Analysis of Momentum in Indian Stock Markets

Analysis of Momentum in Indian Stock Markets LITERATURE REVIEW The first study on momentum based investment strategy was documented way back in 1967. Levi (1967) claims the success of trading strategy based on buying stock with current price significantly higher than the average of last 27 weeks generate significant positive abnormal returns. However Jensen Bennington (1970) argues that the trading rule based on relative strength proposed by Levi was the one out of sixty eight trading strategies he tested and while tested for out of the sample test period it did not outperformed the buy hold strategy and hence was attributable to selection bias. Test of contrarian investment strategies was stealing the show fund managers were found busy picking stocks based on relative strength in US market. Majority of mutual funds examined by Grinblatt Titman (1989) note the tendency of fund managers to buy the stocks that have seen price increase in last quarter. Apart from that Value Line rankings of mutual funds that were largely based on relative strength also enjoyed high predictive power. The success of mutual funds investing on the basis of relative strength and high predictive power of value line rankings (Copeland Myres (1982)) provide some evidence of success of investment strategies based on relative strength. The academic literature suggests contrarian returns generate abnormal returns whereas value line rankings and mutual funds generating abnormal returns based on relative strength strategy are in stark contrast of each other. A seminal study by Jegadeesh Titman (1993) solves the puzzle by providing an explanation based on different of investment horizons considered by mutual funds using momentum strategies and contrarian strategies advocated by academic literature in late eighties and early nineties. Jegadeesh and Titman (1993) using US market data from 1965-1989 found not only the evidence of long term success of contrarian investment strategy but also found that momentum strategies generate significant positive returns in medium run over 3-12-month holding periods. They documented the reversal of momentum after about nine months. Their study suggests that in short run for about 3-12 months holding period momentum strategy generate significantly positive returns while in long run for the holding period of 1-3 years contrarian strategy generates significantly positive returns. Conrad and Kaul (1993) also find evidence from US market that the contrarian strategy is profitable for short-term (weekly, monthly) and long-term (2-5 years, or longer) intervals, while the momentum strategy is profitable for medium-term (3-12-month). As mentioned earlier the results of Jegadeesh and Titman (1993) had thrown a new light on seminal study of De Bondt Thaler (1985, 1987) and found evidence of short term momentum precedes long term reversal. Although all the results provided strong evidence of market inefficiency, different studies documented different explanations for such returns. Fama French (1996) presents result based on multifactor CAPM using size and MV/BV ratio to explain various anomalies in asset prices including momentum as well as contrarian returns and claim that market efficiency is intact. However the study failed to explain the presence of short term momentum using the multifactor model and hence short term momentum anomaly remains unexplained. Several behavioural explanations were found and presented to jointly explain the short-run cross-sectional momentum in stock returns documented by Jegadeesh and Titman (1993) and the long-run cross-sectional reversal in stock returns documented by DeBondt and Thaler (1985). Daniel, Hirshleifer, and Subrahmanyam (1998) (DHS hereafter) assume that investors are overconfident about their private information and overreact to it. If these investors also have a self-attribution bias, then investors attribute success to their own skills more than they should and attribute failures to external noise more than they should. The consequence of this behaviour is that investors overconfidence increases following the arrival of confirming news. The increase in overconfidence furthers the initial overreaction and generates return momentum. The overreaction in prices will eventually be corrected in the long-run as investors observe future news and realize their errors. Hence, increased overconfidenc e results in short-run momentum and long-run reversal. As against the above cited behavioral explanation to short term momentum and long term reversal, some scholars argue that the returns from these strategies are just compensation for taking additional risk or may be the product of the data mining. Most noteworthy of all Conard and Kaul (1998) argue that the profitability of momentum strategies may be the result of data-mining and momentum portfolio shows positive returns in any post ranking period is true irrespective of the length of test period. Thus Conard and Kaul (1998) suggest that there is no case of long term reversal. This is diagonally opposite to what the behavioral models suggests where after short term momentum prices will reverse to more fundamental levels. In fact, the criticism of Conard and Kaul (1998) led to another study by Jegadeesh and Titman (2001) where they used out of the sample test by using data from 1991 to 1998 an overlapping test period compared to their 1993 study where they used data form 1965-89. Their study also eliminated small firms from the study to check whether the earlier momentum returns were actually dominated by small, high-risk and illiquid stock or otherwise. Though they focus on short term momentum in their study choosing two year holding period post formation but they also tested post holding period returns from the period of two to five years after formation. They present some very interesting results. The momentum profits of Jegadeesh and Titman (1993) continued in 2001 also with almost same magnitude for same holding period that actually has proved that the earlier momentum profits were not the result of data-mining. It also suggests that unlike small firm effect where after the published research on superior returns on small firms compared to their large counterparts, superior returns on small firms disappeared in subsequent studies using data from the periods after the small firm effect from earlier studies got published, that means market has learnt quickly and hence such superior returns disappeared however momentum returns were still present with the same magnitude in 2001 as they were in 1993 study suggest that momentum returns are not just the temporary anomaly but it may have to do with some systemic cognitive bias which sustains for a long time. It also proves that momentum profit is just not the result of some small, illiquid and risky stocks and most noteworthy the reversal found in their post holding period cumulative returns, which render support to the explanations of behavioral theorists and provides evidence against the Conard and Kaul hypothesis. As far as studies in Asian markets are concerned Chang (1995) found abnormal profits of contrarian strategies in the Japanese markets. Chui (2000) found significant positive abnormal returns with contrarian investment strategy in Japanese and Korean markets. Hameed Ting (2000) found evidence of market overreaction hypothesis (contrarian strategy) in Malaysia. Kang (2002) found significant short term positive returns with contrarian strategy in Chinese markets. On the other end, Hameed Kusandi (2002) found no evidence of contrarian profits in six Pacific Basin markets. While Rouwenhorst (1998) and Griffin Martin (2005) found existence of momentum in many non-US countries, the quantum of momentum returns in non-US countries was small, and in the case of Asia, insignificant. For example, Griffin (2005) estimates average monthly returns of 0.78%, 0.77% and 0.40% for the Americas (excluding the US), Europe and Asia respectively. End of the Beginning or Beginning of the End†¦ The big bull has fallen down, investors have lost their vision, and experts knowledge went futile with the downturn of the global economies. When the markets were on peak, the funds across the world have flooded in the global economies. Policy makers had lot of confidence on the market, that it will help the economy to grow at faster pace. The market excelled 21000 points which was more ahead then the growth of the economy of India. But that does not seem true for the world economies, as the crisis had hit badly in USA and other parts of world which insisted FIIs and other investors to withdraw their money and markets crashed, went to 7000 points, where investor lost everything and policies could not work to take them up to the level. What was the reason of the crash? What will be the result of the market? Is this the end of the beginning or beginning of the end? Indian market is the strong base of determining the financial system of the country. Majority of the financial decisions are dependent on the stock market other financial market. Indian stock market serves a link to banking and other financial policies which provides impetus to the industry. Indian stock markets heavily based on the sentiments of the clients (market players) also of the market makers. The crash or boom (in a period/ year) determines the structure of the Indian capital system. The boom in the market (year till 2008) has brought many changes in the performance of mutual funds, insurance (ULIPS), investment products which led the country into the inflow of the money supply in the market. Till 2007-08 the market was running at its best, touched the heights, but the global crash in the market became a typhoon took away major players organizations into the quick sand of the recession. The insights from the market were not showing positive sign in anyways, so whether this was a new platform or just a time (economic) cycle. Prologue to decline†¦ Earth provides enough to satisfy mans need, but not greed. -M.K.Gandhi The market crash started with the fall of big financial organizations in the USA in the world like Lehman Brothers, AIG, Freddie and Fannie and many more. The failures were primarily due to exposure into Subprime loans Credit default swaps issued to insure these loans the issuers devolved resulted into bank failures steep reduction in the price of equities worldwide. The economic crisis led many world markets to suspend the trade due to fall in price. On October 8, 2008 Indonesian stock market halted trading, after a 10 % drop in one day. The crash of 2008 was around 21% which was little less than 1987 (Times of London). Beginning of October month was Black in the world market. The Dow Jones volumes were low and the industrial average fell over 1874 points which was worst weekly decline. The Icelandic stock market was into pitiable situation where the markets had been suspended for 3 days i.e. 9, 10 13 October. On October 24 many of the worlds stock market experienced the worst decline, with around 10% drop in the indices. Source: http://en.wikipedia.org/wiki/File:OMX_Iceland_15_SEP-OCT_2008.png The above graph shows the steep and the worst decline a market could ever witness. The Iceland stock market crashed up to unpredictable level. The trading had been suspended for 3 days because of the crash in the market. This situation was visible in all global stock markets, because of financial crisis in USA. Hence, the worst was yet to be experienced by the global markets market players. The Indian stock markets were also badly hit the confidence of people was shattered. The markets were not showing the positive sign in any of the context people had no clue about the next jump or next level of the market. Market experts were expecting the markets will be into recuperation at the earliest, but things were not going the way it had been desired. Source: Hindubusinessline.com Indian market which has shown strong performance till 2007, but from January it plummeted more than 3000 points on all the stock prices by October 2008, it had touched the 7000 (BSE) line. The continuous unpredictable scenarios in the stock market led many investors and institutional investors to withdraw their money because of negative performance of the markets. The above shown graph is depicting the dream turned into nightmare for global domestic investors. The Beehive capitalism†¦ Everything that goes up without base falls steeply with great force. The same situation has happened with the world economies. The supreme economy of the world has become the devil for the small economies, leading major big companies to file for the bankruptcy. The global meltdown is the result of Financial Hybrids Innovations, which has been actively traded all across the world markets. The investment bankers, banks, financial institutions were actively relied on these new and innovative models, which has yet to gain the acceptance across the world. The main accused element for collapse is â€Å"Credit crisis†, in which the US banks got the regulations to lend money to the people having no sufficient background to get the loans. These kind of loans were termed as NINJA loans (NO INCOME, NO JOBS, NO ASSETS), given in abundance by the US banks. Emerging economies like India, China and other big economies were initially considered to be the places which will remain unaffected from the distortion of crisis. But despite of the strong fundamentals Indian economy dipped into the crisis. The stock market had lost more than 50% of its value (source: economic times), which shattered the hopes of the Indians. There was continuous monitoring by the Central Bank (Reserve Bank of India) on the market trend. The tornado of crisis had destroyed most of the stock markets, banks and financial institutions after soaring to the new heights of investment. The below mentioned graph depicts the movement of BSE Sensex SP CNX Nifty Source: SEBI Bulletin November 2008. BSE Sensex closed at 9788 on October 31, 2008 as against 12680 on September 30, 2008, a fall of 3072 points (almost 24%).The month of October 2008 had been the most volatile month, where Sensex recorded a high of 13055.67 on October 1, 2008 low of 8509.56 on October 27. Nifty closed 2886 on October 31 against 3921 against 30 September 2008. By the end of a month Nifty registered the fall of 1035 points (almost 27%). The market had shown unpredictability of the base stability level, dissuading more and more investors to take exit from the market. The Financial crisis: A Sub-prime loan is a type of mortgage loan made to borrowers who have at least one of the following characteristics: (1) Low credit scores; (2) The inability to post the traditional 20 percent down-payment for a home; and/or (3) The inability to fully document their income. The subprime crisis is not the result of recent financial innovations and developments, but it is the outcome of lax capitalism policies which had been developed by the US government. In the fifties American government passed a legislation to delink the commercial banking investment banking. The legislation stated implied that a commercial bank cannot open an investment bank. In 70s European American economies faced slowdown, due to which these banks were finding difficult to invest their investible surplus. This time the East Asian economies were liberalizing their economies, due to which the capital from western economies started moving to these economies. After the huge influx of capital into these economies, Asian bubble gets burst, forcing the western economies to introduce new financial measures to invest into the markets. These circumstances and the need of new financial avenues led the US European economies to trade into the new financial products, by liberalizing the norms for Commercial Investment Banks. The liberalization in the regulations led to the introduction of the Mortgaged products (a prime cause of crisis). In the late 90s US mortgage lender began offering the mortgage products to would be â€Å"home buyers† who could not qualify for a mortgage loans. Millions of Americans Europeans, who previously could not afford to buy home, were obtaining these mortgages, due to which great Demand of home (boom) took place leading to shoot of real estate prices. The above diagram shows how the base of subprime crisis took place in the global markets. The downfall in the economies is considered to be as the Dominoes Effect. The lax screening of borrowers, large capital accumulation capitalized market structure created a bubble which could not be ceased from getting expand. The whole cycle got mitigated with the introduction of new instruments in the financial markets. The sub prime crisis is about the collapse of the unregulated, $3 trillion over-the-counter market for complex structured assets, some of which happen to contain sub prime residential mortgages. The semiannual global financial stability report by IMF said that declining US housing prices and rising delinquencies on the residential mortgage market could lead to losses of $565 billion. When combining these factors with other market factors, it puts potential losses at about $945 billion which is almost 25% of the $24trillion global credit market. Financial innovations were brought into the market to make the products work in the market. The Mortgage products started to conflagrate the US European markets, where such loans started becoming the pool of assets (Risky) and been traded in the market. Hence, due to this many other factors got the impetus ultimately resulted into the uncontrollable bubble of mortgage, which gets burst and deepened the world economies into the recession. The subprime crisis has affected the global economies resulting into the fall of big financial corporation like Lehman Brothers, Bear sterns, AIG, Freddie Fannie, and many more big organizations of whom one cannot think to get fail. The sizes of the organization (exposure) were in plethora that it was not possible for the US European government to revive these financial institutions. AIG, one of the largest insurance companies (Private) became government undertaking due to the impacts of financial crisis. SUB PRIME OVERVIEW: Source: The India Economic Review 2008. (Dec 08) The whole system works in three stages, Stage First consist of Borrowers lenders; Second stage consists of the creation of SpecialPurpose Vehicle (SPV) with the inclusion of legal intermediaries. The last (third) stage consists of investors those who had invested their money into the riskier assets including the investment banks. In stage first agent enters between borrowers and lenders, accepting the collateral and also factoring the future price rise. The agents accept the loans, who previously could not even qualify for the approval, now getting loans from the banks other lenders. The housing price bubble allowed many borrowers to get loans easily because of the high house prices. The loans were mortgaged on a larger scale by creating the pool of similar group of mortgage assets through Special Purpose Vehicle (SPV) given the risk involved on the pool of assets. In second stage, SPVs were created all the liabilities were transferred into bankruptcy remote securitization trust or SPV. Underwriters were used to issue market the MBS (mortgage backed securities). These securities were divided into different tranches, which were of similar securities. The rating agencies were to give rating to these tranches of securities. The ratings were given to the tranches based on the risk, priority of payment of the funds. Higher ratings were given to those tranches benefiting from the credit enhancements the MBS generates or credit insurance purchased from third party bond insurer. In third stage, Institutional or individual investors such as hedge funds or managers of Collateralized Debt Obligations (CDOs), purchase the securities and then re-securitize the MBS, along with other assets, into a CDO. The Commercial Papers (CP) generated in the initial years was all sold and there was demand for more. Consequently the SPVs started producing more CPs or MBS. The sale of the same only meant that the SPVs were flush with funds. These funds were to be invested somewhere so, the agents were pressed to bring in more borrowers. The lending norms were further diluted to accommodate lesser and lesser deserving borrowers in order to deploy the huge funds available. The consequent spiral that got generated only led to the continued dilution of the Capital Adequacy and Prudence norms. The system went burst once the housing prices turned negative turning the very foundation of subprime lending upside down. The turmoil of subprime has been expected of more than $ 3 trillion, which is too big for any country to even imagine of recuperating. The impact on Indian market was slow but had been proved acute on the stock market due to the constant humongous withdrawal of FIIs loss of confidence in the consumers (investors). Mortgage: Huge pack of cards†¦ The magnanimous crisis which all started with lax policies of US government, provided impetus for the Fed Reserve to implement new structures in the economy. The capitalist policy was looking very attractive to the market players, but the policy was hollow from the fundamentals. It all started with the Alan Greenspans reformative structures models in the financial markets, led to turmoil in the global economies. The US Fed Bank Clinton government in 1999 passed Gramm-Leach-Bliley Act (GLBA) which had abjured the old Glass-Steagall Act which had regulated the Investment Banks, Banks Insurance industries. The new legislation has unregulated the Wall Street Investment Banks and commercial banks. This deregulation has enlarged the gamut of activities in the financial activities of the commercial banks other financial institutions. The deregulation had been further reintroduced by legalizing gambling activities into financial sector, a prohibition that had been in place after 1907 financial crisis. The steps towards deregulation of the US markets had converted the US markets into a big casino. Securities Exchange Commission (SEC) in 2004 took a step towards the deregulation on the financial activities by removing the ceiling on risk that the largest American investment banks could take on Securitized loans. By this time, no one would have thought that the deregulation will result into large speculation create a bubble in the market. Lastly, the Securities and Exchange Commission took the last step toward deregulating financial markets when in the month of July 2007, weeks before the onset of the subprime crisis; it removed the â€Å"uptick† rule for short selling any security. The housing bubble was fed by extraordinarily low interest rates low lending standards (norms) for mortgages. The excessive monetary liquidity short term interest rates fell to 1%, which led to high borrowing of loans from the banks, resulted into the big bubble of mismanagement of financial activities. After the tech bubble burst in 2001 the recession, the Fed (Greenspan) aggressively lowered the Federal funds rate from 6.5 percent to 1 percent in 2004, the lowest since 1958. The lowered interest rates reduced lending standards made the banks to lend the money known as ‘ Predatory Lending to the borrowers who did not have capabilities to qualify for the loans, but with the mortgage lending, excessive loans were provided to these lenders as they (banks) were getting big bonuses for bearing risk on these loans. Non-traditional home loans were advanced to borrowers who had no documented incomes. Some loans were interest only loans with down payments of 5% or less . Some were Adjustable Rate loans (ARMs), with low interest rates for one or two years to be reset later at much higher rates. In 2006 around 25% of American mortgages were subprime and close to 20% were ARMs. Mortgage lenders and Home buyers presumed that home prices were not going to fall on a national basis. THE NEW ALCHEMY OF FINANCE The subprime crisis is the result of new financial products in the market the deregulation of the financial activities for the FIs. The main reason of such lending was the facility with which subprime lenders could sell their risky mortgages upstream to bigger players, investments banks for example, which undertook to buy them, pool them into mortgage bonds and re-channel them into new financial instruments through a process of aggressive securitization. The Structured Investment Vehicles (SIVs) which fall into the large class of derivative products came under various names such as Collateral Debt Obligations (CDOs). They had the characteristics of short term asset based commercial paper that were backed by the underlying income producing mortgage assets downstream and were graded according to a certain risk of default. More than 1 trillion half dollars of these asset backed financial products were sold in all over the world. Another new financial instrument that made matters much worse and led directly to the crisis: the Credit Default Swaps. Due to lack of government regulation, this product has become a weapon of mass destruction. In order to protect against the risk of default on the new asset-backed securities (ABS), some insurance companies but also some investment banks themselves began to issue bilateral â€Å"insurance† contracts against the newly created ABS. These were called Credit Default Swaps (CDS), which were supposed to protect the investment instruments against the default on asset based securities. The issuer of ABS could buy the protection against the default by paying a premium. This was a financial innovation, the so-called â€Å"insurance against default†, that opened the floodgates of money to be invested in the new financial instruments. Indeed, it allowed investors such as pension funds and other institutions which have a fiduciary obligation to buy only high-qualit y securities, to legally buy artificially highly rated (but risky) ABS securities, or to invest in hedge funds which specialized in leverage trading in derivative products. But the problem was that the issuance and use of such financial â€Å"insurance† contracts were not regulated by any government agency, because the word â€Å"insurance† was not used; instead, they were considered as simply a protection against the â€Å"default† of payment on a financial security. And thats where the gambling part enters the picture: only ten percent of CDS are genuine insurance contracts held by investors who really own asset-backed securities (these are covered CDS); 90 percent of them are rather held by speculators who trade CDS, while not owning any asset-backed securities to be protected (these are naked CDS). Economy as Casino: The gamut of gambling that US government Fed has created was even unimaginable, allowed big participation into these new investment instruments. Credit Default Swaps (CDS) can be bought and sold by speculators who are not directly involved in the mortgage business. Because of the 2000 Commodity Futures Modernization Act passed by Congress, no state has the power to regulate this new form of sophisticated gambling. The result is astounding: it is estimated that the notional value of credit default swaps outstanding today is about $ 62 trillion (four times the size of the US economy). This is an indication of popularity of the â€Å"naked† CDS innovation was as a way to bet on the collapse of the entire asset-backed securities construction. This was also a clear sign that, in a crisis, it would be all but financially impossible for the issuers of CDS to meet their obligations. In other words, disaster was just around the corner. This is an event that any regulatory agency should have seen coming. When housing prices hit the expected top of their cycle, in the 2005, and began falling, especially in 2006, the price for CDS s was still relatively low. So, some astute speculators undertook to buy CDSs and simultaneously began selling short the ABS that had been issued by investment banks, such as Lehman Brothers, in the correct expectation that mortgage-backed securities were bound to lose value with the expected rise in home foreclosures and mortgage defaults. This is how unimaginable spiral got created by the steps undertaken by Fed Reserve US government which ultimately result into the great burst ever faced in the history globally. GRAMM-LEACH- BILLEY ACT 1999 The Gramm Leach Billey Act 1999 (GLBA) passed by US government in the year 1999 with a view of security data integrity in the market. The GLBA repealed the part Glass Steagall act of 1933, which had opened the market among the banking companies, securities companies insurance companies. The GSA had prohibited any one institution from acting as any combination of an investment bank, a commercial bank and or an insurance company. But the GLBA allowed commercial banks, investment banks, securities firms, insurance companies to consolidate. The act was announced in the 1993 finalized in 1994, allowing many big corporations to merge to enhance their range of activities take the benefit of the deregulation. The law was passed to legalize these mergers on a permanent basis. The law has not fully deregulated the previous act, but they had relaxed the norms and allowed the FIs to have non financial assets. GLBA was amended with some part of the Bank Holding Company act of 1956. The crucial aspect of the GLBA stated that no merger can go ahead until the financial holding institutions, or affiliates receives a â€Å"less than satisfactory (SIC) rating at its most recent CRA exam†. GLBA compliance was mandatory; whether a financial institution discloses non public information or not, there must be a policy in place to protect the information from prospective threats in security data integrity. The law was segregated into three main aspects: FINANCIAL PRIVACY RULE: This rule requires FIs to provide each consumer with a privacy notice at the time the consumer relationship is established and annually afterwards. The notice must explain the information collected about the consumer, where that information is shared, how that information is used and how that information about the consumer is protected. The consumer must be notified give consent about any change at any point of time. Each time the privacy notice is reestablished the consumer has the right to opt it again. SAFEGUARDS RULE: The safeguards rule requires FIs to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect clients non public personal information. This plan must include the following; Denoting at least one employee to manage the safeguards. Constructing a thorough on each department handling the non public information. Develop, monitor test a program to secure the information. Change the safeguards as needed. The Safeguards Rule forces financial institutions to take a closer look at how they manage private data and to do a risk analysis on their current processes. PRETEXTING PROTECTION: The GLBA encourages the organizations covered by GLBA to implement safeguards against pre texting. Pre texting means when someone tries to access the personal nonpublic information without proper authority approval. Thus the institutions having covered under the GLBA, needs to have control safeguard the information of their client, to prevent the details from any misuse. CRITICISM AND DEFENSE: There Analysis of Momentum in Indian Stock Markets Analysis of Momentum in Indian Stock Markets LITERATURE REVIEW The first study on momentum based investment strategy was documented way back in 1967. Levi (1967) claims the success of trading strategy based on buying stock with current price significantly higher than the average of last 27 weeks generate significant positive abnormal returns. However Jensen Bennington (1970) argues that the trading rule based on relative strength proposed by Levi was the one out of sixty eight trading strategies he tested and while tested for out of the sample test period it did not outperformed the buy hold strategy and hence was attributable to selection bias. Test of contrarian investment strategies was stealing the show fund managers were found busy picking stocks based on relative strength in US market. Majority of mutual funds examined by Grinblatt Titman (1989) note the tendency of fund managers to buy the stocks that have seen price increase in last quarter. Apart from that Value Line rankings of mutual funds that were largely based on relative strength also enjoyed high predictive power. The success of mutual funds investing on the basis of relative strength and high predictive power of value line rankings (Copeland Myres (1982)) provide some evidence of success of investment strategies based on relative strength. The academic literature suggests contrarian returns generate abnormal returns whereas value line rankings and mutual funds generating abnormal returns based on relative strength strategy are in stark contrast of each other. A seminal study by Jegadeesh Titman (1993) solves the puzzle by providing an explanation based on different of investment horizons considered by mutual funds using momentum strategies and contrarian strategies advocated by academic literature in late eighties and early nineties. Jegadeesh and Titman (1993) using US market data from 1965-1989 found not only the evidence of long term success of contrarian investment strategy but also found that momentum strategies generate significant positive returns in medium run over 3-12-month holding periods. They documented the reversal of momentum after about nine months. Their study suggests that in short run for about 3-12 months holding period momentum strategy generate significantly positive returns while in long run for the holding period of 1-3 years contrarian strategy generates significantly positive returns. Conrad and Kaul (1993) also find evidence from US market that the contrarian strategy is profitable for short-term (weekly, monthly) and long-term (2-5 years, or longer) intervals, while the momentum strategy is profitable for medium-term (3-12-month). As mentioned earlier the results of Jegadeesh and Titman (1993) had thrown a new light on seminal study of De Bondt Thaler (1985, 1987) and found evidence of short term momentum precedes long term reversal. Although all the results provided strong evidence of market inefficiency, different studies documented different explanations for such returns. Fama French (1996) presents result based on multifactor CAPM using size and MV/BV ratio to explain various anomalies in asset prices including momentum as well as contrarian returns and claim that market efficiency is intact. However the study failed to explain the presence of short term momentum using the multifactor model and hence short term momentum anomaly remains unexplained. Several behavioural explanations were found and presented to jointly explain the short-run cross-sectional momentum in stock returns documented by Jegadeesh and Titman (1993) and the long-run cross-sectional reversal in stock returns documented by DeBondt and Thaler (1985). Daniel, Hirshleifer, and Subrahmanyam (1998) (DHS hereafter) assume that investors are overconfident about their private information and overreact to it. If these investors also have a self-attribution bias, then investors attribute success to their own skills more than they should and attribute failures to external noise more than they should. The consequence of this behaviour is that investors overconfidence increases following the arrival of confirming news. The increase in overconfidence furthers the initial overreaction and generates return momentum. The overreaction in prices will eventually be corrected in the long-run as investors observe future news and realize their errors. Hence, increased overconfidenc e results in short-run momentum and long-run reversal. As against the above cited behavioral explanation to short term momentum and long term reversal, some scholars argue that the returns from these strategies are just compensation for taking additional risk or may be the product of the data mining. Most noteworthy of all Conard and Kaul (1998) argue that the profitability of momentum strategies may be the result of data-mining and momentum portfolio shows positive returns in any post ranking period is true irrespective of the length of test period. Thus Conard and Kaul (1998) suggest that there is no case of long term reversal. This is diagonally opposite to what the behavioral models suggests where after short term momentum prices will reverse to more fundamental levels. In fact, the criticism of Conard and Kaul (1998) led to another study by Jegadeesh and Titman (2001) where they used out of the sample test by using data from 1991 to 1998 an overlapping test period compared to their 1993 study where they used data form 1965-89. Their study also eliminated small firms from the study to check whether the earlier momentum returns were actually dominated by small, high-risk and illiquid stock or otherwise. Though they focus on short term momentum in their study choosing two year holding period post formation but they also tested post holding period returns from the period of two to five years after formation. They present some very interesting results. The momentum profits of Jegadeesh and Titman (1993) continued in 2001 also with almost same magnitude for same holding period that actually has proved that the earlier momentum profits were not the result of data-mining. It also suggests that unlike small firm effect where after the published research on superior returns on small firms compared to their large counterparts, superior returns on small firms disappeared in subsequent studies using data from the periods after the small firm effect from earlier studies got published, that means market has learnt quickly and hence such superior returns disappeared however momentum returns were still present with the same magnitude in 2001 as they were in 1993 study suggest that momentum returns are not just the temporary anomaly but it may have to do with some systemic cognitive bias which sustains for a long time. It also proves that momentum profit is just not the result of some small, illiquid and risky stocks and most noteworthy the reversal found in their post holding period cumulative returns, which render support to the explanations of behavioral theorists and provides evidence against the Conard and Kaul hypothesis. As far as studies in Asian markets are concerned Chang (1995) found abnormal profits of contrarian strategies in the Japanese markets. Chui (2000) found significant positive abnormal returns with contrarian investment strategy in Japanese and Korean markets. Hameed Ting (2000) found evidence of market overreaction hypothesis (contrarian strategy) in Malaysia. Kang (2002) found significant short term positive returns with contrarian strategy in Chinese markets. On the other end, Hameed Kusandi (2002) found no evidence of contrarian profits in six Pacific Basin markets. While Rouwenhorst (1998) and Griffin Martin (2005) found existence of momentum in many non-US countries, the quantum of momentum returns in non-US countries was small, and in the case of Asia, insignificant. For example, Griffin (2005) estimates average monthly returns of 0.78%, 0.77% and 0.40% for the Americas (excluding the US), Europe and Asia respectively. End of the Beginning or Beginning of the End†¦ The big bull has fallen down, investors have lost their vision, and experts knowledge went futile with the downturn of the global economies. When the markets were on peak, the funds across the world have flooded in the global economies. Policy makers had lot of confidence on the market, that it will help the economy to grow at faster pace. The market excelled 21000 points which was more ahead then the growth of the economy of India. But that does not seem true for the world economies, as the crisis had hit badly in USA and other parts of world which insisted FIIs and other investors to withdraw their money and markets crashed, went to 7000 points, where investor lost everything and policies could not work to take them up to the level. What was the reason of the crash? What will be the result of the market? Is this the end of the beginning or beginning of the end? Indian market is the strong base of determining the financial system of the country. Majority of the financial decisions are dependent on the stock market other financial market. Indian stock market serves a link to banking and other financial policies which provides impetus to the industry. Indian stock markets heavily based on the sentiments of the clients (market players) also of the market makers. The crash or boom (in a period/ year) determines the structure of the Indian capital system. The boom in the market (year till 2008) has brought many changes in the performance of mutual funds, insurance (ULIPS), investment products which led the country into the inflow of the money supply in the market. Till 2007-08 the market was running at its best, touched the heights, but the global crash in the market became a typhoon took away major players organizations into the quick sand of the recession. The insights from the market were not showing positive sign in anyways, so whether this was a new platform or just a time (economic) cycle. Prologue to decline†¦ Earth provides enough to satisfy mans need, but not greed. -M.K.Gandhi The market crash started with the fall of big financial organizations in the USA in the world like Lehman Brothers, AIG, Freddie and Fannie and many more. The failures were primarily due to exposure into Subprime loans Credit default swaps issued to insure these loans the issuers devolved resulted into bank failures steep reduction in the price of equities worldwide. The economic crisis led many world markets to suspend the trade due to fall in price. On October 8, 2008 Indonesian stock market halted trading, after a 10 % drop in one day. The crash of 2008 was around 21% which was little less than 1987 (Times of London). Beginning of October month was Black in the world market. The Dow Jones volumes were low and the industrial average fell over 1874 points which was worst weekly decline. The Icelandic stock market was into pitiable situation where the markets had been suspended for 3 days i.e. 9, 10 13 October. On October 24 many of the worlds stock market experienced the worst decline, with around 10% drop in the indices. Source: http://en.wikipedia.org/wiki/File:OMX_Iceland_15_SEP-OCT_2008.png The above graph shows the steep and the worst decline a market could ever witness. The Iceland stock market crashed up to unpredictable level. The trading had been suspended for 3 days because of the crash in the market. This situation was visible in all global stock markets, because of financial crisis in USA. Hence, the worst was yet to be experienced by the global markets market players. The Indian stock markets were also badly hit the confidence of people was shattered. The markets were not showing the positive sign in any of the context people had no clue about the next jump or next level of the market. Market experts were expecting the markets will be into recuperation at the earliest, but things were not going the way it had been desired. Source: Hindubusinessline.com Indian market which has shown strong performance till 2007, but from January it plummeted more than 3000 points on all the stock prices by October 2008, it had touched the 7000 (BSE) line. The continuous unpredictable scenarios in the stock market led many investors and institutional investors to withdraw their money because of negative performance of the markets. The above shown graph is depicting the dream turned into nightmare for global domestic investors. The Beehive capitalism†¦ Everything that goes up without base falls steeply with great force. The same situation has happened with the world economies. The supreme economy of the world has become the devil for the small economies, leading major big companies to file for the bankruptcy. The global meltdown is the result of Financial Hybrids Innovations, which has been actively traded all across the world markets. The investment bankers, banks, financial institutions were actively relied on these new and innovative models, which has yet to gain the acceptance across the world. The main accused element for collapse is â€Å"Credit crisis†, in which the US banks got the regulations to lend money to the people having no sufficient background to get the loans. These kind of loans were termed as NINJA loans (NO INCOME, NO JOBS, NO ASSETS), given in abundance by the US banks. Emerging economies like India, China and other big economies were initially considered to be the places which will remain unaffected from the distortion of crisis. But despite of the strong fundamentals Indian economy dipped into the crisis. The stock market had lost more than 50% of its value (source: economic times), which shattered the hopes of the Indians. There was continuous monitoring by the Central Bank (Reserve Bank of India) on the market trend. The tornado of crisis had destroyed most of the stock markets, banks and financial institutions after soaring to the new heights of investment. The below mentioned graph depicts the movement of BSE Sensex SP CNX Nifty Source: SEBI Bulletin November 2008. BSE Sensex closed at 9788 on October 31, 2008 as against 12680 on September 30, 2008, a fall of 3072 points (almost 24%).The month of October 2008 had been the most volatile month, where Sensex recorded a high of 13055.67 on October 1, 2008 low of 8509.56 on October 27. Nifty closed 2886 on October 31 against 3921 against 30 September 2008. By the end of a month Nifty registered the fall of 1035 points (almost 27%). The market had shown unpredictability of the base stability level, dissuading more and more investors to take exit from the market. The Financial crisis: A Sub-prime loan is a type of mortgage loan made to borrowers who have at least one of the following characteristics: (1) Low credit scores; (2) The inability to post the traditional 20 percent down-payment for a home; and/or (3) The inability to fully document their income. The subprime crisis is not the result of recent financial innovations and developments, but it is the outcome of lax capitalism policies which had been developed by the US government. In the fifties American government passed a legislation to delink the commercial banking investment banking. The legislation stated implied that a commercial bank cannot open an investment bank. In 70s European American economies faced slowdown, due to which these banks were finding difficult to invest their investible surplus. This time the East Asian economies were liberalizing their economies, due to which the capital from western economies started moving to these economies. After the huge influx of capital into these economies, Asian bubble gets burst, forcing the western economies to introduce new financial measures to invest into the markets. These circumstances and the need of new financial avenues led the US European economies to trade into the new financial products, by liberalizing the norms for Commercial Investment Banks. The liberalization in the regulations led to the introduction of the Mortgaged products (a prime cause of crisis). In the late 90s US mortgage lender began offering the mortgage products to would be â€Å"home buyers† who could not qualify for a mortgage loans. Millions of Americans Europeans, who previously could not afford to buy home, were obtaining these mortgages, due to which great Demand of home (boom) took place leading to shoot of real estate prices. The above diagram shows how the base of subprime crisis took place in the global markets. The downfall in the economies is considered to be as the Dominoes Effect. The lax screening of borrowers, large capital accumulation capitalized market structure created a bubble which could not be ceased from getting expand. The whole cycle got mitigated with the introduction of new instruments in the financial markets. The sub prime crisis is about the collapse of the unregulated, $3 trillion over-the-counter market for complex structured assets, some of which happen to contain sub prime residential mortgages. The semiannual global financial stability report by IMF said that declining US housing prices and rising delinquencies on the residential mortgage market could lead to losses of $565 billion. When combining these factors with other market factors, it puts potential losses at about $945 billion which is almost 25% of the $24trillion global credit market. Financial innovations were brought into the market to make the products work in the market. The Mortgage products started to conflagrate the US European markets, where such loans started becoming the pool of assets (Risky) and been traded in the market. Hence, due to this many other factors got the impetus ultimately resulted into the uncontrollable bubble of mortgage, which gets burst and deepened the world economies into the recession. The subprime crisis has affected the global economies resulting into the fall of big financial corporation like Lehman Brothers, Bear sterns, AIG, Freddie Fannie, and many more big organizations of whom one cannot think to get fail. The sizes of the organization (exposure) were in plethora that it was not possible for the US European government to revive these financial institutions. AIG, one of the largest insurance companies (Private) became government undertaking due to the impacts of financial crisis. SUB PRIME OVERVIEW: Source: The India Economic Review 2008. (Dec 08) The whole system works in three stages, Stage First consist of Borrowers lenders; Second stage consists of the creation of SpecialPurpose Vehicle (SPV) with the inclusion of legal intermediaries. The last (third) stage consists of investors those who had invested their money into the riskier assets including the investment banks. In stage first agent enters between borrowers and lenders, accepting the collateral and also factoring the future price rise. The agents accept the loans, who previously could not even qualify for the approval, now getting loans from the banks other lenders. The housing price bubble allowed many borrowers to get loans easily because of the high house prices. The loans were mortgaged on a larger scale by creating the pool of similar group of mortgage assets through Special Purpose Vehicle (SPV) given the risk involved on the pool of assets. In second stage, SPVs were created all the liabilities were transferred into bankruptcy remote securitization trust or SPV. Underwriters were used to issue market the MBS (mortgage backed securities). These securities were divided into different tranches, which were of similar securities. The rating agencies were to give rating to these tranches of securities. The ratings were given to the tranches based on the risk, priority of payment of the funds. Higher ratings were given to those tranches benefiting from the credit enhancements the MBS generates or credit insurance purchased from third party bond insurer. In third stage, Institutional or individual investors such as hedge funds or managers of Collateralized Debt Obligations (CDOs), purchase the securities and then re-securitize the MBS, along with other assets, into a CDO. The Commercial Papers (CP) generated in the initial years was all sold and there was demand for more. Consequently the SPVs started producing more CPs or MBS. The sale of the same only meant that the SPVs were flush with funds. These funds were to be invested somewhere so, the agents were pressed to bring in more borrowers. The lending norms were further diluted to accommodate lesser and lesser deserving borrowers in order to deploy the huge funds available. The consequent spiral that got generated only led to the continued dilution of the Capital Adequacy and Prudence norms. The system went burst once the housing prices turned negative turning the very foundation of subprime lending upside down. The turmoil of subprime has been expected of more than $ 3 trillion, which is too big for any country to even imagine of recuperating. The impact on Indian market was slow but had been proved acute on the stock market due to the constant humongous withdrawal of FIIs loss of confidence in the consumers (investors). Mortgage: Huge pack of cards†¦ The magnanimous crisis which all started with lax policies of US government, provided impetus for the Fed Reserve to implement new structures in the economy. The capitalist policy was looking very attractive to the market players, but the policy was hollow from the fundamentals. It all started with the Alan Greenspans reformative structures models in the financial markets, led to turmoil in the global economies. The US Fed Bank Clinton government in 1999 passed Gramm-Leach-Bliley Act (GLBA) which had abjured the old Glass-Steagall Act which had regulated the Investment Banks, Banks Insurance industries. The new legislation has unregulated the Wall Street Investment Banks and commercial banks. This deregulation has enlarged the gamut of activities in the financial activities of the commercial banks other financial institutions. The deregulation had been further reintroduced by legalizing gambling activities into financial sector, a prohibition that had been in place after 1907 financial crisis. The steps towards deregulation of the US markets had converted the US markets into a big casino. Securities Exchange Commission (SEC) in 2004 took a step towards the deregulation on the financial activities by removing the ceiling on risk that the largest American investment banks could take on Securitized loans. By this time, no one would have thought that the deregulation will result into large speculation create a bubble in the market. Lastly, the Securities and Exchange Commission took the last step toward deregulating financial markets when in the month of July 2007, weeks before the onset of the subprime crisis; it removed the â€Å"uptick† rule for short selling any security. The housing bubble was fed by extraordinarily low interest rates low lending standards (norms) for mortgages. The excessive monetary liquidity short term interest rates fell to 1%, which led to high borrowing of loans from the banks, resulted into the big bubble of mismanagement of financial activities. After the tech bubble burst in 2001 the recession, the Fed (Greenspan) aggressively lowered the Federal funds rate from 6.5 percent to 1 percent in 2004, the lowest since 1958. The lowered interest rates reduced lending standards made the banks to lend the money known as ‘ Predatory Lending to the borrowers who did not have capabilities to qualify for the loans, but with the mortgage lending, excessive loans were provided to these lenders as they (banks) were getting big bonuses for bearing risk on these loans. Non-traditional home loans were advanced to borrowers who had no documented incomes. Some loans were interest only loans with down payments of 5% or less . Some were Adjustable Rate loans (ARMs), with low interest rates for one or two years to be reset later at much higher rates. In 2006 around 25% of American mortgages were subprime and close to 20% were ARMs. Mortgage lenders and Home buyers presumed that home prices were not going to fall on a national basis. THE NEW ALCHEMY OF FINANCE The subprime crisis is the result of new financial products in the market the deregulation of the financial activities for the FIs. The main reason of such lending was the facility with which subprime lenders could sell their risky mortgages upstream to bigger players, investments banks for example, which undertook to buy them, pool them into mortgage bonds and re-channel them into new financial instruments through a process of aggressive securitization. The Structured Investment Vehicles (SIVs) which fall into the large class of derivative products came under various names such as Collateral Debt Obligations (CDOs). They had the characteristics of short term asset based commercial paper that were backed by the underlying income producing mortgage assets downstream and were graded according to a certain risk of default. More than 1 trillion half dollars of these asset backed financial products were sold in all over the world. Another new financial instrument that made matters much worse and led directly to the crisis: the Credit Default Swaps. Due to lack of government regulation, this product has become a weapon of mass destruction. In order to protect against the risk of default on the new asset-backed securities (ABS), some insurance companies but also some investment banks themselves began to issue bilateral â€Å"insurance† contracts against the newly created ABS. These were called Credit Default Swaps (CDS), which were supposed to protect the investment instruments against the default on asset based securities. The issuer of ABS could buy the protection against the default by paying a premium. This was a financial innovation, the so-called â€Å"insurance against default†, that opened the floodgates of money to be invested in the new financial instruments. Indeed, it allowed investors such as pension funds and other institutions which have a fiduciary obligation to buy only high-qualit y securities, to legally buy artificially highly rated (but risky) ABS securities, or to invest in hedge funds which specialized in leverage trading in derivative products. But the problem was that the issuance and use of such financial â€Å"insurance† contracts were not regulated by any government agency, because the word â€Å"insurance† was not used; instead, they were considered as simply a protection against the â€Å"default† of payment on a financial security. And thats where the gambling part enters the picture: only ten percent of CDS are genuine insurance contracts held by investors who really own asset-backed securities (these are covered CDS); 90 percent of them are rather held by speculators who trade CDS, while not owning any asset-backed securities to be protected (these are naked CDS). Economy as Casino: The gamut of gambling that US government Fed has created was even unimaginable, allowed big participation into these new investment instruments. Credit Default Swaps (CDS) can be bought and sold by speculators who are not directly involved in the mortgage business. Because of the 2000 Commodity Futures Modernization Act passed by Congress, no state has the power to regulate this new form of sophisticated gambling. The result is astounding: it is estimated that the notional value of credit default swaps outstanding today is about $ 62 trillion (four times the size of the US economy). This is an indication of popularity of the â€Å"naked† CDS innovation was as a way to bet on the collapse of the entire asset-backed securities construction. This was also a clear sign that, in a crisis, it would be all but financially impossible for the issuers of CDS to meet their obligations. In other words, disaster was just around the corner. This is an event that any regulatory agency should have seen coming. When housing prices hit the expected top of their cycle, in the 2005, and began falling, especially in 2006, the price for CDS s was still relatively low. So, some astute speculators undertook to buy CDSs and simultaneously began selling short the ABS that had been issued by investment banks, such as Lehman Brothers, in the correct expectation that mortgage-backed securities were bound to lose value with the expected rise in home foreclosures and mortgage defaults. This is how unimaginable spiral got created by the steps undertaken by Fed Reserve US government which ultimately result into the great burst ever faced in the history globally. GRAMM-LEACH- BILLEY ACT 1999 The Gramm Leach Billey Act 1999 (GLBA) passed by US government in the year 1999 with a view of security data integrity in the market. The GLBA repealed the part Glass Steagall act of 1933, which had opened the market among the banking companies, securities companies insurance companies. The GSA had prohibited any one institution from acting as any combination of an investment bank, a commercial bank and or an insurance company. But the GLBA allowed commercial banks, investment banks, securities firms, insurance companies to consolidate. The act was announced in the 1993 finalized in 1994, allowing many big corporations to merge to enhance their range of activities take the benefit of the deregulation. The law was passed to legalize these mergers on a permanent basis. The law has not fully deregulated the previous act, but they had relaxed the norms and allowed the FIs to have non financial assets. GLBA was amended with some part of the Bank Holding Company act of 1956. The crucial aspect of the GLBA stated that no merger can go ahead until the financial holding institutions, or affiliates receives a â€Å"less than satisfactory (SIC) rating at its most recent CRA exam†. GLBA compliance was mandatory; whether a financial institution discloses non public information or not, there must be a policy in place to protect the information from prospective threats in security data integrity. The law was segregated into three main aspects: FINANCIAL PRIVACY RULE: This rule requires FIs to provide each consumer with a privacy notice at the time the consumer relationship is established and annually afterwards. The notice must explain the information collected about the consumer, where that information is shared, how that information is used and how that information about the consumer is protected. The consumer must be notified give consent about any change at any point of time. Each time the privacy notice is reestablished the consumer has the right to opt it again. SAFEGUARDS RULE: The safeguards rule requires FIs to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect clients non public personal information. This plan must include the following; Denoting at least one employee to manage the safeguards. Constructing a thorough on each department handling the non public information. Develop, monitor test a program to secure the information. Change the safeguards as needed. The Safeguards Rule forces financial institutions to take a closer look at how they manage private data and to do a risk analysis on their current processes. PRETEXTING PROTECTION: The GLBA encourages the organizations covered by GLBA to implement safeguards against pre texting. Pre texting means when someone tries to access the personal nonpublic information without proper authority approval. Thus the institutions having covered under the GLBA, needs to have control safeguard the information of their client, to prevent the details from any misuse. CRITICISM AND DEFENSE: There

Distribution Strategy Essay

Introduction The core of this presentation is to discuss the theory of distribution strategy with the underlying real life examples of McDonald’s fast-food restaurants in Australia. In other words, the aim is to discuss McDonald’s distribution channel, the way this fast-food restaurant gets its products to the market. Nonetheless, this presentation will demonstrate that McDonald’s distribution strategy is effective in many cultures. In the theory of marketing mix, place (distribution) determines where the product will be sold and how it will get there. In fact, McDonald’s is the leading global foodservice retailer, with more than 30,000 local restaurants serving nearly 46 million people each day in 121 different countries. Approximately 80 percent of all McDonald’s restaurants worldwide are owned and operated by independent franchisors. Furthermore, at the essence of place decisions, Kotler (et al., 2001, p. 513) claims that, â€Å"retailers, particularly image fast foods chains often state their seven P’s of marketing to be, that is location, location, location, location, location, location and location.† Hence, a retailer’s location is the key to attracting customers. The costs of the building or leasing facilities is a major factor on the retailer’s profits. Thus, site location decisions are among the most important the retailer make (Kotler, et al., 2001, p. 513). Intensive Distribution On the other hand, McDonald’s opened its first restaurant in Australia in December 1971. Today there are more than 690 restaurants throughout Australia and serving in excess of one million customers per day and employing over 55,000 staff. Therefore, you can find them everywhere in Australia, where some of the McDonald’s are open 24 hours per day which satisfy people’s needs and wants, especially for exists their hunger. This kind of distribution strategy is called â€Å"intensive distribution†, means marking the product available for sale through all possible channels of distribution. As defined by Kotler (et al., 2001, p. 487), â€Å"intensive distribution is stocking the product in as many outlets as possible.† In addition, this strategy must be designed to reach the consumer wants at  anytime and anywhere. Vertical marketing network (VMN) Furthermore, to quote Kotler (et al., 2001, p. 482), a franchise organization is â€Å"a contractual vertical marketing network in which a channel member called a franchisor links several stages in production-distribution process†. McDonald’s has adopted the service-firm-sponsored retailer franchise network, in which a service firm licenses a network of retailers to bring its service to consumers (Kotler, et al., 2001, p. 482). Nevertheless, McDonald’s caters to a large consumer market with varying tastes and thus cannot afford to introduce products without familiarizing itself with provincial preferences in food. For this reason, McDonald’s distributes its products in foreign locations with the help of franchisors who are well aware of what works in their country. Moreover, these franchisors also provide insight to the company on its diverse customers and helps McDonald’s achieve its vision of â€Å"being the world’s best quick service restaurant experience.† In brief, this is an extremely intelligent distribution method since it helps in providing people with the kind of products they desire, maintaining the franchise reputation worldwide. To encourage repeat customer visits, McDonald’s are intensifying the efforts to ensure the restaurant interiors and exteriors are clean and welcoming. Moreover, McDonald’s intends to regain the status as the gold standard for clean restaurants. Furthermore, McDonald’s are giving the business a fresh edge in many places by rebuilding, renovating and re-imaging the restaurants. The experiences in Australia demonstrate that doing such can result in improved sales and profitability. McDonald’s ensures consistent products by controlling every stage of the distribution. In addition, regional distribution centres purchase products and distribute them to individual restaurants. On the other hand, when designing its channels, a company needs to consider competitors’ channels. Yet, it may want to compete in or close to the same outlets that carry competitors’ products (Kotler, et al., 2001, p. 486). Thus, food companies  want their brands to be displayed next to competing brands. Meanwhile, McDonald’s adopted this setting channel objective as a view and therefore wants to locate near KFC. On the other hand, McDonald’s uses essentially the same competitive strategy in every country as be the first in a market and establish the brand as rapidly as possible by advertising very heavily. However, the strategy has helped McDonald’s develop a strong market share in the fast-food market around the world. Moreover, according to Kotler (et al., 2001, p. 513) store must have a planned atmosphere that suits the target market and moves customers to buy. In addition, McDonald’s determine the locations for reaching a widely spread population. Hence, McDonald’s are turning their stores into theatres that transport customers into unusual, exciting shopping environments that designed to meet the taste of target markets. For instance, McDonald’s Blacktown is one of McDonald’s Australia’s newest restaurants, it has create a locate playgrounds for children to enjoy. Conclusion In conclusion, McDonald’s improve the frequency of their deliveries, form relevant partnerships and implement alternate distribution strategies to effectively capture market and build international brand name based on hygienic, healthy, appetizing fast food consistently worldwide. Adopting market study and focusing on location of franchise, MacDonald’s ensures market niche for food product distribution is a definite success story. References ââ€" ª Kotler, P., Brown, K., Adam, S., & Armstrong, G., 2001, Marketing, 5th Edition, Pearson Education Australia, Frenchs Forest, NSW ââ€" ª http://www.mcdonalds.com

WZT1 TASK1 MATRIX - 1016 Words

Authors Resource/ Database Year of Publication Research Type Population Sample Size Outcome Variables Measured Pertinent Data from Results Author’s Suggested Conclusions Comments Allegretti, A. L., Malkiewicz, A., Brienza, D. Advances in Skin Wound Care 2012 Qualitative Experimental Design 5 surgical patients. six Month study Pressure ulcer classification. Scrum pressure Buttock Temperature. Demographic characteristics 48 hrs. postop no pressure sores were found. More investigative studies are needed to test the variation of tissue tolerance during prolonged surgery I chose this article based on its relevance to my topic and the highlights on new measures that use technology to measure the temperature and pressure†¦show more content†¦Association of periOperative Registered Nurses 2006 Quantitative; retrospective descriptive study 150 cardiac surgical patients. six month study Three groups of fifty patients each used A -Standard foam mattress. B-Fluid pressure reducing mattress C-Fluid pressure reducing mattress and nursing intervention Group A=18% Group B=12% Group C=4% developed pressure ulcer Author suggest that preventing pressure sores is a team effort between preoperative, interpretive, and postoperative nurses. I chose this article to compare the differences pressure sore incidences in operation tables used during surgery. Shahin, E., Dassen, T., Halfens, R. International Journal of Nursing Studies 2009 Quantitative, Longitudinal Study 121 ICU patients six month study Patients were assessed at admission and discharge of ICU and assessed using Braden Score and APACHE II score. During the ICU stay 6 pressure sores developed and 5 Pressure sores healed. there was a correlation between APACHE II score and new pressure sores. pressure sores can be healed in ICU patients I chose this article to gain understanding between pressure sores and critically ill patients. Tschannen D1, Bates O, Talsma A, Guo Y. American Journal of Critical Care 2012 Quantitative; Cohort Study 3,225

Charles Darwin to Dr Jekyll and Mr. Hyde - 1565 Words

How does Stevenson present duality in Dr. Jekyll and Mr. Hyde? Stevenson presents duality in Dr. Jekyll and Mr. Hyde in various ways. One of these variations of the duality is among the minor characters, for example Utterson and Enfield. Their similarity is that they are both respectable Victorian gentlemen, that both like to discuss stories but they feel it is gossiping about their friend and say ‘let us make a bargain to never refer to this again’, this shows that they feel that they have over stepped the mark and have stumbled upon something that is better left alone, this is also the first mention of a mystery giving us a clue in to the genre. ‘Dink gin †¦ he was alone’ this quote shows us that Utterson was not as social as Enfield†¦show more content†¦Jekyll). But the novel was also partly based on a play Deacon Brodia (1880) which is about a ‘publicly respectable gentleman but privately a thief and rakehell.’ The novel had been considered by some people, mainly the higher ranked and imp ortant persons of the 19th centaury, as a criticism of ‘Victorian double morality’ meaning they felt it was presenting a false image of what went on in London. They may have also have felt that it was encouraging other people to do things considered wrong-like. This shows duality between the novel and the behaviour in London during the 19th centaury. The novel also creates a lot of tension as you progress through the text. It rises every time something is discovered in the mystery of Hyde which strengthens it’s the detective/mystery genre. At the beginning all is calm but as Hyde comes to life, the tension rises. ‘A really damnable man’ this shows us how much Hyde is hated, but this also shows us where the tension begins to rise. The tension is near enough sky high when the quotes ‘something wrong with his appearance’ and ‘He must be deformed’ are used to make the audience worry and wonder what will prevail from the mystery of Hyde. The weather is a ladder for the tension, described as ‘a wild, cold, seasonable night of March †¦ pale moon’ this was used when Utterson searched for Hyde, showing us a mysterious side of London. Although it doesn’t show much duality, it does play a part in making the novel’s mysteryShow MoreRelatedDarwin in Dr.Jekyll and Mr.Hyde1835 Words   |  8 PagesIn Robert Louis Stevensons The Strange Case of Dr. Jekyll and Mr. Hyde, as well as in Charles Darwins On the Origin of Species of Natural Selection, mans dual nature is illustrated in terms of evolution and morality. In this essay I will argue that Stevensons description of both the interior and exterior struggles of Dr. Jekyll and Mr. Hyde echo Darwins theories of evolution and natural selection. Through close readings, comparisons, and the juxtaposition of the novel and theoretical genre,Read MoreDr. Jekyll and Mr. Hyde: A View Into Societal Changes in the 19th Century1398 Words   |  6 PagesStrange Case of Dr. Jekyll and Mr. Hyde, based on a man with pure intentions, who ends up turning himself into a viscous murderer. Dr. Henry Jekyll is a well-known doctor and respected man, known for doing numerous acts of kindness and work for charities. However, since he was a young boy, he secretly engaged in wrongful behavior, and from then on, was determined to experiment and find a way to separate his good side from his bad. What would then be known as, Mr. Hyde. Mr. Edward Hyde is described asRead MoreInfluence of Science and Religion on The Strange Case of Dr. Jekyll and Mr. Hyde689 Words   |  3 PagesThe novella, ‘The Strange Case of Dr Jekyll and Mr Hyde’ was written by Robert Louis Stevenson in 1886. The author was born in Edinburgh, Scotland, in 1850. His family included engineers, scientists, a professor of philosophy, and a religious minister. The scientific and religious sides of Stevensons family reflected in both his personal life and in Dr Jek yll and Mr Hyde (disapproval between Dr Lanyon and Dr Jekyll). In 1859 Charles Darwin published his famous book called the ‘Origin of Species’Read MoreStevenson and Conrad: The Duality of Human Nature 778 Words   |  3 PagesThe Victorian Age marked a period of immense transition in many aspects of human life. In 1859 Charles Darwin published The Origin of Species, a work that opposed the traditional way of perceiving religion. Candyce Klin author of â€Å"Darwinism as A Cultural Issue†, states that The Origin of Species proposed the theory that all living creatures had to compete within their own preconditions in order to survive. This may be why the controversial issue of the duality of human nature has been found at theRead MoreThe Nature of Good and Evil and the Dual Nature of Mans Personality1063 Words   |  5 Pages Dr Jekyll and Mr Hyde is a novel about a man named Henry Jekyll who has a split personality. Dr Jekyll takes a potion to turn himself into his double, Mr Hyde. Dr Jekyll is a caring person. Mr Hyde is evil. It is when Jekylls lawyer, Mr Utterson, looks at Dr Jekylls will that his suspicions arise. He becomes suspicious because in Dr Jekylls will everything Dr Jekyll owns is left to Mr Hyde when Dr Jekyll disappears. Utterson wants to know what the relationship between Dr Jekyll andRead MoreProfound Duplicity Exhibited by Jekyll as a Reflection of the Victorian Way of Life1526 Words   |  7 PagesProfound Duplicity Exhibited by Jekyll as a Reflection of the Victorian Way of Life The Victorian society was filled with many divisions. It consisted of two extremes, the very wealthy and intense poverty. It was these divisions that contributed to the causes behind the life of Henry Jekyll to be split between the two. However, there are many other reasons as to why Jekyll wanted the best of both worlds. Within the Victorian period, there were many successes, including Read MoreStevensons Representation of Good and Evil in The Strange Case of Dr. Jekyll and Mr. Hyde1522 Words   |  7 PagesCase of Dr. Jekyll and Mr. Hyde In this piece of coursework, I am asked to first of all, discuss how the novel is mainly concerned with the struggle between good and evil. Next, I will be moving on to discovering the historical, social, and cultural issues of the novel; this will discus what Stevensons literary influences were. Subsequently, I will be exploring the actual evil character oh Mr. Edward Hyde; this will include a character description of Hyde. Then, IRead More Personality and the Beast Within in The Strange Case of Dr. Jekyll and Mr. Hyde981 Words   |  4 PagesPersonality and the Beast Within in The Strange Case of Dr. Jekyll and Mr. Hyde Everyone has a dual personality, two sides, good and evil. Robert Louis Stephenson uses the book to explain this, he wanted people to realise that not only Dr Jekyll carries a double personality, but the other characters in the book too. Also the people reading it must see that they too, are a part of this frightening uncontrollable fact, that there is â€Å"the beast within† us all. Stephenson suggests that allRead More Robert Louis Stevenson’s The Strange Case of Dr Jekyll and Mr Hyde2544 Words   |  11 Pagesâ€Å"The Strange Case of Dr Jekyll and Mr Hyde† is a gothic horror novella written by Robert Louis Stevenson in the Victorian era. The novella follows a well-respected doctor - Henry Jekyll - and his struggle between good and evil when he takes a potion and becomes Mr Hyde. Robert Louis Stevenson - the author of the novella â€Å"The Strange Case of Dr Jekyll and Mr Hyde†- was born in Edinburgh in 1850 and died at the young age of forty-four. He wrote the book in 1886. As a child he was very closeRead MoreEssay on The Strange Case of Dr Jekyll and Mr Hyde2405 Words   |  10 PagesThe Strange Case of Dr Jekyll and Mr Hyde The strange case of Dr Jekyll and Mr Hyde was first published in1886, which was in the Victorian era. Dr Jekyll was a scientist who went too far in his experiments. He found a formula for a potion, which when drunk could separate his dual persona into good and pure evil. The formula not only affected him mentally but physically also