Intro to beta in Finance
2:21
Жыл бұрын
The Cost of Capital
19:09
2 жыл бұрын
The CAPM
24:18
2 жыл бұрын
SPACs
11:44
3 жыл бұрын
Short selling explained
21:47
3 жыл бұрын
Youtube Channel Intro
0:40
3 жыл бұрын
EVA, stakeholders and shareholders
12:33
Financial Signalling
26:39
4 жыл бұрын
Efficient markets and corporate fraud
21:00
Private Equity Explained
25:35
4 жыл бұрын
Sustainable Growth Explained
26:17
4 жыл бұрын
Managing Financial Performance
17:38
4 жыл бұрын
SAFA Fama French Vs Style HedgeFund
22:28
Valuation Principles - Introduction
27:46
Corporate Valuation - Introduction
10:46
Estimating a share's BETA
6:08
4 жыл бұрын
Пікірлер
@YueZhangMusic
@YueZhangMusic Ай бұрын
Thank you so much!! I was so confused and this video helped tremendously.
@ShivanshuMishra-hq2bu
@ShivanshuMishra-hq2bu 7 ай бұрын
hello sir ! would you be kind enough to share me this excel model, i am in dire need of it.
@Rune_Eriksen
@Rune_Eriksen 9 ай бұрын
Hi Michael! On the last graph, can we conclude that it's better not to invest in companies that has heigher beta than 0,6? Or is it just a coincidence?
@MichaelWardFinance
@MichaelWardFinance 9 ай бұрын
I wouldn't say that. A low beta would indicate that future returns are LIKELY to be low, BUT there are many other factors to consider...
@shivangiagrawal7700
@shivangiagrawal7700 10 ай бұрын
Can you tell why growth rate subtract from wacc
@MichaelWardFinance
@MichaelWardFinance 10 ай бұрын
The present value of a growing perpetuity can be calculated using the Gordon Growth model, which states PV=FCF/(Wacc-g) where g is constant.
@abatesnz
@abatesnz 10 ай бұрын
How does this affect your variance, Covariance and SD calculations? Do they essentially remain the same, but use e^(average(log returns)) as the average that deviations are calculated from?
@abatesnz
@abatesnz 10 ай бұрын
Is it more accurate to calculate the deviations using the series of daily log returns and the average of the daily log returns?
@pierretur2733
@pierretur2733 Жыл бұрын
Can you let us know, where I could find the excel sheet to train myself?
@Commando303X
@Commando303X Жыл бұрын
Your audio is way too low to bother trying to decipher. Thanks anyway.
@sarahamalainen1297
@sarahamalainen1297 Жыл бұрын
I have created an investment strategy and I have first calculated simple returns for the portfolio and after that the log-returns. Now I want to run a linear regression model with FamaFrench factors. Should the Fama French data also be converted to log-returns if the dependent variable (portfolio return) is in log-form? I suppose that I cannot have the portfolio return in log-form and Fama French factors as they are(?)
@MichaelWardFinance
@MichaelWardFinance Жыл бұрын
Hi Sara, yes both should be the same. I doubt it will make any difference if you are using the FF daily data.
@adinitum4168
@adinitum4168 Жыл бұрын
Why aren't you mentioning interest during this time? 1:30 What an ineffective and incompetent way to go about thing
@toukka4
@toukka4 2 ай бұрын
Wow you are so competent and good!!
@Sam-tg4ii
@Sam-tg4ii Жыл бұрын
Such a clear example.Thanks
@Unknowledgeable1
@Unknowledgeable1 Жыл бұрын
2:09 Why does g have to be less than wacc? 5:30 6:30 Terminal value is calculated using a perpetuity calculation - terminal value approaches infinity meaning explosion of value 7:12 But I think these represent the dollar amount of completed transactions in the economy. And this gdp and its growth rate can be a good proxy for the growth rate of the free cash flows of the firm because the free cash flows of the firm increases when it successfully completes more transactions. So maybe we caj assume that the transaction growth rate of the firm is the same as the transaction growth rate of the economy. Do you think this is a reasonable argument for why they compare g with the gdp growth rate?
@MichaelWardFinance
@MichaelWardFinance Жыл бұрын
If "g" is equal to WACC the denominator is zero, implying a huge terminal value of infinity. If "g" is greater than WACC, the terminal value is negative, implying the company is destroying value each year thereafter. Of course investors would close/liquidate the company in this scenario. One must not blindly use the terminal value calculation; a reality check is necessary.
@Unknowledgeable1
@Unknowledgeable1 Жыл бұрын
@@MichaelWardFinance Thanks Michael! Do you by any chance know what source (e.g. paper, textbook) you got the rule of thumb that the denominator of (r-g) shouldn't be less than 3% from?
@tomadawa6859
@tomadawa6859 Жыл бұрын
Is this Jordan model
@rajpadhiyar7202
@rajpadhiyar7202 Жыл бұрын
Very nicely explained, great video
@Al-oz3nl
@Al-oz3nl Жыл бұрын
I've literally got an exam next Wednesday on this, I've never seen this topic explained so well and simply. Thank you!
@piranha_finance
@piranha_finance Жыл бұрын
Hi Michael, is the WACC value used pretax or aftertax?
@MichaelWardFinance
@MichaelWardFinance Жыл бұрын
Hi Making Sales - WACC should always be after tax.
@SagarPatel-gw9ub
@SagarPatel-gw9ub Жыл бұрын
Hi Michael...this is super, super helpful and helped me understand a lot which I am been searching from a while. However, I have a question, after having TV, how to approach to calculate price/free cash flow? Instead of price/EBIT ? Would be awesome if you can take any real life ticker as an example to get to TV to price/FCF. Thank you bunch!
@MichaelWardFinance
@MichaelWardFinance Жыл бұрын
Yes, Price/FreeCashFlow would be a better metric (than Price/EBIT) to "triangulate" the final terminal value. I only use Price/EBIT because this is a more commonly used metric. If you were to calculate the median current Price/FCF for similar companies, this would be more appropriate - I agree.
@thexplorerinme
@thexplorerinme Жыл бұрын
Very helpful.
@nylahjustin7218
@nylahjustin7218 Жыл бұрын
✨ *Promo SM*
@theforexgent6186
@theforexgent6186 Жыл бұрын
great content
@SiyabongaMalibeng
@SiyabongaMalibeng Жыл бұрын
Great insights and delivery Mark, thank you!!
@franklinlee3361
@franklinlee3361 Жыл бұрын
Hi Michael! This is amazing explanation! can you kindly share the excel template?
@willrace3844
@willrace3844 Жыл бұрын
Thanks Michael!
@shivamshah3345
@shivamshah3345 2 жыл бұрын
Roadall, a large road construction firm that operates in three provinces, is considering the purchase of ten newly designed, heavy-duty road graders to replace its current fleet. One of the advantages of these new road graders is their increased stability, which Roadall believes will cut in half the frequency with which graders roll over, injuring or killing operators. Such injuries and fatalities have proved a significant loss exposure for Roadall. Additional advantages of these new graders are that they are more fuel-efficient and productive than the graders Roadall is now using. The new graders, which Roadall can purchase for $40,000 each, can be expected to have a useful life of seven years, with no salvage value. If Roadall management wishes to earn an annual after tax, time adjusted rate of return of at least 16% on its funds, compute the minimum after-tax cash flow that each grader would have to generate to attain this rate of return. (For 16%, 7 years, the present value factor is 4.039).
@davidsaomi6493
@davidsaomi6493 2 жыл бұрын
Hi Michael! For the choice of using the market cap as the weight for equity, is there an underlying assumption that markets are efficient and that the stocks investors act rationally? If that's the case, would the market weight theoretically be an estimate of the "true" value of equity?
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
The accounting (or "book") value of equity is little more than an historical artefact of accounting (to ensure the balance sheet "balances"). It is often a small percentage (eg 50%) of the market cap of the company, and so it makes no sense to use the book value of equity as the weight for equity when calculating WACC. SO, yes, we are assuming that markets are operationally efficient and that investors are rational. To improve the measure, we might take the average market cap over the last (say) 3 years, and not a point estimate.
@davidsaomi6493
@davidsaomi6493 2 жыл бұрын
Hi Michael! For the choice of using the market cap as the weight for equity, is there an underlying assumption that markets are efficient and that the stocks investors act rationally? If that's not the case, would the market weight theoretically be an estimate of the "true" value of equity?
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
The accounting (or "book") value of equity is little more than an historical artefact of accounting (to ensure the balance sheet "balances"). It is often a small percentage (eg 50%) of the market cap of the company, and so it makes no sense to use the book value of equity as the weight for equity when calculating WACC. SO, yes, we are assuming that markets are operationally efficient and that investors are rational. To improve the measure, we might take the average market cap over the last (say) 3 years, and not a point estimate.
@davidsaomi6493
@davidsaomi6493 2 жыл бұрын
@@MichaelWardFinance I'm confused since I've gotten different answers from different people. It would be intuitive for me to do what you just said, or use target rate weights, but I've heard people elsewhere say that the most recent market values should always be used (Damodaran, and also in the book "Valuation" from McKinsey)
@davidsaomi6493
@davidsaomi6493 2 жыл бұрын
And it never made sense to me because doesn't the model (if we use a constant WACC) assume a constant capital structure and therefore the weights should be the future average?
@elonakuci7309
@elonakuci7309 2 жыл бұрын
very well explained
@joseantonioperezamuedo5116
@joseantonioperezamuedo5116 2 жыл бұрын
Would you conclude then that there is an optimal capital structure? Thanks
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
Yes, one can estimate an optimal WACC (but not with precision).
@joseantonioperezamuedo5116
@joseantonioperezamuedo5116 2 жыл бұрын
@@MichaelWardFinance if it is not precise then you cannot
@afonsoluz7527
@afonsoluz7527 2 жыл бұрын
Hey, this is very important. Where did you see the historical growth rate of GDP between 1872 and today? Thank you.
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
Hi Afonso - Jones CI, Handbook of Macroeconomics, Volume 2A © 2016 Elsevier B.V. ISSN 1574-0048, dx.doi.org/10.1016/bs.hesmac.2016.03.002 A
@christopherchan8309
@christopherchan8309 2 жыл бұрын
helped a lot, appreciate it. Thanks Michael!
@sallihaharbee3135
@sallihaharbee3135 2 жыл бұрын
An amazing, insightful video. I am studying for the SAICA board exam, and the board course question is on this exactly. Very well explained. Thank you!
@user-wr4yl7tx3w
@user-wr4yl7tx3w 2 жыл бұрын
may be start out with equations before going to excel. might be easier to see where the excel part is heading to. of course, just my opinion.
@TheBilbo91
@TheBilbo91 2 жыл бұрын
This is well described, easy to understand and very simply visualized. Thanks for the upload!
@swathinaresh4045
@swathinaresh4045 2 жыл бұрын
Thank you author for making this vedio.. Can you make a Vedio on IPOs event.. In the IPO event there will be no estimation windy.. How to calculate T test.. Please suggest
@eggtimer2
@eggtimer2 2 жыл бұрын
This is off course not the reason for the log ormal assumption.
@SD-ze7vu
@SD-ze7vu Жыл бұрын
@eggtimer2 I agree with you, but can you give me why we use log normal. Because for the explanation given here could be resolved using geometric linking or geometric mean.
@eggtimer2
@eggtimer2 Жыл бұрын
@@SD-ze7vu I could.
@Kig_Ama
@Kig_Ama 2 жыл бұрын
Sound is unfortunately to low, my question would be what is the so called market? Stoxx50, s&p500, msci world? What is the risk free rate? Yield of 10y us government treasury bonds?
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
The market should be the SAME as that which the company is listed. So use STX500 for companies listed in Europe and the ECB 10 year yield, or the S&P500 for companies listed in the US and the USFed 10 year yield etc. Apologies for low sound!
@Kig_Ama
@Kig_Ama 2 жыл бұрын
@@MichaelWardFinance Thank you for your answer Michael, however I can't understand your answer so well why. Because if you are a world investor, isn't the relevant market also the world market? By the way as far as I know there is no such thing like an ECB 10 yr yield, u can buy European government bonds of countries like Germany, France, Italy, etc.. Keep up the great work.
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
@@Kig_Ama It's the currency that matters. If a share is listed in Johannesburg (say) the returns on the share are in ZAR, so to estimate the beta we need JSE returns in ZAR, and for the CAPM a market risk premium in ZAR (still about 6%), and RfR in ZAR. Using the CAPM we then get the required return in ZAR - which is appropriate for investors in the share listed on the JSE etc. Because interest rates (inflation) are much higher in emerging markets than in EUR or USD etc. we must make sure all the parameters in the CAPM are based on the appropriate currency of the listed company.
@Kig_Ama
@Kig_Ama 2 жыл бұрын
@@MichaelWardFinance Thank you, I don't want to bother you too much, your point I can understand, but the money you have you can also invest risk free in US bonds and determine the risk of a stock in South Africa in relation to the world market based on a beta or not? As a world investor, it would be possible to invest the money risk-free anywhere in the world and use the world market as a benchmark. The ZAR can be converted into US dollars and thus invested in US bonds. What am I doing wrong here? In my opinion, this would theoretically be the CAPM approach. Sorry that I may be annoying here.
@vishnu8899
@vishnu8899 2 жыл бұрын
This is an amazing explanation..it would be great if you could provide the spreadsheet too sir!
@derryj-in-ams
@derryj-in-ams 2 жыл бұрын
As always, excellent delivery. Hopefully some day we get a demo of the Thomson Reuters Eikon datastream. #cantaffordit :)
@omm5960
@omm5960 2 жыл бұрын
Very helpful. I believe you meant 'GDP growth' not 'GDP.'
@MichaelWardFinance
@MichaelWardFinance 2 жыл бұрын
Yes indeed, 'GDP growth' and not 'GDP' is correct, apologies.
@tuka99norway
@tuka99norway 2 жыл бұрын
brilliant, thanks
@建芳胡
@建芳胡 2 жыл бұрын
The video content is so excellent, congratulations
@avinashmulye3165
@avinashmulye3165 2 жыл бұрын
Amazingly explained. Thanks a lot. Can you please share the excel template?
@ICCHighlights07
@ICCHighlights07 2 жыл бұрын
Great video, very well explained, i watched several times
@TheWanderercontent
@TheWanderercontent 3 жыл бұрын
Which WACC to use if the cost of debt is 0% and there is no equity ? The case of a startup ?
@MichaelWardFinance
@MichaelWardFinance 3 жыл бұрын
The Weighted Average Cost of Capital must reflect the weighted expected returns of the investors of the start-up.
@bullypop6545
@bullypop6545 3 жыл бұрын
Great video!
@matthewsmith6697
@matthewsmith6697 3 жыл бұрын
Hi. For my research I am conducting an event study for a sample of Pharmaceutical firms partaking in M&A in the U.S. Specifically, I want to include whether the event being a horzontal or vertical acquisition plays a part in the returns. However, I wanted to focus on a longer horizon, say, 1-year, 2-year and 3-years out from the event. Is this method still applicable? If not, how should I go about this? Thank you so much
@MichaelWardFinance
@MichaelWardFinance 3 жыл бұрын
Hi Matthew, many would argue that event studies are only valid over an event window of a few days (say -10 to +10 around the actual event dates). But, this will depend on how good your forecast methodology is of abnormal returns (if you have a good model to predict abnormal returns, you can lengthen the window - and there are ways of testing this). However, for a long horizon such as you plan, I would suggest Style Analysis (also known as "Buy and Hold" portfolio analysis). In your example, you would compare the performance of just two portfolios (horizontal and vertical acquisitions) over three years. Here's a link to our video on our "Style Engine" which explains more: kzbin.info/www/bejne/bJq3fGpuab10p6c
@takshilkanekar8006
@takshilkanekar8006 3 жыл бұрын
best expiation available on yt!
@ivangool6444
@ivangool6444 3 жыл бұрын
Lovely video thank you! very well explained.
@MichaelWardFinance
@MichaelWardFinance 3 жыл бұрын
Glad it was helpful!
@mdavis1992
@mdavis1992 3 жыл бұрын
Excellent explanation! Thank you so much. I look forward to more finance based mathematic breakdowns. You're relieving a lot of stress for students.
@MichaelWardFinance
@MichaelWardFinance 3 жыл бұрын
Great to hear!
@nahshahehsha6794
@nahshahehsha6794 3 жыл бұрын
But how do you find the excess real log return? Do you first find the real log return by subtracting off log inflation from nominal log return… then subtract off log inflation from nominal risk free return… then take the difference between the real log return and the real log risk free return to arrive at excess real log return? Or… do you find excess nominal log return by taking the difference between nominal log return and nominal log risk free return, and then subtracting off log inflation? It’s all very confusing to me.
@MichaelWardFinance
@MichaelWardFinance 3 жыл бұрын
Assume share return = 9.0% and expected return = 6.0%, then the excess return = (1+9.0%)/(1+6.0%)-1 = 2.83%. Since we are using Ln returns, we must divide (not subtract).
@nahshahehsha6794
@nahshahehsha6794 3 жыл бұрын
@@MichaelWardFinance so assuming 6% is risk free rate and 9% is share return (both on returns), then the excess on return is 2.83%? Then how do you get to ln real excess return?