2019 CFA level 2 finquiz notes equity
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2019 CFA level 2 finquiz notes equity
Reoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuation 2019 CFA level 2 finquiz notes equity n of an asset; but it is a challenging task and investment’s success2. VALUE DEFINITIONS AND VALUATION APPLICATIONS2.1What is Value?2.1.1)Intrinsic ValueThe intrinsic valve of an asset is the valve of the asset, which IS calculated based on “hypothetically" complete understanding of the asset's inve 2019 CFA level 2 finquiz notes equity stment characteristics.•Abnormal/ Alpha Return: It is an excess risk adjusted return•Ex post alpha: It is the historical hold.ng period return minus t2019 CFA level 2 finquiz notes equity
he historical return on similar assets.•Ex-Ante Alpha: Forward looking Alpha IS called exante alpha.Active investment manager estimates abnormal/alphaReoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuation 2019 CFA level 2 finquiz notes equity -P: Mispricing V-P: True Mispricing Vr-V: Valuation Errorwhere.Vỉ = estimated value p = market priceV = intrinsic vaiueThis explains that reference b/w estimated value & prevaÊÉng market price is the sum of two components.I)True mispricing: True (non- observable) intrinsic value"V” - observed market 2019 CFA level 2 finquiz notes equity price “P"it) Valuation Error: It is an error in the estimate of intrinsic value i.e. estimated intrinsic value “VE" - true |non-observablel intrinsic2019 CFA level 2 finquiz notes equity
value "V•Good quality forecasts are essential for successful active security selection, which means that expectations should be correct and should beReoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuation 2019 CFA level 2 finquiz notes equity equity valuation persists Moreover, it is not necessary that market price will converge to perceived Intrinsic value within the investor'sINTRODUCTIONsignificantly depends on the analyst’s ability to determine the correct value.investment horizon.2.1.2)Going-Concern Value and Liquidation ValueGoing 2019 CFA level 2 finquiz notes equity Concern Value: It is a value based on the assumption that the company wii continue its business activities into the foreseeable future.Liquidation Va2019 CFA level 2 finquiz notes equity
lue: It is a value based on the situation of financial distress i.e when a company is dissolved and its assets are sold indĩviduơty.•Orderly LiquidatiReoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuation 2019 CFA level 2 finquiz notes equity ing a larger period of time wtll be greater than the vaue of "perishable" inventory that has to be liquidated immediately.2.1.3)Fair Market Value and Investment ValueFair market Value: It is the price at which an asset (or liability) would change hands between both a willing buyer and a seller when 2019 CFA level 2 finquiz notes equity none of them is under compulsion to buy/sel and both have complete market information. This value Is often used for assessing taxes and for financial2019 CFA level 2 finquiz notes equity
reporting purposes.Investment Value: It is a value based on the requirements, expectations and potential synergies of the acquisitions to a specific bReoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuation 2019 CFA level 2 finquiz notes equity ttled, or an equity instrument granted could be exchanged between knowledgeable. w?Sng parties in an arm's length transaction2.1.4)Delinition ot Value: SummaryFor the purpose of pubic equity valuation, analysts mostly use Intrinsic value definition.2.2Applications of Equity ValuationEquity Valuation 2019 CFA level 2 finquiz notes equity is done for the following purposes:Reoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuationReoơing 26Equity Vduoncn: Appncotions ond ProcessesI.Valuation is the process of estimating the value of an asset. There ore many ways to do valuationGọi ngay
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