUANTITATIVE INVESTOR
THE QUANTITATIVE STOCK SELECTION MODEL
THE OVERALL QUANTITATIVE INVESTMENT PROCESS
RESEARCH
PORTFOLIO CONSTRUCTION
MONITORING
CURRENT TRENDS
KEY POINTS
NOTES
Quantitative Equity Portfolio Management
TRADITIONAL AND QUANTITATIVE APPROACHES TO EQUITY PORTFOLIO MANAGEMENT
FORECASTING STOCK RETURNS, RISKS, AND TRANSACTION COSTS
CONSTRUCTING PORTFOLIOS
TRADING
EVALUATING RESULTS AND UPDATING THE PROCESS
KEY POINTS
REFERENCES
Forecasting Stock Returns
THE CONCEPT OF PREDICTABILITY
A CLOSER LOOK AT PRICING MODELS
PREDICTIVE RETURN MODELS
IS FORECASTING MARKETS WORTH THE EFFORT?
KEY POINTS
NOTES
REFERENCES
Factor Models for Portfolio Construction
Factor Models
ARBITRAGE PRICING THEORY
TYPES OF FACTOR MODELS
FACTOR MODEL ESTIMATION
USE OF PRINCIPAL COMPONENTS ANALYSIS
KEY POINTS
REFERENCES
Principal Components Analysis and Factor Analysis
FACTOR MODELS
PRINCIPAL COMPONENTS ANALYSIS
FACTOR ANALYSIS
PCA AND FACTOR ANALYSIS COMPARED
KEY POINTS
REFERENCES
Multifactor Equity Risk Models and Their Applications
MOTIVATION
EQUITY RISK FACTOR MODELS
APPLICATIONS OF EQUITY RISK MODELS
KEY POINTS
NOTES
REFERENCES
Factor-Based Equity Portfolio Construction and Analysis
FACTOR-BASED TRADING
DEVELOPING FACTOR-BASED TRADING STRATEGIES
RISK TO TRADING STRATEGIES
DESIRABLE PROPERTIES OF FACTORS
SOURCES FOR FACTORS
BUILDING FACTORS FROM COMPANY CHARACTERISTICS
WORKING WITH DATA
ANALYSIS OF FACTOR DATA
KEY POINTS
NOTES
REFERENCES
Cross-Sectional Factor-Based Models and Trading Strategies
CROSS-SECTIONAL METHODS FOR EVALUATION OF FACTOR PREMIUMS
FACTOR MODELS
PERFORMANCE EVALUATION OF FACTORS
MODEL CONSTRUCTION METHODOLOGIES FOR A FACTOR-BASED TRADING STRATEGY
BACKTESTING
BACKTESTING OUR FACTOR TRADING STRATEGY
KEY POINTS
APPENDIX: THE COMPUSTAT POINT-IN-TIME, IBES CONSENSUS DATABASES AND FACTOR DEFINITIONS
NOTES
REFERENCES
The Fundamentals of Fundamental Factor Models
FUNDAMENTAL ANALYSIS AND THE BARRA FUNDAMENTAL FACTOR MODEL
CRITICAL INSIGHTS FROM THE BARRA FUNDAMENTAL FACTOR MODEL
RISK DECOMPOSITION
KEY POINTS
NOTES
REFERENCES
Multifactor Equity Risk Models and Their Applications
MODEL DESCRIPTION AND ESTIMATION
RISK DECOMPOSITION
APPLICATIONS IN PORTFOLIO CONSTRUCTION AND RISK CONTROL
KEY POINTS
NOTES
REFERENCES
Multifactor Fixed Income Risk Models and Their Applications
APPROACHES USED TO ANALYZE RISK
APPLICATIONS OF RISK MODELING
KEY POINTS
NOTES
REFERENCES
Financial Econometrics
Scope and Methods of Financial Econometrics
THE DATA GENERATING PROCESS
FINANCIAL ECONOMETRICS AT WORK
TIME HORIZON OF MODELS
APPLICATIONS
KEY POINTS
REFERENCES
Regression Analysis: Theory and Estimation
THE CONCEPT OF DEPENDENCE
REGRESSIONS AND LINEAR MODELS
ESTIMATION OF LINEAR REGRESSIONS
SAMPLING DISTRIBUTIONS OF REGRESSIONS
DETERMINING THE EXPLANATORY POWER OF A REGRESSION
USING REGRESSION ANALYSIS IN FINANCE
NONNORMALITY AND AUTOCORRELATION OF THE RESIDUALS
PITFALLS OF REGRESSIONS
KEY POINTS
NOTES
REFERENCES
Categorical and Dummy Variables in Regression Models
INDEPENDENT CATEGORICAL VARIABLES
DEPENDENT CATEGORICAL VARIABLES
KEY POINTS
NOTE
REFERENCES
Quantile Regression
COMPARING QUANTILE AND OLS APPROACHES
REASONS FOR USING QUANTILE METHODS
BACKGROUND AND FURTHER EXAMPLES
KEY POINTS
REFERENCES
ARCH/GARCH Models in Applied Financial Econometrics
REVIEW OF LINEAR REGRESSION AND AUTOREGRESSIVE MODELS
ARCH/GARCH MODELS
WHY ARCH/GARCH?
GENERALIZATIONS OF THE ARCH/GARCH MODELS
KEY POINTS
REFERENCES
Classification and Regression Trees and Their Use in Financial Modeling
TECHNICAL DETAILS
TREE PRUNING
STRENGTHS AND WEAKNESSES OF CART
APPLICATION OF CART IN STOCK SELECTION
KEY POINTS
NOTE
ACKNOWLEDGMENT
REFERENCES
Applying Cointegration to Problems in Finance
STATIONARY AND NONSTATIONARY VARIABLES AND COINTEGRATION
TESTING FOR COINTEGRATION
KEY POINTS
NOTES
REFERENCES
Nonlinearity and Nonlinear Econometric Models in Finance
STUDY OF NONLINEARITY IN ECONOMETRICS AND STATISTICS
NONLINEAR MODELS
NONLINEARITY TESTS
1 MODELING
FORECASTING
2 APPLICATION
KEY POINTS
REFERENCES
Robust Estimates of Betas and Correlations
OLS REVISITED
THEIL-SEN REGRESSION
ROBUST ESTIMATES OF BETA
ROBUST ESTIMATES OF CORRELATION
KEY POINTS
REFERENCES
Working with High-Frequency Data
WHAT ARE HIGH-FREQUENCY DATA?
HOW ARE HIGH-FREQUENCY DATA RECORDED?
PROPERTIES OF HIGH-FREQUENCY DATA
HIGH-FREQUENCY DATA ARE VOLUMINOUS
HIGH-FREQUENCY DATA ARE SUBJECT TO BID-ASK BOUNCE
HIGH-FREQUENCY DATA ARE IRREGULARLY SPACED IN TIME
KEY POINTS
REFERENCES
Financial Modeling Principles
Milestones in Financial Modeling
THE PRECURSORS: PARETO, WALRAS, AND THE LAUSANNE SCHOOL
PRICE DIFFUSION: BACHELIER
THE RUIN PROBLEM IN INSURANCE: LUNDBERG
THE PRINCIPLES OF INVESTMENT: MARKOWITZ
UNDERSTANDING VALUE: MODIGLIANI AND MILLER
EFFICIENT MARKETS: FAMA AND SAMUELSON
CAPITAL ASSET PRICING MODEL: SHARPE, LINTNER, AND MOSSIN
THE MULTIFACTOR CAPM: MERTON
ARBITRAGE PRICING THEORY: ROSS
ARBITRAGE, HEDGING, AND OPTION THEORY: BLACK, SCHOLES, AND MERTON
KEY POINTS
REFERENCES
From Art to Financial Modeling
THE ROLE OF INFORMATION TECHNOLOGY
INTEGRATING QUALITATIVE AND QUANTITATIVE INFORMATION
PRINCIPLES FOR ENGINEERING A SUITE OF MODELS
KEY POINTS
REFERENCES
Basic Data Description for Financial Modeling and Analysis
DATA TYPES
FREQUENCY DISTRIBUTIONS
EMPIRICAL CUMULATIVE FREQUENCY DISTRIBUTION
DATA CLASSES
CUMULATIVE FREQUENCY DISTRIBUTIONS
KEY POINTS
NOTES
REFERENCES
Time Series Concepts, Representations, and Models
CONCEPTS OF TIME SERIES
STYLIZED FACTS OF FINANCIAL TIME SERIES
INFINITE MOVING-AVERAGE AND AUTOREGRESSIVE REPRESENTATION OF TIME SERIES
ARMA REPRESENTATIONS
INTEGRATED SERIES AND TRENDS
APPENDIX
KEY POINTS
NOTE
REFERENCES
Extracting Risk-Neutral Density Information from Options Market Prices
AN APPROPRIATE PARAMETRIC MODEL
TWO PARAMETRIC MODELS FOR RND ESTIMATION
FITTING THE MODELS TO DATA
KEY POINTS
NOTE
REFERENCES
Financial Statement Analysis
Financial Statements
ACCOUNTING PRINCIPLES
INFORMATION CONVEYED BY THE BASIC FINANCIAL STATEMENTS
ACCOUNTING FLEXIBILITY
KEY POINTS
NOTES
REFERENCES
Financial Ratio Analysis
RATIOS AND THEIR CLASSIFICATION
RETURN-ON-INVESTMENT RATIOS
LIQUIDITY
PROFITABILITY RATIOS
ACTIVITY RATIOS
FINANCIAL LEVERAGE RATIOS
COMMON-SIZE ANALYSIS
USING FINANCIAL RATIO ANALYSIS
KEY POINTS
REFERENCES
Cash-Flow Analysis
DIFFICULTIES WITH MEASURING CASH FLOW
CASH FLOWS AND THE STATEMENT OF CASH FLOWS
FREE CASH FLOW
CALCULATING FREE CASH FLOW
NET FREE CASH FLOW
USEFULNESS OF CASH FLOWS IN FINANCIAL ANALYSIS
KEY POINTS
REFERENCES
Finite Mathematics for Financial Modeling
Important Functions and Their Features
CONTINUOUS FUNCTION
INDICATOR FUNCTION
DERIVATIVES
MONOTONIC FUNCTION
INTEGRAL
SOME FUNCTIONS
KEY POINTS
REFERENCES
Time Value of Money
IMPORTANCE OF THE TIME VALUE OF MONEY
DETERMINING THE FUTURE VALUE
DETERMINING THE PRESENT VALUE
DETERMINING THE UNKNOWN INTEREST RATE
DETERMINING THE NUMBER OF COMPOUNDING PERIODS
THE TIME VALUE OF A SERIES OF CASH FLOWS
VALUING CASH FLOWS WITH DIFFERENT TIME PATTERNS
LOAN AMORTIZATION
THE CALCULATION OF INTEREST RATES AND YIELDS
KEY POINTS
NOTE
REFERENCES
Fundamentals of Matrix Algebra
VECTORS AND MATRICES DEFINED
SQUARE MATRICES
DETERMINANTS
SYSTEMS OF LINEAR EQUATIONS
LINEAR INDEPENDENCE AND RANK
VECTOR AND MATRIX OPERATIONS
MATRIX OPERATIONS
EIGENVALUES AND EIGENVECTORS
KEY POINTS
NOTES
Difference Equations
THE LAG OPERATOR L
HOMOGENEOUS DIFFERENCE EQUATIONS
NONHOMOGENEOUS DIFFERENCE EQUATIONS
SYSTEMS OF LINEAR DIFFERENCE EQUATIONS
SYSTEMS OF HOMOGENEOUS LINEAR DIFFERENCE EQUATIONS
KEY POINTS
NOTE
REFERENCES
Differential Equations
DIFFERENTIAL EQUATIONS DEFINED
ORDINARY DIFFERENTIAL EQUATIONS
SYSTEMS OF ORDINARY DIFFERENTIAL EQUATIONS
CLOSED-FORM SOLUTIONS OF ORDINARY DIFFERENTIAL EQUATIONS
NUMERICAL SOLUTIONS OF ORDINARY DIFFERENTIAL EQUATIONS
NONLINEAR DYNAMICS AND CHAOS
KEY POINTS
NOTES
REFERENCES
Partial Differential Equations in Finance
PARTIAL DIFFERENTIAL EQUATIONS FOR OPTION PRICING
PRICING EUROPEAN OPTIONS WITH PDES
PRICING AMERICAN OPTIONS WITH PDES
CALIBRATION
KEY POINTS
NOTES
REFERENCES
Model Risk and Selection
Model Risk
MODELS AND MODEL RISK
SOURCES OF MODEL RISK
MANAGING MODEL RISK
KEY POINTS
REFERENCES
Model Selection and Its Pitfalls
MODEL SELECTION AND ESTIMATION
THE (MACHINE) LEARNING APPROACH TO MODEL SELECTION
SAMPLE SIZE AND MODEL COMPLEXITY
DANGEROUS PATTERNS OF BEHAVIOR
DATA SNOOPING
SURVIVORSHIP BIASES AND OTHER SAMPLE DEFECTS
MOVING TRAINING WINDOWS
MODEL RISK
MODEL SELECTION IN A NUTSHELL
KEY POINTS
REFERENCES
Managing the Model Risk with the Methods of the Probabilistic Decision Theory
AN OUTLINE OF PROBABLISTIC DECISION THEORY
MODEL RISK OF A SIMPLE PORTFOLIO
INVESTMENT IN A RISKY BOND
KEY POINTS
REFERENCES
Fat-Tailed Models for Risk Estimation
THE FUNDAMENTALS: NORMAL DISTRIBUTION
INCORPORATING HEAVY TAILS AND SKEWNESS: PARAMETRIC FAT-TAILED MODELS
INCORPORATING HEAVY TAILS AND SKEWNESS: SEMI-PARAMETRIC FAT-TAILED MODELS
COMPARISON AMONG RISK MODELS
KEY POINTS
NOTES
REFERENCES
Index
Search in book...
Toggle Font Controls
Playlists
Add To
Create new playlist
Name your new playlist
Playlist description (optional)
Cancel
Create playlist
Sign In
Email address
Password
Forgot Password?
Create account
Login
or
Continue with Facebook
Continue with Google
Sign Up
Full Name
Email address
Confirm Email Address
Password
Login
Create account
or
Continue with Facebook
Continue with Google
Prev
Previous Chapter
Extracting Risk-Neutral Density Information from Options Market Prices
Next
Next Chapter
Financial Statements
Financial Statement Analysis
Add Highlight
No Comment
..................Content has been hidden....................
You can't read the all page of ebook, please click
here
login for view all page.
Day Mode
Cloud Mode
Night Mode
Reset