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what is the difference between wei and gas | wei is the lowest unit for the cryptocurrency ether ethereum s gas is an amount of ether paid in wei for transactions on the blockchain | |
what is 2 5 ether to wei | to convert eth to wei you multiply the amount by 1018 which in this case results in 2 500 000 000 000 000 000 wei the bottom linewei is the atomic smallest unit of ether on the ethereum blockchain it is equal to one quintillionth of an ether which makes transactions in wei very difficult to add for this reason there are many other unit however gwei giga or billion is the most commonly used unit because gas is charged in gwei | |
what is weighted | weighted is a description of adjustments to a figure to reflect different proportions or weights of components that make up that figure a weighted average for example takes into account the proportional relevance of each component instead of measuring each individual component equally the dow jones industrial average djia is a price weighted average that compares each security based on the stock s price relative to the sum of all the stocks prices the s p 500 index and nasdaq composite index on the other hand are based on market capitalization where each company is measured relative to its market value | |
where the djia and nasdaq indexes utilize weighting in their calculation to more closely approximate the effect that changing stock prices will have on the overall market weighting can also be used to help evaluate the past and current prices of individual instruments through technical analysis | breaking down weightedemphasis can be placed on the more pertinent data through weighting this method is used frequently in the investing and accounting world a weighted moving average for example places additional emphasis on the most recent data thereby providing a better view of current market activity similarly a weighted alpha measures how much a stock has risen or fallen over a certain period placing more emphasis on recent activity since more focus is placed on the current period the calculation provides a more relevant measure for short term analysis other weighted metrics include weighted average cost of capital wacc weighted average coupon and time weighted average annual rate of return paying attention to index weightspassive investing or index investing has many cheerleaders investing in an index is held out as the best way to participate in the stock market for many investors who do not have the time aptitude or inclination to follow the stock market this may be true for others though who care about balance in an index periodic checks of sector weightings are useful the s p 500 index the most common market index upon which several passive investment vehicles are formed can become overweighted in certain sectors such as information technology if the market caps of these constituents grow disproportionately relative to the other sectors if an investor is uncomfortable with too much weight in a particular sector an index fund may not be the right choice | |
what is weighted alpha | weighted alpha measures the performance of a security over a certain period usually a year but with relatively more importance given to recent activity compared to earlier performance alpha is a term used to describe an investment strategy s ability to beat the market or its edge alpha is thus also often referred to as excess return or abnormal rate of return which refers to the idea that markets are efficient and so there is no way to systematically earn returns that exceed the broad market as a whole understanding weighted alphaas implied in the name weighted alpha is a weighted measure of how much a security say a stock has risen or fallen over a defined period usually a year generally more emphasis is placed on recent activity by assigning higher weights to later performance measurements than those assigned to earlier measurements this helps to give a return figure that has a greater focus on the most current period which should prove to be more relevant when analyzing that security this metric is quite popular with technical analysts and those who tend to rely on analytics to augment their trading decision weighted alpha uses weighted mathematical calculations to arrive at an alpha performance figure alpha is a measure of risk adjusted performance relative to a benchmark in the field of asset management alpha is often thought of as a proxy for the fund manager s skill that reasoning can also be valid when analyzing a stock which is in part a reflection of the effectiveness of a firm s management team for example a stock that had returns on par with the benchmark adjusted for the level of risk assumed has an alpha of zero a positive alpha shows that the stock produced a return greater than the benchmark while a negative alpha indicates the converse weighted alpha calculationweighted calculations give an assigned weight based on various factors indexes use weighting to give higher weight to securities by price or market cap in a weighted alpha calculation higher weight is typically given to more recent time period returns over a time series weighted alpha calculations usually focus on one year of a security s return in general if a security has a positive weighted alpha an investor can assume its price has been gaining over the past year adversely if a security s price has a negative weighted alpha investors can assume that the one year price return is lower weighted alpha w n where w weight assigned to each data point alpha n number of days in defined time series begin aligned text weighted alpha frac sum w times alpha n textbf where w text weight assigned to each data point alpha text alpha n text number of days in defined time series end aligned weighted alpha n w where w weight assigned to each data point alphan number of days in defined time series in a weighted alpha calculation weights can vary based on preferences or technical analysis software programs some weighted alpha calculations may assign weights by quartiles while others use a standard decreasing weight methodology alpha is often used in conjunction with beta the greek letter which measures the broad market s overall volatility or risk known as systematic market risk weighted alpha inferencesweighted alpha is used by a variety of investors most commonly technical analysts will use weighted alpha as an indicator for supporting buy and sell signals technical analysts use this measure to identify companies that have shown a strong trend over the past year and more specifically to focus their attention on companies whose momentum is building when weighted alpha is positive it can support a bullish buy signal when weighted alpha is negative it can support a bearish sell signal as an example consider a stock that has experienced several highs and lows over the last year through both bullish and bearish trending patterns a technical analyst using a bollinger band channel may see that the price is approaching its support trendline if the stock has a positive weighted alpha it can be an affirmation that the stock s price has largely been gaining over the last year supporting another bullish push higher in another scenario a trader may see a stock s price reaching and beginning to exceed its resistance band in a bollinger band channel often this is a signal of a reversal and would indicate a sell signal however if this security has a positive weighted alpha it is more likely to break beyond its resistance level and move higher therefore the weighted alpha could support a buy trade in this scenario investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is weighted average | a weighted average is a calculation that takes into account the varying degrees of importance of the numbers in a data set a weighted average can be more accurate than a simple average in which all numbers in a data set are assigned an identical weight paige mclaughlin investopedia | |
what is the purpose of a weighted average | in calculating a simple average or arithmetic mean all numbers are treated equally and assigned equal weight but a weighted average assigns weights that determine in advance the relative importance of each data point in calculating a weighted average each number in the data set is multiplied by a predetermined weight before the final calculation is made a weighted average is most often computed to equalize the frequency of the values in a data set for example a survey may gather enough responses from every age group to be considered statistically valid but the 18 to 34 age group may have fewer respondents than all others relative to their share of the population the survey team may weigh the results of the 18 to 34 age group so that their views are represented proportionately however values in a data set may be weighted for other reasons than the frequency of occurrence for example if students in a dance class are graded on skill attendance and manners the grade for skill may be given greater weight than the other factors each data point value in a weighted average is multiplied by the assigned weight which is then summed and divided by the number of data points the final average number reflects the relative importance of each observation and is thus more descriptive than a simple average it also has the effect of smoothing out the data and enhancing its accuracy weighting a stock portfolioinvestors usually build a position in a stock over a period of several years that makes it tough to keep track of the cost basis on those shares and their relative changes in value the investor can calculate a weighted average of the share price paid for the shares to do so multiply the number of shares acquired at each price by that price add those values then divide the total value by the total number of shares a weighted average is arrived at by determining in advance the relative importance of each data point for example say an investor acquires 100 shares of a company in year one at 10 and 50 shares of the same stock in year two at 40 to get a weighted average of the price paid the investor multiplies 100 shares by 10 for year one and 50 shares by 40 for year two then adds the results to get a total of 3 000 then the total amount paid for the shares 3 000 in this case is divided by the number of shares acquired over both years 150 to get the weighted average price paid of 20 this average is now weighted with respect to the number of shares acquired at each price not just the absolute price the weighted average is sometimes also called the weighted mean advantages and disadvantages of weighted averageweighted average provides a more accurate representation of data when different values within a dataset hold varying degrees of importance by assigning weights to each value based on their significance weighted averages ensure that more weight is given to data points that have a greater impact on the overall result this allows for a more nuanced analysis and decision making process next weighted averages are particularly useful for handling skewed distributions or outliers within a dataset instead of being overly influenced by extreme values weighted averages take into account the relative importance of each data point this means you can manipulate your data set so it s more relevant especially when you don t want to consider extreme values thirdly weighted averages offer flexibility in their application across various fields and disciplines whether in finance statistics engineering or manufacturing weighted averages can be customized to suit specific needs and objectives for instance like we discussed above weighted averages are commonly used to calculate portfolio returns where the weights represent the allocation of assets weighted averages can also be used in the manufacturing process to determine the right combination of goods to use one downside of a weighted average is the potential for subjectivity in determining the weights assigned to each data point deciding on the appropriate weights can be challenging and it often involves subjective judgment where you don t actually know the weight to attribute this subjectivity can introduce bias into the analysis and undermine the reliability of the weighted average weighted averages may be sensitive to changes in the underlying data or weighting scheme small variations in the weights or input values can lead to significant fluctuations in the calculated average making the results less stable and harder to interpret this sensitivity can be particularly problematic in scenarios where the weights are based on uncertain or volatile factors which may include human emotion i e are you confident you ll feel the same about the appropriate weights over time last the interpretation of weighted averages can be more complex compared to simple arithmetic means though weighted averages provide a single summary statistic they may make it tough to understand the full scope of the relationship across data points therefore it s essential to carefully assess how the weights are assigned and the values are clearly communicated to those who interpret the results accurate representation via weighted significance aiding nuanced decision making | |
what is weighted average cost of capital wacc | weighted average cost of capital wacc represents a company s average after tax cost of capital from all sources including common stock preferred stock bonds and other forms of debt as such wacc is the average rate that a company expects to pay to finance its business wacc is a common way to determine required rate of return rrr because it expresses in a single number the return that bondholders and shareholders demand to provide the company with capital a company s wacc is likely to be higher if its stock is relatively volatile or if its debt is seen as risky because investors will want greater returns to compensate them jessica olah investopediaunderstanding wacccalculating a company s wacc is useful for investors and stock analysts as well company management although they may use it for different purposes in corporate finance determining a company s cost of capital can be important for a couple of reasons for instance wacc can be used as the discount rate for estimating the net present value of a project or acquisition if the company believes that a merger for example will generate a return higher than its cost of capital then it s likely a good choice for the company however if it anticipates a return lower than its investors are expecting then it might want to put its capital to better use 1to investors wacc is an important tool in assessing a company s potential for profitability in most cases a lower wacc indicates a healthy business that s able to attract money from investors at a lower cost by contrast a higher wacc usually coincides with businesses that are seen as riskier and need to compensate investors with higher returns if a company only obtains financing through one source say common stock then calculating its cost of capital would be relatively simple if investors expected a rate of return ror of 10 on their shares the company s cost of capital would be the same as its cost of equity 10 the same would be true if the company only used debt financing for example if the company paid an average yield of 5 on its bonds its cost of debt would be 5 this is also its cost of capital however many companies use both debt and equity financing in various proportions which is where wacc comes in wacc formula and calculationwacc e v r e d v r d 1 t c where e market value of the firm s equity d market value of the firm s debt v e d r e cost of equity r d cost of debt t c corporate tax rate begin aligned text wacc left frac e v times re right left frac d v times rd times 1 tc right textbf where e text market value of the firm s equity d text market value of the firm s debt v e d re text cost of equity rd text cost of debt tc text corporate tax rate end aligned wacc ve re vd rd 1 tc where e market value of the firm s equityd market value of the firm s debtv e dre cost of equityrd cost of debttc corporate tax rate wacc is calculated by multiplying the cost of each capital source debt and equity by its relevant weight and then adding those results together in the above formula e v represents the proportion of equity based financing while d v represents the proportion of debt based financing 1 the wacc formula thus involves the summation of two terms e v r e left frac e v times re right ve re d v r d 1 t c left frac d v times rd times 1 tc right vd rd 1 tc the former represents the weighted value of equity capital while the latter represents the weighted value of debt capital suppose that a company obtained 1 million in debt financing and 4 million in equity financing by selling common shares e v would equal 0 8 4 000 000 5 000 000 of total capital and d v would equal 0 2 1 000 000 5 000 000 of total capital wacc can be calculated using excel the biggest challenge is sourcing the correct data to plug into the model see investopedia s explanation of how to calculate wacc in excel explaining the formula elementscost of equity re in the formula can be a bit tricky to calculate because share capital does not technically have an explicit value when companies reimburse bondholders the amount they pay has a predetermined interest rate on the other hand equity has no concrete price that the company must pay as a result companies have to estimate the cost of equity in other words the rate of return that investors demand based on the expected volatility of the stock because shareholders will expect to receive a certain return on their investment in a company the equity holders required rate of return is a cost from the company s perspective if the company fails to deliver this expected return shareholders may simply sell their shares which can lead to a decrease in both share price and the company s value the cost of equity then is essentially the total return that a company must generate to maintain a share price that will satisfy its investors companies typically use the capital asset pricing model capm to arrive at the cost of equity in capm it s called the expected return of investment again this is not an exact calculation because companies have to lean on historical data which can never accurately predict future growth 2determining cost of debt rd in the formula on the other hand is a more straightforward process this is often done by averaging the yield to maturity for a company s outstanding debts this method is easier if you re looking at a publicly traded company that has to report its debt obligations for privately owned companies one can look at the company s credit rating from firms such as moody s and s p global and then add a relevant spread over risk free assets for example treasury bonds of the same maturity to approximate the return that investors would demand businesses are able to deduct interest expenses from their taxes 3 because of this the net cost of a company s debt is the amount of interest it is paying minus the amount it was able to deduct on its taxes this is why rd x 1 the corporate tax rate is used to calculate the after tax cost of debt wacc vs required rate of return rrr the required rate of return is the minimum rate that an investor will accept if they expect a smaller return than they require they ll put their money elsewhere one way to determine the rrr is by using the capm which looks at a stock s volatility relative to the broader market its beta to estimate the return that stockholders will require another method for identifying the rrr is by calculating wacc the advantage of using wacc is that it takes the company s capital structure into account that is how much it leans on debt financing vs equity 4limitations of waccthe wacc formula seems easier to calculate than it really is because certain elements of the formula such as the cost of equity are not consistent values various parties may report them differently for different reasons as such although wacc can often offer valuable insight into a company one should always use it along with other metrics in deciding whether to invest more complex balance sheets such as for companies using multiple types of debt with various interest rates make it more difficult to calculate wacc in addition there are many inputs to calculating wacc such as interest rates and tax rates all of which can be affected by market and economic conditions example of how to use waccconsider a hypothetical manufacturer called xyz brands suppose the market value of the company s debt is 1 million and its market capitalization or the market value of its equity is 4 million let s further assume that xyz s cost of equity the minimum return that shareholders demand is 10 here e v would equal 0 8 4 000 000 of equity value divided by 5 000 000 of total financing therefore the weighted cost of equity would be 0 08 0 8 0 10 this is the first half of the wacc equation now we have to figure out xyz s weighted cost of debt to do this we need to determine d v in this case that s 0 2 1 000 000 in debt divided by 5 000 000 in total capital next we would multiply that figure by the company s cost of debt which we ll say is 5 last we multiply the product of those two numbers by 1 minus the tax rate so if the tax rate is 0 25 then 1 minus tc is equal to 0 75 in the end we arrive at a weighted cost of debt of 0 0075 0 2 0 05 0 75 when that s added to the weighted cost of equity 0 08 we get a wacc of 0 0875 or 8 75 0 08 weighted cost of equity 0 0075 weighted cost of debt that represents xyz s average cost to attract investors and the return that they re going to expect given the company s financial strength and risk compared with other investment opportunities | |
what is capital structure | companies use various means to obtain the capital they need which can include issuing bonds debt and shares of stock equity capital structure refers to how they mix the two | |
what is a debt to equity ratio | a debt to equity ratio is another way of looking at the risk that investing in a particular company may hold it compares a company s liabilities to the value of its shareholder equity the higher the debt to equity ratio the riskier a company is often considered to be 6the bottom lineweighted average cost of capital wacc is a useful measure for both investors and company executives however it can be difficult to compute with accuracy and usually should not be relied on all by itself | |
what is the weighted average cost of equity wace | weighted average cost of equity wace is a way to calculate the cost of a company s equity that gives different weight to different types of equities according to their proportion in the corporate structure instead of lumping retained earnings common stock and preferred stock together wace provides a more accurate idea of a company s total cost of equity determining an accurate cost of equity for a firm is integral for the firm to be able to calculate its cost of capital in turn an accurate measure of the cost of capital is essential when a firm is trying to decide if a future project will be profitable or not | |
how the weighted average cost of equity wace works | the weighted average cost of equity wace is essentially the same as the cost of equity that relates to the capital asset pricing model capm rather than simply averaging out the cost of equity a weighting is applied that reflects the mix of that equity type in the company at the time if the cost of equity was averaged without being weighted outliers in the cost of equity could cause an overstatement or understatement of the cost calculating the weighted average cost of equity wace calculating the weighted average cost of equity isn t as straightforward as calculating the cost of debt first you must calculate the cost of new common stock the cost of preferred stock and the cost of retained earnings separately the most common way to do this is the capm formula cost of equity risk free rate of return beta x market rate of return risk free rate of return generally speaking the cost of equity for common stock preferred stock and retained earnings will usually be within a tight range for this example let us assume the cost of common stock preferred stock and retained earnings are 14 12 and 11 respectively now calculate the portion of total equity that is occupied by each form of equity again let us assume this is 50 25 and 25 for common stock preferred stock and retained earnings respectively finally multiply the cost of each form of equity by its respective portion of total equity and sum of the values which results in the wace our example results in a wace of 19 5 wace 14 x 50 12 x 25 11 x 25 0 1275 or 12 8 simply averaging the cost of equity across categories in the example above would have yielded a cost of equity of 12 3 that said averaging is rarely done as the weighted average cost of equity is usually used as part of the larger calculation of a company s weighted average cost of capital wacc | |
why the weighted average cost of equity wace matters | potential buyers who are considering acquiring a company might use the weighted average cost of equity to help them assign a value to the future cash flows of the target company the results of this formula can also be coupled with other indicators such as the after tax cost of debt to form an assessment as mentioned the weighted average cost of equity is commonly combined with the weighted average cost of debt to calculate a firm s weighted average cost of capital wacc as part of the wacc the wace is used within the company to better assess how its campaigns and capital intensive projects translate into the overall return on earnings for the shareholders as a stand alone metric the weighted average cost of equity tends to temper a company s issuance of new stock if it is attempting to raise more capital debt in the form of bonds tends to be a cheaper way of raising capital for most companies and it is easier for investors to calculate the capital costs of debt when doing balance sheet analysis | |
what is the weighted average coupon wac | the weighted average coupon wac is a measurement of the rate of return on a pool of mortgages that is sold to investors as a mortgage backed security mbs the underlying mortgages are repaid at different lengths of time so the wac represents its return at the time it was issued and may differ from its wac later understanding a weighted average coupon wac banks routinely sell the mortgages they issue on a secondary mortgage market the buyers are institutional investors such as hedge funds and investment banks these buyers package the mortgages into marketable securities that can be traded to investors on the open market as mortgage backed securities mbs 1in the weighted average calculation the principal balance of each mortgage is used as its weighting factor mbs holders receive interest or coupon payments which are calculated as the weighted average of the underlying coupon of the mortgage loans backing the mbs 2the weighted average coupon wac is calculated by taking the gross of the interest rates owed on the underlying mortgages of the mbs and weighting them according to the percentage of the security that each mortgage represents the wac represents the average interest rate of different pools of mortgages with varying interest rates in the weighted average calculation the principal balance of each underlying mortgage is used as the weighting factor to calculate the wac the coupon rate of each mortgage or mbs is multiplied by its remaining principal balance the results are added together and the sum total is divided by the remaining balance another way to calculate the weighted average coupon is by taking the weights of each mortgage pool multiplying by their respective coupon rates and adding the result to get the wac 3for example suppose a mbs is composed of three different pools of mortgages with a principal balance of 11 million the first mortgage bundle or tranche consists of 4 million worth of mortgages that yield 7 5 the second pool has a 5 million mortgage balance at a 5 rate the third pool has 2 million worth of mortgages with a rate of 3 8 using the first method outlined above wac 4 million x 0 075 5 million x 0 05 2 million x 0 038 11 millionwac 300 000 250 000 76 000 11 millionwac 626 000 11 million 5 69 alternatively the wac an be computed by evaluating the weight of each of the mortgage tranches first pool 1 weight 4 million 11 million 36 36 pool 2 weight 5 million 11 million 45 45 pool 3 weight 2 million 11 million 18 18 sum of the weights is 100 the wac is therefore calculated as wac 36 36 x 0 075 45 45 x 0 05 18 18 x 0 038 wac 2 727 2 2725 0 6908 5 69 the weighted average coupon rate may change over the life of the mbs as various mortgage holders pay down their mortgages at different interest rates and on different timetables no mention of mortgage backed securities is complete without a reference to the 2007 2008 financial crisis which was blamed on them in large part many of the mbs investments of that period were backed by mortgages issued during the nationwide housing bubble and in many cases issued to borrowers who could not afford to repay them when the bubble burst many of these borrowers were forced into default and the value of the securitization of these assets melted away they were in fact collateralized with subprime loans 4 | |
what is a weighted average credit rating wacr | the weighted average credit rating wacr relates to the weighted average rating regarding all bonds in a bond fund this rating procedure provides investors with an idea as to a fund s credit quality it also helps to identify the overall risk involved with a bond portfolio the lower the weighted average credit rating the riskier a bond fund is the weighted average credit rating is designated in letter rating form including aaa bbb or ccc | |
how a weighted average credit rating is tabulated varies throughout the financial industry in general the weighted average credit rating takes into consideration the proportion of the value of each credit rating and considers it as a percentage of the total portfolio with individual rating weights the fund can determine the average credit rating | with a weighted average credit rating investors can uncover the true credit quality of a bond fund special considerationsthe weighted average credit rating is not the only statistic that investors have access to when understanding the credit quality of a fund statistical reporting companies may also integrate a linear factor into weighted average credit rating calculations similar in concept to standard weighted average calculations this methodology identifies the proportional weight of the value of each rating level with linear factor calculations a linear factor is assigned to each rating level based on the rating default probability an average linear factor is determined by the proportional credit ratings of the bonds in the portfolio the weighted average credit rating is then determined by its corresponding linear factor criticism of weighted average credit ratingsthis type of rating is not without controversy the weighted average credit rating process has been disputed in the bond fund industry as a result of the potential for investor confusion a weighted average rating methodology can take into consideration all of the potential rating classifications a fund can invest in therefore the fund may not hold any bonds in the specified weighted average rating category and this can result in confusion by those who see the tabulated figures example of a weighted average credit rating wacr a bond with 25 of its value in aaa 25 in bbb and 50 in ccc could have an average credit rating of b which is between bbb and ccc this may not necessarily provide a good representation to investors since the fund does not hold any b bonds for this reason most bond funds choose to provide a scale with weightings by credit rating in their marketing materials this helps investors to understand the concentration of bonds by rating and not just look to the results of the weighted average credit rating the vanguard long term corporate bond etf is a large bond fund with more than 6 billion in assets the fund does not provide a weighted average credit rating in its marketing materials or fund reporting instead it includes the following scale which shows its credit quality dispersion as of december 31 2020 1 source vanguard 1 | |
what is weighted average life wal | the weighted average life wal is the average length of time that each dollar of unpaid principal on a loan a mortgage or an amortizing bond remains outstanding calculating wal shows an investor an analyst or a portfolio manager how many years it will take to receive roughly half of the amount of the outstanding principal the formula is useful in measuring the credit risk associated with fixed income securities understanding weighted average life wal the time weightings used in weighted average life calculations are based on payments to the principal in many loans such as mortgages each payment consists of payments to principal and payments to interest in wal only the principal payments are considered and these payments tend to get larger over time with early payments of a mortgage going mostly to interest while payments made towards the end of the loan are applied mostly to the principal balance of the loan time periods with higher dollar amounts have more weight in wal for example if the majority of the repayment to principal is in 10 years the weighted average life will be closer to 10 years weighted average life examplethere are four steps involved in calculating an amortizing bond s wal assume a bond makes one payment per year over the next five years the bond s payments are 1 000 2 000 4 000 6 000 and 10 000 therefore the total value of the unweighted payments before the wal computation is 23 000 the first step of the calculation is to take each of these payments and multiply them by the number of years until the payment occurs in this example these values would be the second step in the calculation is to add these weighted amounts together in this example the total weighted payments equal 91 000 step three is to add up the bond s total unweighted payments in this example the total is 23 000 the final step is to take the total weighted payments and divide this value by the total unweighted payments to get the wal weighted average life 91 000 23 000 3 96 yearsin this example wal is roughly equal to 4 00 and at the end of four years 13 000 of the 23 000 of principal is paid slightly more than half the largest payment is the final payment so the wal is closer to the total five year term of the bond on the other hand if year two and year five payments were switched the weighted average life would be much lower weighted average life 67 000 23 000 2 91 yearswal gives investors or analysts a rough idea of how quickly the bond in question pays out returns since rational investors want to receive returns earlier if two bonds were compared the investor would select the one with the shorter wal stated differently the most significant credit risk of a loan is the risk of loss of principal and a smaller wal indicates a higher likelihood that the principal will be repaid in full | |
what is weighted average loan age wala | the weighted average loan age wala measures the average age of the loans in a pool of mortgage backed securities mbs the weights are based on the dollar amount of each loan at each maturity in proportion to the aggregate total of the pool and can be weighted on the remaining principal balance dollar figure or the nominal value of the loan | |
how weighted average loan age works | weighted average loan age is used by investors of mortgage backed securities to estimate how long it will take for a pool of mortgage backed securities to be repaid the measure varies over time due to the fact that some mortgages get paid off faster than others essentially a mortgage backed security turns the bank into an intermediary between the homebuyer and the investment industry a bank can grant mortgages to its customers and then sell them at a discount for inclusion in an mbs the bank records the sale as a plus on its balance sheet and loses nothing if the homebuyer defaults sometime down the road the investor who buys a mortgage backed security is essentially lending money to home buyers an mbs can be bought and sold through a broker the minimum investment varies between issuers wala is arrived at by multiplying the initial nominal value of each individual mortgage in the mbs pool by the number of months since the mortgage loan was originated wala and other measures of mbs maturity are used to estimate both profit potential and prepayment risk prepayment risk is the risk involved with the premature return of principal on a fixed income security such as when a mortgage is refinanced or a house is sold and the mortgage paid off when principal is returned early future interest payments will not be paid on that part of the principal meaning investors in associated fixed income securities will not receive interest paid on the principal weighted average loan age vs weighted average maturityweighted average maturity wam and wala are both used to estimate the likelihood of an investment in a mortgage backed security being profitable however wam tends to be a more broadly used measure for the maturity of pools of mortgage backed securities it measures the average time it takes for securities in a debt portfolio to mature weighted in proportion to the dollar amount invested in the portfolio portfolios with higher weighted average maturities are more sensitive to interest rate changes wala is actually calculated as the inverse of wam wam computes the percentage value of each mortgage or debt instrument in the portfolio the number of months or years until the bond s maturity is multiplied by each percentage and the sum of the subtotals equals the weighted average maturity of the bonds in the portfolio | |
what is the weighted average market capitalization | the weighted average market capitalization refers to a type of stock market index construction that is based on the market capitalization of the index s constituent stocks large companies would therefore account for a greater portion of an index than smaller stocks this means the movement of an index would depend on a small set of stocks the most well known market capitalization weight index is the s p 500 which tracks the 500 largest assets by market capitalization the top four holdings combine for over 10 of the entire index these include apple aapl microsoft msft amazon amzn and meta formerly facebook meta 1 the s p 500 is widely considered a gauge of the strength of the broader market and a benchmark for performance understanding the weighted average market capitalizationthe weighted average market capitalization is determined by multiplying the current market price by the number of outstanding shares and then taking an average to determine the weighting for example if a company s market capitalization is 1 million and the market capitalization of all stocks in the index is 100 million the company would represent 1 of the index morningstar calculates the metric by taking a geometric mean of the market capitalization of the stocks in a fund whereas other providers use an arithmetic mean 2some investors believe a weighted average market capitalization is the optimal method of asset allocation as it reflects the actual behavior of markets this way larger companies tend to have a greater influence over the index just as is the case in the s p 500 this leads to a natural rebalancing mechanism where growing companies are admitted to the index and shrinking ones become excluded investors also believe the methodology causes less risk because a larger proportion of the fund is allocated to stable companies but there are some limitations to the strategy when small cap stocks outperform larger ones as they have for most of history there are fewer opportunities for index investors to gain lofty returns meanwhile market cap weighted indexes like the s p 500 give off the appearance of diversification but a few stocks dictate a larger portion of the movement this represents a big bet that the efficient market hypothesis holds through bull and bear markets the efficient market hypothesis says that stock prices reflect all information available and trade at fair market value on all exchanges alternatives to weighted average market capitalizationalternative methods of asset allocation include price weighting and equal market cap weighting among many more the holdings of a price weighted index are determined by a simple mathematical average of several stock prices the dow jones industrial average is perhaps the most well known index that employs price weighting 3in contrast an equal weighted index gives the same weight to each stock in a portfolio or fund for example the s p 500 equal weight index is the equal weighted version of the popular market cap weighted s p 500 4 | |
what is weighted average maturity wam | weighted average maturity wam is the weighted average amount of time until the maturities on mortgages in a mortgage backed security mbs this term is used more broadly to describe maturities in a portfolio of debt securities including corporate debt and municipal bonds the higher the wam the longer it takes for all of the mortgages or bonds in the portfolio to mature wam is used to manage debt portfolios and to assess the performance of debt portfolio managers 1wam is closely related to weighted average loan age wala understanding weighted average maturitywam is calculated by computing the percentage value of each mortgage or debt instrument in the portfolio the number of months or years until the bond s maturity is multiplied by each percentage and the sum of the subtotals equals the weighted average maturity of the bonds in the portfolio 1wam is used as a tool to manage bond portfolios and to assess the performance of portfolio managers mutual funds for example offer bond portfolios with a variety of wam guidelines and a fund portfolio may have a wam as short as five years or as long as 30 years the investor can choose a bond fund that matches a particular investing time frame the fund s investment objective includes a benchmark such as a bond index and the benchmark portfolio s wam is available for investors and portfolio managers a portfolio manager s investment performance is judged based on the rate of return and the wam on the fund s bond portfolio 34bond laddering is an investment strategy that involves purchasing bonds with different maturity dates which means that the dollars in the portfolio are returned to the investor at different points over time a laddering strategy allows the owner to reinvest bond maturity proceeds at current interest rates over time which reduces the risk of reinvesting the entire portfolio when interest rates are low bond laddering helps an income oriented investor maintain a reasonable interest rate on a bond portfolio and these investors use wam to assess the portfolio 5example of how wam is computedassume for example that an investor owns a 30 000 portfolio which includes three bond holdings to compute wam each of the percentages is multiplied by the years until maturity so the investor can use this formula 16 7 x 10 years 33 3 x 6 years 50 x 4 years 5 67 years or about five years eight months weighted average maturity vs weighted average loan ageweighted average maturity wam and weighted average loan age wala are both used to estimate the likelihood of an investment in a mortgage backed security being profitable however wam tends to be a more broadly used measure for the maturity of pools of mortgage backed securities it measures the average time it takes for securities in a debt portfolio to mature weighted in proportion to the dollar amount invested in the portfolio portfolios with higher weighted average maturities are more sensitive to interest rate changes 2wala is actually calculated as the inverse of wam wam computes the percentage value of each mortgage or debt instrument in the portfolio the number of months or years until the bond s maturity is multiplied by each percentage and the sum of the subtotals equals the weighted average maturity of the bonds in the portfolio 1 | |
what is weighted average rating factor warf | the weighted average rating factor warf is a measure that is used by credit rating companies to indicate the credit quality of a portfolio this measure aggregates the credit ratings of the portfolio s holdings into a single rating warfs are most often calculated for collateralized debt obligations cdos understanding the weighted average rating factor warf to calculate the weighted average rating factor on a cdo the rating agencies must first determine a credit rating for each instrument underlying the cdo in the fitch ratings taxonomy for example this rating can range from extremely high credit quality aaa to low quality ccc to default d this letter rating corresponds to a numerical rating factor which in turn correspond to the 10 year probability of default the warf is determined by calculating the weighted average of these numerical factors to calculate the weighted average the notional balance of the asset is multiplied by the rating factor and then these values are summed this sum is then divided by the total notional balance of the portfolio | |
what is the weighted average remaining term wart | weighted average remaining term wart is a metric that captures the average time to maturity of a portfolio of asset backed securities abs the longer the wart the longer the portfolio s assets will take to mature on average also known as the weighted average maturity wam wart is often used in relation to mortgage backed securities mbs but can also be applied to any portfolio of fixed income securities wart is closely related to weighted average loan age wala which is its inverse | |
how the weighted average remaining term wart works | the wart of a portfolio is a helpful metric because it helps investors understand whether the time to maturity of the assets within the portfolio is relatively short or long for instance a mbs whose underlying mortgages are all very near to the end of their terms would have a low overall wart while one with mortgages that have only recently been initiated would have a higher wart depending on their risk tolerances and sources of funding some investors may prefer being exposed to investments with a particular time to maturity to calculate the wart of a portfolio the investor first adds together the outstanding balance of the underlying assets and calculates the size of each asset in relation to that total then the investor would weigh the remaining time to maturity of each asset by using each asset s relative size as a final step they would then add up the weighted times to maturity of each asset to arrive at a wart for the entire portfolio wart is commonly used in the disclosure materials associated with mbs such as those offered by freddie mac in this context wart serves not to compare two securities but to demonstrate the effects of external forces such as prepayment on the wart of the security an investor considering a freddie mac security would consider these wart calculations when comparing it to an alternative investment or when seeking to construct a portfolio containing different warts example of wartto illustrate consider an mbs consisting of four mortgage loans in which loan 1 has 150 000 of remaining principal due in five years loan 2 has 200 000 due in seven years loan 3 has 50 000 due in 10 years and loan 4 has 100 000 due in 20 years the total remaining value of the loans is therefore 500 000 to calculate the wart our next step would be to calculate each mortgage s share of the total remaining value by dividing each mortgage s remaining principal by the 500 000 total we would find that loan 1 represents 30 of the total loan 2 represents 40 loan 3 represents 10 and loan 4 represents 20 we can then calculate the weighted remaining term of each mortgage by multiplying its time to maturity by its share of the 500 000 total in doing so we find the following weighted remaining terms our final step is to simply add these weighted years together to arrive at a wart for the entire portfolio in this case our wart is 1 5 2 8 1 4 9 3 years wart and interest rate riskin general bonds and other fixed income securities with longer maturities have greater price sensitivity to interest rate changes than shorter maturity securities known as the security s duration mbs and abs with larger warts therefore hold bonds that on average will have more interest rate risk than those with smaller warts one way to reduce this type of risk is through laddering bond laddering is an investment strategy that involves purchasing bonds with different maturity dates which means that the dollars in the portfolio are returned to the investor at different points over time a laddering strategy allows the owner to reinvest bond maturity proceeds at current interest rates over time which reduces the risk of reinvesting the entire portfolio when interest rates are low bond laddering helps an income oriented investor maintain a reasonable interest rate on a bond portfolio and these investors use wart to assess the portfolio wart vs walaweighted average remaining term wart and weighted average loan age wala are both used to estimate the credit risk interest rate sensitivity and potential profitability of fixed income portfolios wam tends to be used as a measure for the maturity of pools of mortgage backed securities mbs it measures the amount of time for the securities in a fixed income portfolio to mature weighted in proportion to the dollar amount invested portfolios with higher warts are more sensitive to interest rate changes wala is essentially the inverse of wart the number of months or years until the bond s maturity is multiplied by each percentage and the sum of the subtotals equals the weighted average maturity of the bonds in the portfolio 1 | |
what is the weightless economy | the term weightless economy refers to the trade of intangible or abstract products and services such as consulting software and professional services the weightless economy sells ideas information expertise or services other terms such as post industrial economy or new economy are also used to describe these intangible products the concept of the weightless economy largely evolved at the turn of the 21st century with the rise of information technology and the many products associated with it understanding the weightless economygranted weightless products have existed throughout civilization music is one however it is only since the mass adoption of computing and the development of the internet that economies have become dominated by weightless products it is now possible to deliver products and services to large numbers of customers and across great distances without the need to manufacture ship or store those products and services using physical labor and machines some products like music or software must be created only once before being distributed at minimal cost to as many consumers as want them for example a musician records a song only once in the past a record company needed to physically manufacture vinyl records or cds reproducing the song package them move them from factories to warehouses and finally deliver them to record stores where they could be purchased by customers all of these stages involve costs in terms of both money and labor today that same artist and record label can distribute their music online through streaming services such as spotify and online marketplaces such as the itunes store although the time needed to produce a song is largely unchanged its delivery is virtually effortless and instantaneous whether the song is sold to one customer or one million an economist looking at this example would say that the musician has a marginal cost of production of nearly 0 therefore the marginal profit associated with selling each additional song is essentially 100 once you have already recorded the song and made it available for sale online it costs you almost nothing to sell each additional unit this is the fundamental reason why it is possible for some technology companies to become so profitable in a relatively short amount of time in the weightless economy there is almost nothing preventing a company from acquiring a large pool of customers if demand for the product or service takes off | |
when a product or service comes to dominate its market the company that produces it can achieve almost limitless growth and profitability in the weightless economy examples are microsoft s windows operating system google s search engine or android operating system and facebook s social network and advertising platform | all of these products have substantial ongoing costs related to their management marketing and product enhancements but their production costs are minimal by comparison traditional firms such as manufacturing plants and brick and mortar retailers face more obstacles to growth and profitability due to the higher costs and logistical hurdles they must overcome in order to make their sales real world example of the weightless economythe weightless economy is characterized by information technology and is made possible by intellectual property rights an artist cannot make money selling songs online if their rights to those songs are not protected by copyright laws one of the consequences of the weightless economy is that it permits new entrepreneurs to offer products and services to a large potential customer base with relatively limited barriers to entry for example if coding is part of your skillset you can create a smartphone application and sell it through the apple and android app stores although there are certainly costs involved in doing so those costs pale in comparison to the cost of establishing a factory for example in 2011 garrett gee created a barcode scanning application called scan while he was a student at brigham young university in 2014 he sold the application to snapchat for 54 million although gee is an outlier in having achieved this level of success his story is representative of the kind of success that is made possible by the weightless economy | |
what is welfare | the term welfare refers to a range of government programs that provide financial or other aid to individuals or groups who can t support themselves welfare programs are typically funded by taxpayers and allow people to cope with financial stress during rough periods of their lives people who use welfare will receive a biweekly or monthly payment in most cases the goals of welfare vary but it looks to promote the pursuit of work education or a better standard of living in some cases | |
how welfare works | social welfare systems assist individuals and families through health care food assistance unemployment compensation housing assistance and child care assistance a caseworker is assigned to each individual or family applying for housing benefits in the u s to determine and confirm the applicant s needs 4the benefits available to an individual vary by state eligibility is determined based on factors surrounding the person s financial status and its relation to the minimum acceptable levels within a particular state the factors involved can include the family unit s size current income levels or an assessed disability 5social welfare systems may go by different names within each state but they often serve similar functions this can cause some confusion when attempting to compare one state s program to another the requirements to qualify also vary depending on the poverty line in a particular state this allows for adjustments based on the cost of living that isn t centered on one standard an individual who is on welfare is usually provided with free or deeply discounted goods and services the government requires that individuals or families seeking assistance must prove that their annual income falls below the federal poverty level fpl the fpl is an economic measure of income used to determine whether an individual or family qualifies for certain subsidies or aid the 2024 poverty guideline is 15 060 for one person and 31 200 for a family of four 6there s no standardized system for the administration of social welfare programs they vary by state they re listed under varying names and have different requirements to qualify special considerationswelfare programs are initiatives set up by the government to support poor developmentally challenged and disadvantaged groups the u s provides a relatively small social safety net compared to other developed countries and has fewer welfare programs available and with greater restrictions the history of welfare programs in the united states is complex and controversial in some circles of politics former president lyndon johnson created programs like head start food stamps and medicare in the 1960s 78 all these programs were designed to fight what he called the war on poverty in america former president richard nixon was responsible for spearheading the family assistance plan 9fast forward to the 1980s former president ronald reagan slashed welfare budget programs designed to help families and created welfare to work programs that were instituted in 40 states welfare reform legislation focused on shifting responsibility to welfare participants and advocating work over general assistance in 1996 10 welfare reform and assistance programs continue to expand and change under president joe biden s leadership in the 21st century 11america provides seven major welfare programs they include the u s federal government doesn t give out grants to individuals or families in need it s a scam if someone offers to help you get one do not give that individual any personal information 12types of u s welfare programsmedicaid is a health insurance program for people with income below federal poverty standards and aging adults pregnant women children people with disabilities and aging adults who fall below a certain income threshold are guaranteed coverage under the medicaid program medicaid is only offered to those who meet a specific low income threshold children don t qualify for medicaid but they have their own special welfare assistance program called the child s health insurance program chip data found that both chip and medicaid increased under the affordable care act aca when it went into effect 13supplemental security income is administered by the social security administration ssa and provides public assistance to children and adults living with disabilities these can include blindness neurological challenges respiratory disease and failure to thrive the full list of disabilities that qualify can be found on the ssa s website 14about 7 6 million people receive approximately 622 in disability income in the form of ssi each month according to statistics from the ssa 15the supplemental nutrition assistance program previously known as the food stamp program is run by each state it provides vouchers to low income households to buy nutritious and low cost foods millions of americans use snap vouchers every year to buy food for their households 16the special supplemental food program for women infants and children wic and the child nutrition program are two other programs designed to help children and families wic s offering includes nearly everything a mother and young child need to thrive up until the age of five 17 wic s services include food educational classes and support vouchers and health referrals for pregnancy breastfeeding and postpartum services the child nutrition program is an umbrella that shelters the national school lunch program the school breakfast program and the summer food service program all these programs are designed to ensure that kids get free or reduced cost breakfast and lunch when school is in session and when it s closed for the summer 18according to the pew research center 41 9 million people in 22 2 million households benefited from snap vouchers in april 2023 19the child s health insurance program is administered by the u s department of health and human services hhs it provides low cost health care to children in households that won t otherwise qualify for medicaid this program covers all benefits for children including dental care special needs assistance such as physical speech and language and occupational therapy provide a strong safety net for children in low income homes 20the u s government provides welfare assistance through temporary assistance to needy families congress created the program to prevent recipients from abusing the welfare program by mandating that all recipients find a job within two years or risk losing their welfare benefits the government provides an annual welfare grant of 16 5 billion to all states under this program 21 the states use their allocated funds to operate their own welfare programs states must also use some of their own money to fund their programs to receive the federal grant the housing choice voucher program is a federal program designed to help families with income below federal poverty standards people with disabilities and aging adults so they have access to affordable and livable rental homes in safe neighborhoods in the private market livable means clean sanitary and safe these vouchers are given out by local public housing agencies that receive funding from the federally run u s department of housing and urban development hud office individuals and families who qualify for vouchers may live anywhere they re not limited to subsidized housing projects but can be used in any residential neighborhood that meets pha s health and safety requirements voucher recipients must find their own housing under this program the housing subsidy is directly paid to the landlord of the rental by the pha the family or individual is responsible for paying the difference between the market price of the rent and the amount subsidized by the voucher program out of pocket a family could use vouchers to purchase a modest home in an affordable neighborhood in rare circumstances and under specific requirements the transaction would have to be authorized by the pha however 22the eitc is designed to help low to moderate income individuals and families get a tax break the maximum tax credit for 2024 for qualifying taxpayers is 7 830 23 the phaseout amount for married couples filing jointly in 2024 is 66 819 24entitlements are social or economic programs promised by the government to all its citizens unlike welfare they don t typically have certain criteria or qualifications attached to them social security income and medicare are federal entitlement programs offered to older americans regardless of their income or wealth although the amounts of the entitlement may be affected by these factors who qualifies for welfaregovernment welfare is primarily aimed at people with little to no income as well as aging adults and those with disabilities welfare can include grants food stamps vouchers medicaid health care and housing assistance the subsidized program is only available to legal citizens and permanent residents of the united states federal law bans states from using grants to assist most legal immigrants unless they ve resided in the country for five years or more 25a valid social security number ssn is required to apply for welfare all family members must have an ssn in households with more than one person individuals who are applying for welfare must also meet their states requirements in addition to those imposed by the federal government some states require that the applicant be a resident of that state to live there continuously 2526people s desired outcomes on welfare will depend primarily on the circumstances that caused them to apply for aid | |
what is considered welfare | any federal or state government program that provides financial or other assistance for housing food and healthcare to individuals and families who meet specific guidelines is considered welfare 27 | |
what makes you eligible for welfare | different welfare programs each have their own eligibility requirements including income limits providing proof that you re a u s citizen or eligible non citizen and providing information about family size 28 | |
what can welfare help me with | the goal of welfare is to support families and individuals in need as they work toward a more secure financial life welfare programs are designed to help individuals and families secure safe and clean housing get access to neonatal health and medical care purchase food and take advantage of tax breaks 28 | |
what welfare programs does the united states provide | welfare programs in the u s include medicaid supplemental security income supplemental nutrition assistance program children s health insurance program temporary assistance for needy families housing assistance and the earned income tax credit | |
what is social welfare | a social welfare system assists those in need whether they re individuals or families various types of welfare are available and how much welfare you re eligible for depends on factors like the country region or state in which you live the federal government provides money to each state and the welfare programs operate on a state by state basis in the u s 28 some social welfare programs in countries such as canada send money directly to the individual or family in need if they qualify 29the bottom linewelfare encompasses a wide range of government programs that are designed for individuals and families who don t make enough money to afford a decent standard of living housing food medical care and financial assistance for daily life are all provided by separate social welfare programs these programs are funded by taxpayers and help those who are in need cope with financial stress and hardship recipients often receive biweekly or monthly payments in the form of food stamps vouchers or direct payments in some cases the goal of welfare is to support families and individuals in need as they work toward a more secure financial life | |
what was the welfare and pension plans disclosure act wppda | the welfare and pension plans disclosure act wppda was a 1950s era law that gave the u s department of labor regulatory authority over private employee benefits plans for the first time in an effort to increase transparency the wppda mandated that employers and labor unions provide plan descriptions and financial reports to the government it was intended to make plan sponsors more accountable to participants and beneficiaries for the financial health of the plans understanding the welfare and pension plans disclosure actthe welfare and pension plans disclosure act required the u s labor department to file information about all pension plans with more than 25 employees participating it also required pension plans that totaled between 25 and 100 employees to file detailed descriptions about plan administration plans that had more than 100 participants needed to file financial reports on an annual basis in addition to providing relevant details about their plan 1a 1962 amendment to the welfare and pension plans disclosure act increased regulatory authority over the plans by giving the government enforcement interpretative and investigatory powers the wppda was a precursor to the much broader employee retirement income security act erisa which replaced it in 1974 2 | |
how erisa expanded on the wppda | the employee retirement income security act of 1974 protects americans retirement assets by implementing rules that qualified retirement plans must follow to ensure plan fiduciaries use plan assets appropriately as outlined by erisa plans must provide participants with information about plan features and funding and regularly produce relevant information free of charge 2erisa adds to the requirements under the welfare and pension plans disclosure act by establishing standards of fiduciary duty protecting the plans from mismanagement and increasing the rights of participants and beneficiaries erisa defines a fiduciary as anyone who exercises discretionary authority or control over a plan s management or assets including anyone who provides investment advice to the plan fiduciaries who do not follow the principles of proper conduct may be held responsible for making up losses to the plan in addition erisa addresses fiduciary provisions and bans the misuse of assets through this particular set of provisions 3in addition to keeping participants informed of their legal rights erisa grants participants the right to sue for benefits and breaches of fiduciary duty to ensure participants do not lose their retirement contributions if a defined plan is terminated erisa guarantees payment of certain benefits through the pension benefit guaranty corporation a federally charted corporation 4 | |
what is welfare economics | welfare economics is the study of how the allocation of resources and goods affects social welfare this relates directly to the study of economic efficiency and income distribution as well as how these two factors affect the overall well being of people in the economy in practical terms welfare economists seek to provide tools to guide public policy to achieve beneficial social and economic outcomes for all of society however welfare economics is a subjective study that depends heavily on chosen assumptions regarding how welfare can be defined measured and compared for individuals and society as a whole understanding welfare economicswelfare economics begins with the application of utility theory in microeconomics utility refers to the perceived value associated with a particular good or service in mainstream microeconomic theory individuals seek to maximize their utility through their actions and consumption choices and the interactions of buyers and sellers through the laws of supply and demand in competitive markets yield consumer and producer surplus a microeconomic comparison of consumer and producer surplus in markets under different market structures and conditions constitutes a basic version of welfare economics the simplest version of welfare economics can be thought of as asking which market structures and arrangements of economic resources across individuals and productive processes will maximize the sum total utility received by all individuals or will maximize the total of consumer and producer surplus across all markets welfare economics seeks the economic state that will create the highest overall level of social satisfaction among its members pareto efficiencythis microeconomic analysis leads to the condition of pareto efficiency as an ideal in welfare economics when the economy is in a state of pareto efficiency social welfare is maximized in the sense that no resources can be reallocated to make one individual better off without making at least one individual worse off one goal of economic policy could be to try to move the economy toward a pareto efficient state 1to evaluate whether a proposed change to market conditions or public policy will move the economy toward pareto efficiency economists have developed various criteria which estimate whether the welfare gains of a change to the economy outweigh the losses these include the hicks criterion the kaldor criterion the scitovsky criterion also known as kaldor hicks criterion and the buchanan unanimity principle in general this kind of cost benefit analysis assumes that utility gains and losses can be expressed in money terms it also either treats issues of equity such as human rights private property justice and fairness as outside the question entirely or assumes that the status quo represents some kind of ideal on these types of issues social welfare maximizationhowever pareto efficiency does not provide a unique solution to how the economy should be arranged multiple pareto efficient arrangements of the distributions of wealth income and production are possible moving the economy toward pareto efficiency might be an overall improvement in social welfare but it does not provide a specific target as to which arrangement of economic resources across individuals and markets will actually maximize social welfare to do this welfare economists have devised various types of social welfare functions maximizing the value of these functions then becomes the goal of welfare economic analysis of markets and public policy results from this type of social welfare analysis depend heavily on assumptions regarding whether and how utility can be added or compared between individuals as well as philosophical and ethical assumptions about the value to place on different individuals well being these allow the introduction of ideas about fairness justice and rights to be incorporated into the analysis of social welfare but render the exercise of welfare economics an inherently subjective and possibly contentious field | |
how is economic welfare determined | under the lens of pareto efficiency optimal welfare or utility is achieved when the market is allowed to reach an equilibrium price for a given good or service it s at this point that consumer and producer surpluses are maximized 1however the aim of most modern welfare economists is to apply notions of justice rights and equality to the machinations of the market in that sense markets that are efficient do not necessarily achieve the greatest social good one reason for that disconnect the relative utility of different individuals and producers when assessing an optimal outcome welfare economists could theoretically argue for example in favor of a higher minimum wage even if doing so reduces producer surplus if they believe the economic loss to employers would be felt less acutely than the increased utility experienced by low wage workers practitioners of normative economics which is based on value judgments may also try to measure the desirability of public goods that consumers don t pay for on the open market the desirability of improvements to air quality brought about by government regulations is an example of what practitioners of normative economics might measure measuring the social utility of various outcomes is an inherently imprecise undertaking which has long been a criticism of welfare economics however economists have a number of tools at their disposal to gauge individuals preferences for certain public goods they may conduct surveys for example asking how much consumers would be willing to spend on a new highway project and as the economist per olov johansson points out researchers could estimate the value of say a public park by analyzing the costs people are willing to incur in order to visit it 2another example of applied welfare economics is the use of cost benefit analyses to determine the social impact of specific projects 3 in the case of a city planning commission that s trying to evaluate the creation of a new sports arena the commissioners would likely balance the benefits to fans and team owners with that of businesses or homeowners displaced by new infrastructure criticism of welfare economicsin order for economists to arrive at a set of policies or economic conditions that maximize social utility they have to engage in interpersonal utility comparisons to draw on a previous example one would have to deduce that minimum wage laws would help low skill workers more than they would hurt employers and potentially certain workers who might lose their jobs detractors of welfare economics contend that making such comparisons in any accurate way is an impractical goal it s possible to understand the relative impact on the utility of for example changes in prices for the individual but beginning in the 1930s british economist lionel robbins argued that comparing the value that different consumers place on a set of goods is less practical robbins also disparaged the lack of objective units of measurements to compare utility among different market participants 4perhaps the most potent attack on welfare economics came from kenneth arrow who in the early 1950s introduced the impossibility theorem which suggests that deducing social preferences by aggregating individual rankings is inherently flawed rarely are all the conditions present that would enable one to arrive at a true social ordering of available outcomes if for instance you have three people and they re asked to rank different possible outcomes x y and z you might get these three orderings you might conclude that the group prefers x over y because two people ranked the former over the latter along the same lines one can conclude that the group prefers y to z since two of the participants put them in that order but if we therefore expect x to be ranked above z we would be wrong in fact the majority of subjects put z ahead of x therefore the social ordering that was sought is not attained we re simply stuck in a cycle of preferences such attacks dealt a serious blow to welfare economics which has waned in popularity since its heyday in the mid 20th century however it continues to draw adherents who believe despite these difficulties that economics is in the words of john maynard keynes a moral science | |
what is the first and second welfare theorem | welfare economics is associated with two main theorems the first is that competitive markets yield pareto efficient outcomes the second is that social welfare can be maximized at an equilibrium with a suitable level of redistribution | |
what are the assumptions of welfare economics | welfare economics seeks to evaluate how economic policies affect the well being of the community as a consequence it is generally based on a lot of assumptions that include above all taking individual preferences as a given who is the founder of welfare economics many different economists have been credited for their contributions to welfare economics neoclassical economists alfred marshall vilfredo pareto and arthur c pigou played a key role in its conception however it s also true that some of the main ideas behind welfare economics can be traced all the way back to the theories of adam smith and jeremy bentham | |
what is the welfare loss of taxation | welfare loss of taxation refers to a decrease in economic and social well being caused by the imposition of a new tax it is the total cost to society incurred just by the process of transferring purchasing power from taxpayers to the taxing authority these costs consist of economically productive activity foregone and real resources consumed either by the process of taxation or by the compensating behavior of workers consumers and businesses in response to the tax understanding the welfare loss of taxationtaxes are collected by governments to serve a variety of ends such as to fund the provision of public goods to achieve equitable distributions of wealth and income among the population or simply to transfer wealth from the subjects to the ruling class however the imposition and implementation of any tax is not itself a costless process and the impact of the tax on taxpayers changes the economic incentives that they are faced with and thus their behavior in a sense these costs can be thought of as the transaction costs of the tax side of public finance several types of costs can contribute to the total cost of taxation including deadweight losses in the taxed market and welfare losses in related markets compliance costs administrative costs tax evasion costs and tax avoidance costs they arise from two principal sources note that some of these changes in behavior may be considered positive in the presence of externalized costs or benefits to activities being discouraged or encouraged and this may offset some or all of the social cost of the tax as in the case of a pigouvian tax net of such externalities the costs of taxation represent a social welfare loss that can offset the social welfare benefits produced through the expenditure of public revenues generated these costs are an essential consideration in the design and implementation of economically optimal taxes which need to be balanced against any social benefits that may arise from the public services that can be funded or other benefits of the tax itself categories of social costs of taxationthe costs that make up the total welfare loss of taxation can be broken down into several categories the deadweight loss of taxation in the taxed market is the welfare loss of taxation most discussed and focused on by economists but because it is only one aspect of the total cost of taxation it at best represents a lower bound on the total welfare loss deadweight losses occur anytime the market price and quantity of a good are held apart from the equilibrium price and quantity implied by the fully internalized costs and benefits of producing and consuming the good embodied in the relevant supply and demand curves in welfare economics it can be calculated or depicted graphically as the difference between total economic surplus generated by a market with or without the tax based on the amount of consumer surplus producer surplus and the tax revenue collected because a tax drives a wedge between the price that buyers pay for some goods and the price the sellers receive for that good there is always a deadweight loss for any tax other than a perfect pigouvian tax deadweight losses tend to increase in direct proportion to the tax rate furthermore because changes in the after tax market price and quantity of the taxed good impact demand and supply conditions for other goods substitutes complements and goods that are upstream or downstream from the taxed good in the production process the tax can cause additional welfare losses in related markets additional losses may be incurred to the extent that the process of adjusting all the impacted markets to the after tax situation from their initial equilibria may itself be costly creating and implementing any tax involves some cost in and of itself the legislative process of enacting the tax and any subsequent reforms the process of documenting the goods to activities to be taxed the physical collection of the tax and the pursuit of tax evaders in order to enforce the tax all involve some cost to carry out these costs may vary based on the efficiency of the respective processes and the degree of voluntary compliance with the tax compliance costs are related to administrative costs in that they represent the administrative cost of the tax that has been externalized on to those who are taxed this includes the cost of producing and storing any accounting records forms or tax returns that are required for tax purposes and related professional tax preparation services this can also include any agency costs arising from taxes administered by third parties such as employers these costs can vary based on the complexity and specific requirements of the tax code avoidance costs represent the transaction costs and opportunity costs arising from any transactions that take place for the purpose of reducing one s tax burden examples include holding on to capital gains longer than an investor would otherwise prefer in order to get a lower tax rate investing in tax advantaged assets despite an otherwise lower rate of return or traveling to another tax jurisdiction to avoid paying a local tax the costs of any action that a taxpayer engages voluntarily in order to legally reduce their tax can be included here evasion costs are similar to avoidance costs but in addition to the cost of any activities pursued solely to evade the tax itself they also include the cost of any activities by the taxpayer to avoid detection when illegally evading taxes or alternatively the subjective cost to the taxpayer of incurring the risk of detection and punishment | |
what is a welfare state | the term welfare state refers to a type of governing in which the national government plays a key role in the protection and promotion of the economic and social well being of its citizens a welfare state is based on the principles of equality of opportunity equitable distribution of wealth and public responsibility for those unable to avail themselves of the minimal provisions of a good life social security federally mandated unemployment insurance programs and welfare payments to people unable to work are all examples of the welfare state most modern countries practice some elements of what is considered the welfare state that said the term is frequently used in a derogatory sense to describe a state of affairs where the government in question creates incentives that are beyond reason resulting in an unemployed person on welfare payments earning more than a struggling worker the welfare state is sometimes criticized as being a nanny state in which adults are coddled and treated like children understanding the welfare statethe welfare state has become a target of derision under this system the welfare of its citizens is the responsibility of the state some countries take this to mean offering unemployment benefits and base level welfare payments while others take it much further with universal healthcare free college and so on despite most nations falling on a spectrum of welfare state activity with few holdouts among the most developed nations there is a lot of charged rhetoric when the term comes up in conversation a lot of this owes to the history of the welfare state the history of the welfare statealthough fair treatment of citizens and a state provided standard of living for the poor dates back further than the roman empire the modern welfare states that best exemplify the historical rise and fall of this concept are the u k and the united states from the 1940s to the 1970s the welfare state in the u k based on the beveridge report took hold leading to a growth in the government to replace the services that were once provided by charities trade unions and the church in the u s the groundwork for the welfare state grew out of the great depression and the massive price paid by the poor and the working poor during this period the u k s system grew despite some spirited opposition by margaret thatcher in the 1980s and it continues today although it frequently needs restructuring and adjustments to keep it from getting too unwieldily the u s never went to the extent of the u k let alone somewhere like germany or denmark and ronald reagan had much more success than thatcher in shrinking government many people look at the differing economic growth rates of the u s and the u k throughout periods where the welfare state flourished and floundered to make conclusions on whether it is good or bad for a nation as a whole special considerationswhile it is true that the government is rarely the most cost effective agent to deliver a program it is also true that the government is the only organization that can potentially care for all its citizens without being driven to do so as part of another agenda running a welfare state is fraught with difficulties but it is also difficult to run a nation where large swaths of the population struggle to get the food education and care needed to better their personal situation | |
what is a wellbore | a wellbore is a hole that is drilled to aid in the exploration and recovery of natural resources including oil gas or water a wellbore is the actual hole that forms the well a wellbore can be encased by materials such as steel and cement or it may be uncased the motivation for drilling a wellbore is usually to extract oil or gas for a protracted period of time understanding a wellborea wellbore is a type of borehole which is a narrow shaft that is drilled into the ground either horizontally or vertically to extract water petroleum or gases other reasons for drilling boreholes include mineral exploration environmental site assessment and temperature measurement resource extraction companies dig wellbores to gain access to the natural resources they are seeking such as oil and gas a wellbore is usually a straight vertical shaft that bores into the ground to allow the recovery of natural resources it also includes the open hole and uncased portions of the well examples of a wellborethe following is a diagram of an oil wellbore encased in steel and cement the wellbore is the actual drilled hole the drilled hole may refer to the inside diameter of the wellbore wall or the rock face that bounds the drilled hole the wellbore can then be cased with materials to improve its stability while improving operation and resource recovery borehole is often used as a synonym for wellbores though sometimes the borehole refers to the open diameter of the hole itself whereas the wellbore is the hole including the casing between the opening and the rock or earth walls on the outside wellbores must be cleaned before and after production because if mud or debris is not removed it can increase operating costs while increasing safety and environmental risks furthermore drilling wellbores is complex and requires specialized training tools and equipment when successful the wellbore creates a well that can extract oil and gas for a protracted period of time though wellbores are commonly thought to belong to oil drillers a wellbore can be used for any type of well for thousands of years drillers have used drilling rigs or a hand operated rigs to dig wells the machinery and techniques used to create wellbores differ based on geological conditions and the intended purpose of the well for offshore drilling floating units or platforms supported by the seafloor are used for the drilling rig chinese miners have been creating wellbores since at least the qin dynasty 221 206 bc initially these wells could reach depths of 30 meters by the 1800s depths of 1 000 meters were being achieved 1 k s tom describes the drilling process the chinese method of deep drilling was accomplished by a team of men jumping on and off a beam to impact the drilling bit while the boring tool was rotated by buffalo and oxen early oil extraction in california in the 1860s and beyond used this method which they called kicking her down 2 | |
what is a wellness program | the term wellness program refers to an organizational approach to improving individual health wellness programs are commonly offered by companies to their employees providing financial incentives or other resources to stay healthy local and state governments and insurance companies may also offer incentive based wellness programs aimed at promoting the health of the public their employees or insured individuals some of the main offerings of wellness programs include company sponsored exercise and tobacco cessation programs understanding wellness programsemployers are taking a very serious approach to the health and wellbeing of their employees as such wellness programs have become a very important part of the corporate world these are initiatives that are designed to promote healthy living and work life balance for employees insurance companies and governments may also offer wellness programs for individuals | |
when individuals are healthy it improves productivity decreases sick days and leaves of absences lowers an organization s health insurance expenses reduces turnover and lowers the chances of workers compensation claims employees can also benefit from wellness programs through lower health insurance premiums decreased out of pocket medical expenditures and an increased sense of wellbeing | there are many ways that wellness programs can help individuals make healthy choices to improve their lifestyles companies can offer in house workout spaces or marked walking paths on the corporate campus to encourage physical activity some corporations may even offer financial incentives such as lower health insurance premiums or gift cards for meeting fitness goals offerings may include regardless of how they may be advertised by those who offer them many people choose not to participate in wellness programs some of the main reasons may include a lack of time and commitment and a general lack of knowledge on how to claim wellness related benefits some people may feel uncomfortable about how health screenings and personal information will be used corporate wellness programs should aim to promote the mindfulness of workplace noise and allow individuals to take regular breaks special considerationsorganizations may create wellness related linkages between their programs and other company benefits such as employee assistance programs eaps these programs provide support for employees when they find themselves in difficult emotional or physical situations that affect both their health and work eaps connect employees to counselors who can advise them confidentially on issues ranging from emotional distress a difficult medical diagnosis and personal or work related issues to life events such as marriage or parenting 1criticism of wellness programsalthough they are designed to give individuals a leg up on their health by improving wellbeing and reducing operating costs there is some criticism of wellness programs one common criticism of these programs is that they only cater to individuals who are already healthy and that they don t necessarily appeal to those who may have emotional and or physical issues some critics argue that health screenings are controversial components of many company wellness programs corporate wellness programs can lead to unnecessary over testing that s because some people contend that tracking cholesterol body mass index and other figures leads to de facto discrimination and heavier financial burdens placed on workers with below average health 2the motivations for employer and insurance company sponsored wellness programs are heavily debated although these programs may be designed to improve individual health corporations may adopt certain initiatives that may not actually contribute to people s wellbeing instead they may be developed to simply boost a company s bottom line | |
how much corporate wellness programs cost | companies spend anywhere from 150 to 1 200 per employee on wellness programs depending on the size of the company and the number of individuals employed according to the internal revenue service irs any employer provided cash rewards such as subsidies for gym memberships count as taxable income since they are not considered medical care 3that being said many studies have been done on the return on investment roi of wellness programs for example a towers watson and the national business group on health study found that companies with highly effective wellness programs had a significantly lower turnover rate than companies with ineffective programs with 9 voluntary attrition compared to 15 without research published in the harvard business review shows that roi on effective employee wellness programs can be as high as six to one 4examples of wellness programscorporate wellness programs offer a variety of scheduled programs including stress management seminars that cover topics such as sleep to work life balance cooking classes healthy recipe exchanges financial well being and fitness challenges other components of an effective corporate wellness program may include healthy options at vending machines and cafeterias healthy food may also be served at meetings and included in company provided overtime meals | |
how effective are workplace wellness programs | research published in the harvard business review shows that the return on investment for effective employee wellness programs can be as high as six to one | |
what are reasons why employees don t participate in wellness programs | many employees don t participate in wellness programs due to lack of time lack of knowledge on how to claim these benefits or sensitivities around certain types of wellness programs such as health screenings that may compromise their personal information | |
what steps should companies take to start a wellness program | companies looking to start a wellness program should poll their employees on the perks they find most beneficial while a younger company base may prefer wellness programs such as subsidized gym memberships more established corporations may prefer health screenings or mental health benefits such as access to free therapy counseling sessions or otherwise the bottom linecorporate wellness programs can offer their employees a huge benefit in managing their work and personal life balance from cooking classes to gym memberships health screenings massage therapists on campus and subsidized counseling sessions wellness programs come in all shapes and sizes ultimately serious investment in these benefits is ultimately about understanding the employees expectations if done well the return on investment in health care savings and lowering attrition can be significant | |
what is a wells notice | a wells notice is a notification issued by regulators to inform individuals or companies of completed investigations where infractions have been discovered it usually takes the form of a letter which notifies recipients both of the broad nature of the violations uncovered as well as the nature of the enforcement proceedings to be initiated against the recipient 1understanding wells noticesthe wells notice is named after the wells committee formed in 1972 by then sec chair william j casey in order to review the enforcement practices and policies of the securities and exchange commission sec and chair by john wells 3the receipt of a wells notice means that the sec may bring a civil action against the person or firm named therein and gives said person or firm the chance to offer information as to why such an action shouldn t be brought 1responding to a wells noticeafter receiving a wells notice recipients have a chance for prospective defendants in sec enforcement proceedings to speak on their own behalves directly to the decision makers involved in the case 4a prospective defendant s response to a wells notice is known as a wells submission prospective defendants have a certain number of days to make a wells submission which should take the form of a legal brief and include both factual and legal arguments to prove why charges should not be brought against the prospective defendants 1a wells submission and its contents are public information and as a result most securities law attorneys may advise that making such a submission is not always to the prospective defendants best interests anything alleged in the wells submission can be used against the defendant in the enforcement proceedings it can also be subpoenaed and used against the respondents in any other civil litigation brought against the defendants 5the pre wells processin some cases regulators are willing to start a dialog with the accused party at the conclusion of their investigation but before issuing a formal wells notice when this occurs it may be referred to as a pre wells process this process will often include written submissions and oral arguments made by the defense counsel the sec may be willing to engage in a pre wells process if a case involves novel or highly technical issues or significant policy questions in other cases the sec is willing to allow a pre wells process because they believe it will facilitate reaching a settlement finally there may be extenuating circumstances in a particular case that cause regulators to be willing to proceed on a pre wells basis | |
what is the xof west african cfa franc | the west african cfa franc xof is the shared currency of eight independent states in west africa the xof uses both coins and banknotes with the franc subdivided into 100 centimes the central bank of west african states located in dakar senegal regulates the currency the members that use the west african cfa france consist of the west african economic and monetary union and include benin burkina faso ivory coast guinea bissau mali niger senegal and togo together these countries have a spending power that exceeds over 78 billion dollars cfa stands for communatu financi re d afrique or african financial community understanding the west african cfa francthe cfa franc is one of two regional african currencies backed by the french treasury with pegging to the euro cfa franc can refer to either the central african cfa franc abbreviated xaf in currency markets or the west african cfa franc abbreviated xof in currency markets although they are separate currencies the two are effectively interchangeable as they hold the same monetary value against other currencies in theory however the french government or the monetary unions using the currencies could decide to change the value of one or the other because the members are joined together by their use of the cfa franc they have created what is known as the cfa franc zone the cfa franc zone is made up of the two independent unions of the west african economic and monetary union and the central africa economic and monetary community the dual union helped cement the value and usability of the cfa franc first by setting its equivalent to the french franc which later became the euro by aligning the values the colonies were able to gain security and stability with the franc in return however the french treasure required large deposits of their external reserves into their accounts first at 65 percent and then later lowered down to 50 percent history of the west african cfa franc xof along with the central african cfa franc xaf the west african cfa franc xof makes up the currency for most of central and west africa the currency was introduced following the world war ii and replaced the french west african franc several countries belonging to the west african economic and monetary union uemoa were french colonies using the french west african franc including the ivory coast dahomey french sudan mauritania niger senegal togo and upper volta as those colonies gained independence they continued to use the cfa france for their currency mali also known as french sudan was the only independent colony to create a national currency in 1961 however by 1984 mali returned to use the cfa franc with an exchange of 1 cfa france to 2 malian francs the cfa pegs to the euro creation of the cfa franc was in 1945 following the end of the second world war previously french colonies had their currencies pegged to the french franc however changes made by the signing of the bretton woods agreement ratified in 1945 pegged the french franc to the dollar which devalued the french franc france created the new currency to avoid devaluing the money in its colonies the initial exchange rate in 1945 was 1 cfa franc to 1 70 french francs in 1948 the rate changed to 1 cfa franc to 2 french francs after the devaluation of the french franc this artificially high exchange rate for the cfa franc caused economic stagnation among the countries in the cfa franc zone in the 1980s and early 1990s in consultation with france and the international monetary fund the african monetary unions decided to devalue their currencies by 50 percent which along with other fiscal and monetary policy adjustments generated gdp growth of 5 percent in the cfa franc zone between 1995 and 2000 | |
what is west texas intermediate wti | west texas intermediate wti is a grade of crude oil and one of the main three benchmarks in oil pricing along with brent and dubai crude wti is considered a high quality oil that is relatively easy to refine wti is known as a light sweet oil it contains less than 0 50 sulfur whereas the norm is about 0 24 to 0 34 making it sweet it also has a low density making it light 12wti is the underlying commodity of the new york mercantile exchange s nymex oil futures contract understanding west texas intermediate wti wti is the main oil benchmark for north america as it is sourced from the united states it originates mainly in the permian basin the site of the nation s highest producing oil field the oil travels via pipeline from texas to refineries in the midwest and the gulf of mexico the main delivery point for physical exchange and price settlement for wti is cushing oklahoma known as the pipeline crossroads of the world the cushing hub delivery system consists of 35 20 inbound and 15 outbound pipelines and 16 storage terminals 3the hub has 90 million barrels of storage capacity and accounts for 13 of u s oil storage the inbound and outbound capacity is 6 5 million barrels a day 4west texas intermediate as an oil market benchmarka benchmark in the oil market serves as a reference price for buyers and sellers of crude oil oil benchmarks are frequently referred to in the media as the price of oil brent crude and wti crude are the most popular benchmarks but their prices are often contrasted the difference in price between brent and wti is called the brent wti spread wti is not the most commonly used benchmark globally that honor goes to brent which is used as a benchmark globally in two thirds of oil contracts 5wti and brent however are both considered high quality oils and therefore are the two most important oil benchmarks in the world wti has a sulfur content between 0 24 and 0 34 whereas brent has a sulfur content between 0 35 to 0 40 126 the lower the sulfur content of an oil the easier it is to refine making it more desirable to producers a sulfur content below 0 5 is considered sweet both benchmark oils are considered sweet but wti is sweeter making it a bit easier to refine theoretically wti crude should trade at a premium to brent crude given the quality but this is not always the case while the two crude oil varieties can trade at similar price points each one has its own unique supply and demand market and therefore its price reflects distinct market fundamentals since the shale boom in the u s which resulted in a production increase of wti the price of wti has gone down and usually trades at a discount to brent brent is also tied to more worldwide oil markets meaning that more factors are influencing its price furthermore transporting wti overseas to brent crude s market can be costly making it difficult for wti to compete with brent crude in terms of pricing | |
is the u s a net exporter or importer of oil | the u s exports more petroleum products than it imports in 2023 the u s imported about 8 51 million barrels per day of petroleum products from 86 countries the same year it exported about 10 15 million barrels of petroleum to 173 countries and three u s territories 7petroleum products include crude oil hydrocarbon gas liquids refined petroleum products and biofuels | |
what countries does the u s import petroleum from | the top five source countries for petroleum products imported into the u s are canada mexico saudi arabia iraq and brazil 8 | |
what s the difference between crude oil petroleum and petroleum products | crude oil is a mixture of hydrocarbons found in liquid form underground and brought to the surface for refining into fuel and other products petroleum products are processed in refineries from crude oil and other liquids petroleum is a broad term that includes both crude oil and petroleum products 9the bottom linewest texas intermediate is a high quality crude oil sourced in west texas as one of the world s foremost sources of crude oil wti is a benchmark for the u s oil industry and investors when you hear a reference to crude oil prices in a business report it s the price of west texas intermediate that is being quoted | |
what is a western account | a western account is a type of agreement among underwriters aau in which each underwriter agrees to share responsibility for only a specific portion of the overall new issuance they are the opposite of an eastern account in which each underwriter shares responsibility for the entire issuance western accounts are popular among some underwriters because they reduce each underwriter s risk these accounts lower each participant s effective liability should the new issuance prove more difficult than expected on the other hand western accounts also limit the potential upside enjoyed by underwriters in the event that the new issuance is unusually successful | |
how western accounts work | the western account is one of the ways that underwriters seek to manage the risk associated with bringing new securities to the public such as in the case of an initial public offering ipo these transactions are inherently risky for the underwriters involved because they are required to pay a certain amount of money to the issuer of the security regardless of the price at which those securities can then be sold to the public the profit of the underwriter is based on the spread between the price paid to the issuer and the price ultimately obtained from selling the new securities to the public to mitigate this risk underwriters generally conduct new issuances in collaboration with one another this creates what are known as underwriting consortiums | |
when bringing together several underwriting firms in this manner it is necessary to clearly delineate the rights and responsibilities of the parties involved this is accomplished through explicit agreements known as agreements among underwriters or aaus which lay out which underwriter is responsible for which portion of the new issuance | the western account also known as a divided account is simply one common example of an aau structure in it each underwriter agrees to take on liability for only the portion of the issuance that it takes into its own inventory if any of the securities held by other underwriters fail to sell or obtain disappointing prices then that risk is only borne by the specific underwriter left holding that inventory example of a western accountxyz corporation is a prominent manufacturing company preparing for its ipo its management team are experts in their industry but are not especially knowledgeable about the financial markets for this reason they hire a lead underwriter who in turn forms a consortium of firms who are collectively responsible for carrying out xyz s ipo under the terms of this transaction xyz is paid a sum by the underwriters that is equivalent to 25 per share in order to profit from the transaction the underwriting consortium needs to sell its shares to other investors for greater than 25 per share in forming their consortium xyz s underwriters adopted an aau modeled on the western account structure accordingly each of the underwriting firms involved only assumed responsibility for a specific portion of the newly issued shares for this reason the ultimate profit or loss of the underwriters will vary from one firm to the next | |
what is an underwriter | an underwriter is a person or organization that takes on another party s financial risk through a mortgage loan insurance or other financial transaction the underwriter often makes money through interest payments underwriters can also make money through the difference between what they pay for a new investment or security issuance and the price at which it is eventually sold to the public | |
what is an ipo | an ipo is an initial public offering which means a large company is selling shares to the public for the first time an ipo is a way for companies to raise money from public investors after an ipo the company s shares are available to buy and sell on a public stock exchange who underwrites an ipo initial public offerings ipos are usually underwritten by investment banks these banks usually have ipo specialists on staff who work with the company making the ipo to ensure that all regulatory requirements are met the bottom line | |
when a new security is offered to the public such as through an ipo the risk of the new security is taken on by underwriters that may form an underwriting consortium the underwriters may use an agreement known as a western account in this arrangement each underwriter is only responsible for a specific portion of the new shares | this type of agreement lowers the risk each underwriter takes on however it also lowers the potential profit they can make once the shares are sold to the public | |
what is a wet loan | a wet loan is a mortgage in which the funds realize at or with the completion of a loan application submission of other required documentation for closing the property such as surveys and title searches happens after the dispersion of funds wet loans allow the borrower to purchase property more rapidly and to complete the necessary documentation after the transaction conditions surrounding the use of wet loans differ based on state laws and not all states allow a wet loan understanding a wet loan in a wet funded mortgage the borrower receives money at the time their loan is approved the borrower may then purchase property and complete the other required documentation to officially transfer the property title after the transfer of funds the bank will obtain the loan documentation for review wet loans expedite the purchasing process by allowing the sale to occur before the paperwork is completed a wet loan allows a borrower to purchase property more rapidly before completing the necessary paperwork wet loans vs dry loanswith wet loan transactions speed comes at the price of increased risk the likelihood of fraud and loan default is significant with a wet loan the risk comes from the seller receiving funds before the review and approval of the loan documentation if after evaluation the bank determines the loan is too risky it faces great time and expense in revoking the mortgage in contrast a dry loan is one where the release of funds is after completion and review of all necessary sale and loan documentation dry funding provides an added layer of consumer protection and helps to ensure the legality of the transaction with a slower closing process and no funds disbursed at the closing there s more time to address or avoid issues dry loans date to pre electronic banking days when property buyers and sellers often lived far apart from one another and their mortgage lenders so transactions took longer the dispersal of funds happens when the mortgage is considered officially closed the new owner can take possession of the property at this point wet closings vs dry closingswet loans may go through either a traditional closing or a dry closing a real estate closing is the completion of a transaction involving the sale or exchange of real property a conventional closing consists of the following events in contrast a dry closing takes place for the benefit and convenience of both the buyer and the seller but in itself it is not technically a closing a dry closing usually occurs when there has been some delay in the funding of the loan and buyer and seller are geographically separated dry closings allow for the signing of documents but no money changes hands special considerations for a wet loanwet loans are permitted in all states except alaska arizona california hawaii idaho nevada new mexico oregon and washington 1 states that have wet settlement laws require lending banks to disburse funds within a certain period some require payment to the sellers and other involved parties on the day of the settlement others allow payment within one or two days of closing wet settlement laws are in place to curb the bank practice of delaying funding after closing documents have been signed by the borrowers all of the before funding conditions must be met for the lender to allow closing in wet states | |
what is the wharton school | the wharton school of the university of pennsylvania often referred to simply as wharton is one of the most prestigious business schools in the world wharton s master of business administration mba program placed first in front of the university of chicago booth school of business in a 2023 global survey of the best business finance schools by u s news world report 1the school is best known for its rigorous finance program it is a top choice for those seeking careers in investment banking private equity pe investment management or venture capital vc admission and programs at the wharton schoolas is understandable given its prized ivy league brand value the admissions process at wharton is highly competitive for example its mba class of 2024 received over 6 300 applications and only 877 were enrolled 2on average the accepted applicants boasted an average gmat score of 733 and an average undergraduate gpa of 3 6 on a 4 0 scale although these applicants hailed from a wide variety of industries the most common fields were consulting technology government nonprofit private equity and venture capital which collectively represented about 59 of the total 2in addition to its well known mba program wharton also offers a variety of undergraduate business degrees along with a ph d program examples of specific specializations that the school offers include accounting finance marketing real estate statistics and entrepreneurship 3in 1975 wharton launched an executive mba emba program which students can pursue out of its philadelphia or san francisco campus the latter of which is strategically located near the hub of california s technology sector 45in a similar move wharton also established the penn wharton china center in 2015 a new campus based in beijing which is supported by over 20 additional partnerships with chinese organizations 67wharton s main campus is located at the heart of the university of pennsylvania some of the notable figures who have attended wharton are donald trump warren buffett ceo of berkshire hathaway brk b sundar pichai ceo of both alphabet goog and google and elon musk founder of tesla tsla and spacex and co founder of paypal pypl the wharton school s reputation and standingwharton claims the largest alumni network of any business school in the united states with a total membership of nearly 100 000 strong 8historically wharton s reputation has been especially strong with regard to finance the school produces a steady stream of top candidates for wall street firms and other finance related institutions however with the recent growth of the american technology sector wharton has been making greater efforts to bolster its programs outside of its core strength of finance in order to better prepare its students for the workforce of the future the school s recent investments in china are also oriented in a similar direction the penn wharton china center already has over 15 000 alumni in the greater china region 7costs to attend whartonwharton is one of the more expensive business schools in the u s total expenses including room and board books supplies and tuition for its two year mba program are 246 952 for the 2023 2024 school year first year costs include 9second year costs include 9 | |
is wharton better than harvard | each school is known for its focus wharton is famous for its business and corporate finance research while harvard is known for its business management and leadership research | |
why is wharton so famous | wharton has been teaching business finance for more than 120 years creating a brand and education that is in demand by students and industries worldwide | |
is wharton considered ivy league | wharton is a school within the university of pennsylvania which is one of the eight universities that make up the ivy league university of pennsylvania columbia harvard dartmouth yale cornell brown and princeton the bottom linethe wharton school of business was founded in the u s in 1881 as the country s first business school since then it has become the premier business finance school in the world attracting students globally and extending its presence into other countries correction sept 19 2023 this article previously misidentified the university of pennsylvania as penn state in its description of the ivy league | |
what is a whartonite | whartonite is a colloquial term used to refer to graduates of the wharton school of the university of pennsylvania because of the wharton school s reputation in the financial sector the term whartonite is often associated with professionals in industries such as investment banking investment management private equity and venture capital in some cases the term can be used in a derogatory manner referring to a professional with an attitude of superiority or arrogance in this sense it is associated with the negative stereotypes that sometimes surround the financial sector the wharton schoolthe wharton school was established in 1881 by the industrialist joseph wharton it is widely referred to simply as the finance school due to having long been rated as the preeminent school for those pursuing careers in finance 1despite its reputation for producing graduates who work for wall street and other financial firms wharton also boasts mba majors in a diverse range of subjects including healthcare management marketing real estate and environmental social and governance esg factors 2the school has been expanding outside of its pennsylvania location it launched an executive mba program in 2001 through which students can complete their studies out of a newly established campus building located in san francisco similarly the school opened the penn wharton china center in 2015 a new campus located in beijing that aims to strengthen wharton s connections and influence in the greater china region 34rankings and alumniwharton is widely regarded as one of the world s top institutions for business education u s news world report ranks wharton s mba program as the third best in the united states it ranks its undergraduate business program as number one 56those looking for examples of individual wharton graduates will have no shortage of people to choose from in fact wharton boasts a large alumni network for its mba program of 100 000 graduates it is no surprise that some among them are very prominent indeed including sundar pichai ceo of alphabet john sculley former ceo of pepsi and peter lynch the one time manager of fidelity s magellan fund elon musk and warren buffett both also attended wharton as undergrads though buffett transferred out before graduating 78 | |
is wharton better than harvard | wharton s mba program is ranked better than harvard s by u s news world report number three and number five respectively however for undergraduate purposes harvard is a better ranked school that offers a variety of more subjects for students while wharton is business focused 659 | |
how much does wharton s mba cost | the first year of wharton s mba program costs 124 476 which includes tuition and fees room and board books and supplies and health insurance second year costs are 122 476 10 | |
how hard is it to get into wharton grad school | wharton s mba program is extremely difficult to get into the school receives between 6 000 and 7 000 applicants a year and accepts approximately 1 000 of those 11 | |
is wharton school an ivy league school | yes the wharton school is an ivy league school as it is part of the university of pennsylvania which is one of the eight ivy league schools the other schools are harvard princeton columbia cornell dartmouth yale and brown the term ivy league applies only to u s schools which were originally tied together through athletics before the formation of the united states they are now considered to be some of the best schools in the world and admittance into them is extremely competitive the bottom linewhartonites are those individuals that graduated from the wharton school one of the most prestigious business schools in the world the ivy league school offers undergraduate and graduate programs in a wide range of majors not only finance with graduates going on to find employment in many successful companies | |
when issued wi is a transaction that is made conditionally because a security has been authorized but not yet issued treasury securities stock splits and new issues of stocks and bonds are all traded on a when issued basis | prior to a new issue s offering underwriters solicit potential investors who may elect to book an order to purchase a portion of the new issue understanding when issuedwhen issued orders are made conditionally because they may not be completed particularly in the event the offering is canceled orders when issued are sometimes called orders with ice or orders when distributed the term is short for when as and if issued securities trade on a when issued basis when they have been announced but not yet issued the transaction is settled only after the security has been issued a when issued market exists where when issued instruments are traded when issued markets can provide an indication regarding the level of interest that a new issue may attract from investors when issued transactions are dependent upon the actual security being issued and the exchange or national association of securities dealers ruling that the transaction is settled example of when issuedan industrial conglomerate wants to spin off its chemicals division due to its drag on earnings and low margins in order to effectuate the spinoff the conglomerate plans to pay its shareholders a dividend in the form of stock of the new chemicals divisions company after the record date the date on which holders of the conglomerate s stock are entitled to receive stock in the spinoff the conglomerate s shareholders can effectively begin trading the right to receive shares in the spinoff on a when issued basis those shareholders who buy the rights but do not hold shares of the conglomerate on the distribution date the date in which the actual shares in the spinoff are issued and begin trading receive their shares in the spinoff and the when issued market ceases benefits of when issued | |
what is whipsaw | whipsaw describes the movement of a security when at a particular time the security s price is moving in one direction but then quickly pivots to move in the opposite direction there are two types of whipsaw patterns the first involves an upward movement in a share price which is then followed by a drastic downward move causing the share s price to fall relative to its original position the second type occurs when a share price drops in value for a short time and then suddenly surges upward to a positive gain relative to the stock s original position understanding whipsawsthe origin of the term whipsaw is derived from the push and pull action of lumberjacks when cutting wood with a saw of the same name a trader is considered to be whipsawed when the price of a security they have just invested in abruptly moves in the opposite and unexpected direction whipsaw patterns most notably occur in a volatile market in which price fluctuations are unpredictable day traders or other short term investors are accustomed to being whipsawed those who have a long term buy and hold approach to investing can often ride out the volatility of the market and emerge with positive gains for example when an investor goes long on a stock the expectation is that the price will increase in value over time however there are many occasions when an investor purchases shares of a company at the top of a market rally the investor buys a stock at its peak assuming that it will continue to post significant gains almost immediately after purchasing the stock the company releases a quarterly report that shakes investor confidence and causes the stock to decline in value by more than 10 never to recover the investor is holding the stock at a loss with no option to sell the stock effectively whipsawed conversely some investors specifically those who short sell can face a whipsaw at the bottom of a market for example an investor may anticipate a downturn in the economy and purchase put options on the s p 500 the investor profits if the market continues to decline however almost immediately after purchasing the put options the market unexpectedly rallies and the investor s options quickly become out of the money or worthless in this case the whipsaw occurs during a recovery phase and the investor loses the investment special considerationsfinancial markets change abruptly many analysts seek models that explain patterns in the markets so that an investor can select the right asset classes a study by sonam srivastava and ritabrata bhattacharyya titled evaluating the building blocks of a dynamically adaptive systematic trading strategy explains that stock patterns vary because of fundamental changes in macroeconomic variables policies or regulations 1the authors state that a trader needs to adapt their trading style to leverage the different phases in the stock markets they also suggest that investors select asset classes in different market regimes to ensure a stable risk adjusted return profile 1 however different experts will offer different advice a whipsaw references any price movement that is in the opposite direction of a trader s intended bet often resulting in a loss or if they are able to ride out the fluctuations in price to maintain the investment and even realize a profit real world examplestocks have whipsawed recently due to uncertainty about the future of the economy rising inflation and geopolitical unrest to weather the volatility experts recommend that investors stick to a long term strategy that plays to their strengths and follow that strategy regardless of whipsaw movements in terms of investment another expert recommended investing in more stable sectors such as healthcare and avoiding more volatile sectors such as real estate most experts were expecting significant volatility in the short term and one recommended assuming a defensive position however they did also state that a long term portfolio based on the stock would win out 2 | |
how can traders profit from whipsaws | while it may look like a sideways market whipsaws imply that there are large up and down swings within a certain trading band this can be profitable for swing traders who can catch momentum both up and down as the market oscillates buying long straddles in the options market is another strategy that can profit as prices move both up and down | |
how can whipsaws hurt traders | whipsaws can cause losses for traders by triggering closing trades only to be reversed in short order traders are often stopped out when a market whipsaws or moves sharply in one direction before returning to its original state for example a stock may whipsaw during an earnings announcement or other market moving event this can execute stop loss orders that close out positions even as the stock subsequently rebounds | |
what technical indicators can be used to spot whipsaws | certain technical indicators are useful in identifying a whipsawing market envelopes momentum indicators parabolic sar and the vortex indicator are some good examples | |
what is a whisper number | a whisper number refers to the purported unofficial and unpublished earnings per share eps forecasts of professional traders and fund managers on wall street the whisper number can also be applied to any news or data release in any marketa whisper number can also refer to the expected future earnings or revenues according to a herd of individual investors in this sense a whisper number could be compiled by a website polling its visitors essentially the whisper number is the unofficial consensus of what earnings and revenue for a company will be at the next announcement understanding the whisper numberearnings forecasts are based on analyst expectations analyst s generally group their forecasts around one another this way they aren t singled out if they make a predication that is way off the mark while consensus estimates can be accurate the whisper number is what analysts traders and fund managers are thinking but the analyst dare not publish it in case it singles them out and they turn out to be wrong staying with the pack is smart in terms of keeping one s career as an analyst straying from the pack and making too many erroneous calls could result in being fired whisper numbers may be useful when they differ from analysts s consensus forecast they can be used as a tool to help spot or avoid an earnings surprise or disappointment of course this is only relevant if they are more accurate than the consensus estimate until the actual announcement no ones knows if the whisper number or the consensus forecast is more accrue whisper numbers can be wrong if the whisper number is much higher than the consensus estimate people may buy a stock ahead of the earnings release if actual earnings are less than the whisper number the stock may sell off even if the earnings beat the consensus but below the whisper number if the company release earnings higher than the whisper number the stock will likely rise regardless of what the consensus is in other words stock prices typically react to earnings relative to the whisper number as the whisper number is what traders believe and are therefore likely acting on myths and questions raised about whisper numbersindividual investors have access to a wealth of information and misinformation relative to the investors of history in the old days the whisper number was the best information provided by brokers to their richest clients the brokers would whisper to these clients what the firm s analyst really thought or knew but wouldn t publish publicly increased regulatory scrutiny on the brokerage industry made it much more difficult to get a whisper number in this traditional sense for example regulations such as sarbanes oxley provided for stricter rules on how companies disclose financial data employees financial professionals and brokerages face significant penalties if they provide insider earnings data to a select group of people there has been some doubt raised about whether whisper numbers were actually shared by brokers with their high net worth clientele some brokers have sought to debunk the entire concept as a myth whisper numbers based on individual opinions and assessments rather than broker input are now marketed by a variety of websites traders can even get an idea of the whisper based on the chatter they hear on social media it is possible for a whisper number to be a more accurate forecast than consensus estimates when it comes to predicting earnings this does not necessarily make whisper numbers more valid as a predictive option it does help explain why sometimes stock prices have weird reactions when compared to consensus estimates following earnings releases example of a whisper numberassume that apple inc aapl has an earnings forecast for the quarter of 5 per share traders actually believe the earnings will be higher near 6 per share as a result the price gets pushed up ahead of the earnings effectively pricing in the 6 eps if the stock comes out with 6 eps a few people may be surprised and the stock may rise or fall marginally but for the most part the price reflects the 6 number heading into the earnings if the earnings come out at 7 most everyone is surprised and the stock jumps higher if the eps comes in at 5 in line with the consensus forecast but below the whisper number the stock will likely sell off the whisper number isn t the only determinant on the stock price though if the eps comes in ahead of the whisper number but stock index futures have sold off that day the stock may sell off too it is also hard to estimate how many people are using the whisper number ahead of earnings which then makes it hard to predict how people will react when the actual number is released | |
what is a whisper stock | a public company s shares can briefly become a whisper stock if rumors circulate that the company is the target of a takeover offer the whispers will probably be followed by an immediate surge in trading volume and an increase in its share price | |
when two companies discuss a merger or an acquisition of one company by the other the talks are held in the strictest secrecy an insider who acts on the information in an attempt to make a profit or help someone else make a profit is committing the crime of insider trading | its price can fall back to earth just as quickly when the whispers stop whether they prove to be true or false understanding whisper stocksan inadvertent leak is nearly as bad since one person or a small group has the power to act on information that most investors do not know whisper stocks may occur as a response to other rumored events though few are as positive and consequential as a takeover for example a whisper about the pending approval of an important drug could impact the share price of a pharmaceutical company a rumor about a massive government order could be the trigger for a defense contractor despite any concerns about insider trading wall street loves a whisper stock traders who act on an event that is about to happen can profit more than those who act on the event after it happens that is they profit if the whisper turns out to be correct and if the trader succeeds in both buying and selling the stock at the right time at one time such trading on inside information was flagrant loose talk by a banker or attorney who was on the fringe of a merger discussion could cause a stock to soar in advance of the deal s announcement sec rules on insider tradingthe securities and exchange commission sec has strict rules and cracks down on insider trading anyone with inside information has to be discreet about passing it on resources to go after those who trade on insider information are generally insufficient but when someone is caught the penalties are severe it s impossible to put a stop to gossip however the sight of two ceos having a private lunch is enough to start speculation in the stock of either or both companies whisper stock vs whisper numbera whisper stock is similar to a whisper number the latter is an unofficial estimate of a company s impending announcement of quarterly earnings typically shared by an investment professional with favored clients the number tops earlier published estimates by the company and by analysts suggesting that those who buy the stock immediately will profit when the good news is announced | |
are hostile takeovers unethical | hostile takeovers can be seen as unethical as they are acquisitions done without the approval of the target company though they are legal they tend to raise legal and ethical questions during the process | |
how do you prevent a hostile takeover | certain defense strategies can be employed to prevent a hostile takeover including a poison pill crown jewel defense pac man defense and white knight these strategies usually make it more costly difficult or impossible for a company to acquire the target company | |
why are hostile takeovers bad | hostile takeovers are initially bad because they are not welcome and they cause chaos in the target company they often lead to mass layoffs in the target company reorganization and a change in upper management the ideas that an acquiring company seeks to implement sometimes don t pay off either leading to more disruption the bottom linerumors abound in the financial world as they do in the real world whisper stocks are those of companies that are rumored to be considered for acquisition when this information is leaked the stock sees an uptick in volume and price and investors try to get in on the deal before the acquisition happens which usually sees an increase in a target company s price | |
what is a whistleblower | a whistleblower is anyone who has and reports insider knowledge of illegal illicit and fraudulent activities occurring in an organization whistleblowers can be employees suppliers contractors clients or any individual who becomes aware of dubious business activities whistleblowers are protected from retaliation under various programs created by the occupational safety and health administration osha sarbanes oxley act and the securities and exchange commission sec federal employees are protected under the whistleblower protection act of 1989 1whistleblower explainedmany organizations dedicate themselves to addressing whistleblowing but some organizations specialize in specific aspects of it for example the occupational safety and health administration osha is more interested in environmental and safety breaches and the securities and exchange commission sec is more concerned with securities law violations many organizations offer rewards for impactful information allow anonymous tips and provide various methods for submission of information a whistleblower may release information to company officials or a large governing or regulating body in cases where fraud or other illegal activity involves high ranking officials and executive members of management the optimal choice is to report wrongdoings to a regulating body origin of the termthe use of the term whistleblower dates back to the 19th century however ralph nader is sometimes credited with coining the modern usage of the term in the 1970s as a way to avoid the negative connotations of alternatives like informer the term combines whistle a device used to alert or call attention to and blower referencing the person issuing the alert by the blowing of the whistle less commonly sports referees were also called whistleblowers as they alerted the crowd players and coaches of illegal sports plays journalists and other political activists such as ralph nader excessively used the term during the 1960s changing the public s understanding of the term to what it is today one of the most notable whistleblowers is w mark felt also known as deep throat who exposed former president richard nixon s involvement in illegal dealings during the watergate scandal another famous whistleblower is sherron watkins a former enron employee who shed light on the company s fraudulent accounting practices as a result enron ceased operations and brought about the birth of the sarbanes oxley act 2whistleblower protectionwhistleblowers are protected from retaliation should the information provided be confirmed to be true this protection includes prohibiting the accused company from taking adverse or harmful actions against the reporter antagonistic activities include demotion termination reprimands and other punitive reactions whistleblower protection also prohibits the company from pursuing legal action against the whistleblower to recoup losses incurred during the investigation or imposed penalties in certain circumstances more protection may be offered where threats of physical violence against the whistleblower or associates and family of the whistleblower are found whistleblower rewardsoften the whistleblower may be entitled to a reward as compensation for reporting illicit activities usually this reward is a percentage of the dollar amount recuperated by the government or regulating agency resulting from the whistleblower s information recovery of a minimum amount may be necessary to qualify and the information provided must be unique or otherwise not previously reported many companies have mechanisms to inform management of wasteful practices these practices may or may not be illegal in nature therefore persons reporting wasteful practices may not receive protection as a whistleblower however many organizations encourage suggestions from all associates to improve operations and practices the reporting person may be recognized for their efforts in improving efficiency and may be entitled to some nominal reward in incidences involving the discovery of gross waste or waste involving a significant dollar amount of value especially within government agencies the reporting of waste can qualify the person as a whistleblower | |
what is a white candlestick | a white candlestick depicts a period where the security s price has closed at a higher level than where it had opened it is a point on a security s candlestick chart representing a bullish period on some charts an up candlestick may be depicted as either green or black these may be contrasted with a red candlestick which denotes a lower closing price than the prior period understanding white candlestickswhite candlesticks represent a positive increase in a security s price during the observed period of time the body of the candlestick will typically be displayed in white on a candlestick series chart to show that the net result of the period s price action was up however in some technical charting systems the trader may have the option to choose a specified color such as blue or green to represent price gains typically a candlestick will show the security s open high low and close for a specified time period e g weekly daily hourly etc the high and low will be shown by the two wicks on each end of the body the body comprises the distance between the period s open and closing prices thus candlestick marks show the range of prices that the security has reported through a single period candlestick charts are convenient for technical traders because they can easily display a full day s price movement generally the default colors for candlestick charts will be either white green up and red black down though nowadays charting packages offer the trader the option to customize the color schemes to their specifications red black candlesticks are the opposite of white candlesticks they represent a downward movement for the day in a red black candlestick the closing price of a security is reported as lower than the opening price the last possibility for charting a period s price action is where the open and close prices are identical this is called a doji and is graphically portrayed by a dash signifying that the charted security s opening price is equal to its closing price candlestick shadingmost charting software allows you to change the colors of candlesticks but the most commonly used colors are white black green filled or hollow and red filled or hollow each color conveys a different meaning the two most common types of candlesticks are white green black hollow candlesticks which are indicative of a strong uptrend and red filled candlesticks which are indicative of a strong downtrend red hollow and black filled candlesticks are less common since they require a price gap to occur candlesticks vs bar chartscandlestick and bar charts show the same information open high low and close but in a different way a bar is a vertical line with no real body like a candlestick consisting of a small horizontal line to the left marking the open price and a small horizontal line on the right marking the close technical analysis and candlestick indicatorstechnical analysis indicators are formed from the combination of white red and doji candlesticks there are many short term and long term formations that can be used as indicators for security investment technical analysts can quickly glean a lot of information from the color of a candlestick before looking at any aspects of the chart for example a white green or black filled candlestick might suggest that the price is becoming top heavy while a red filled candlestick represents a clear and strong downtrend traders may use these insights to gauge market sentiment almost all traders use candlestick charts in conjunction with other forms of analysis it is considered unwise to trade based on candlestick patterns alone the investor or trader may gauge market sentiment using candlestick charts and then use chart patterns to identify potential areas of breakdowns or breakouts technical indicators can also be useful as a confirmation of market sentiment for example the relative strength index rsi may be used in conjunction with candlestick charts to show how strong a trend is in a given direction below are a few candlestick patterns commonly identified on a technical analysis chart | |
what does candlestick mean | a candlestick is a symbol that traders and investors use it can provide a lot of information such as whether the period the candlestick follows is one where the price increased or decreased by how much and with what amount of momentum | |
what does a white candlestick mean | a white candlestick means that the candle closed its period at a higher price than when it opened a white candlestick is the opposite of a red candlestick which indicates a closing price lower than the opening | |
what is the most powerful candlestick pattern | some of the most powerful bullish patterns are the three line strike bullish abandoned baby and morning star some of the most powerful bearish patterns are three black crows identical three crows and evening star | |
what is the difference between red green black and white candlesticks | a read candlestick is one where the price closes lower than the opening green black and white candlesticks are all the same thing where the price closes higher than the open the difference in colors is due to different programs but the candlesticks mean the same thing | |
what does a white line in a candlestick chart represent | a white line in a candlestick chart represents a closing with a higher price than the open but without much price fluctuation during the period candles are taller when there is a greater price spread so when a candle is flat and looks like a line it is because of nominal price movement during the period the bottom linea white candlestick is a trading signal used by many investors that shows that during a specific period of time represented by the candle the closing price was higher than the open price white candlesticks can be other colors such as green or black and signal a higher close many trading strategies rely heavily on candlestick patterns but still rely on additional technical indicators to confirm their trade | |
what is white collar | a white collar worker typically works in an office setting performing administrative or managerial tasks this class of workers stands in contrast to blue collar workers who traditionally perform manual labor at their jobs understanding white collarwhite collar workers are suit and tie workers who work at a desk and stereotypically eschew physical labor they tend to make more money than blue collar workers white collar work used to mean a high level of education and the assumption of securing a cushy job with perks that distinction today is blurred by the fact that white collar employment has become the dominant working class in the u s and other advanced nations american writer upton sinclair is partially responsible for the modern understanding of the term white collar having used the phrase in conjunction with administrative work the differences in connotation between white collar and blue collar have much more to say about the way we perceive the service industry in comparison to manufacturing and agriculture typical white collar jobs include company management lawyers accountants financial and insurance jobs consultants and computer programmers among many others many jobs that require a shirt and tie today are actually low paying and high stress especially in the modern services and technology sectors there are white collar workers unions though historically union membership has been a distinction of blue collar workers expectations of white collar jobswhite collar positions are often expected to offer opportunities to advance to more significant roles as managers or executives a white collar role is likewise expected to generate higher paying salaries with the potential to continue to rapidly scale up their income with further advancement these jobs typically are based in an office however some industries may still require a presence in the field this is especially true for professionals who regularly meet with clients and customers or travel to conferences and meetings attorneys accountants architects bankers real estate agents business consultants and brokers are often described as white collar positions though the actual work performed typically is not menial white collar roles can require the professional to commit to extensive hours during the workweek as well as on weekends white collar professionals may be expected to be on call even during vacation times and outside of normal business hours at senior levels they may be part of a firm s upper management and hierarchy a white collar crime is a non violent crime committed by an individual often of middle or upper socioeconomic status typically for financial gain white collar workers are often expected to develop specialized skills over time making them increasingly valuable intellectual assets for the growth of the company for example an accountant may have to keep abreast of all regulatory changes that could affect how their clients or company reports income an attorney will need to keep themselves apprised of recent rulings and changes in case law that affect their area of expertise real estate agents will need to keep track of fluctuations in real estate prices and the underlying influences that drive such trends advantages and disadvantages of white collar jobsone of the primary advantages of white collar jobs is the potential for higher earnings compared to many blue collar positions white collar professions such as those in finance law engineering and technology often command competitive salaries due to the specialized skills and education required white collar jobs often provide better opportunities for career advancement and professional growth many white collar industries offer clear career paths with opportunities for promotions skill development and continued education though skilled laborers can still be promoted as well there may be limited upside especially if the task performed by the worker is not specialized another benefit of white collar jobs is the potential for a more comfortable and flexible work environment unlike many blue collar positions that involve physical labor or demanding schedules white collar professionals often work in office settings with modern amenities and comfortable surroundings lastly advancements in technology have facilitated remote work options for many white collar workers providing flexibility in terms of location and schedule this flexibility allows individuals to better balance their work and personal lives because physical labor requires people to be on site blue collar jobs tend to have less remote work capabilities there are also some downsides to white collar jobs many white collar professions such as finance law and consulting involve demanding workloads tight deadlines and high expectations for performance the pressure to meet targets deliver results and maintain productivity can lead to burnout anxiety and other mental health issues job insecurity may be another common concern in white collar fields particularly during times of economic uncertainty or industry disruptions layoffs restructuring and outsourcing are all potential risks that white collar workers may face when the economy isn t doing as well though layoffs still happen with blue collar workers companies may be less inclined to downside workers physically assembling products as opposed to administrative oversight of those workers last though somewhat of a joke white collar jobs may be full of monotony and lack of fulfillment for some some may find white collar jobs to include administrative repetitive tasks bureaucratic processes or mundane office routines where other jobs may give you the chance to move around white collar jobs may simply require ongoing mental effort white collar jobs offer higher earnings due to specialized skills | |
what is white collar crime | white collar crime is a nonviolent crime often characterized by deceit or concealment to obtain or avoid losing money or property or to gain a personal or business advantage examples of white collar crimes include securities fraud embezzlement corporate fraud and money laundering entities that investigate white collar crime include the securities and exchange commission sec the financial industry regulatory authority finra the federal bureau of investigation fbi and state authorities understanding white collar crime white collar crime is a term first coined by sociologist edwin sutherland in 1939 who defined it as a crime committed by a person of respectability and high social status during his occupation white collar workers historically held non laboring office positions while blue collar workers traditionally wore blue shirts and worked in plants mills and factories 1high profile individuals convicted of white collar crimes include ivan boesky bernard ebbers michael milken and bernie madoff their crimes have included insider trading accounting scandals securities fraud and ponzi schemes rampant new white collar crimes facilitated by the internet include so called nigerian scams in which fraudulent emails request help in forwarding a substantial amount of money to a criminal ring other common white collar crimes include tunneling insurance fraud and identity theft the madoff victim fund mvf distributed over 3 7 billion to nearly 40 000 victims worldwide in connection with the bernard l madoff investment securities llc blmis fraud scheme 2corporate fraudlarge scale corporate fraud that occurs in corporate or government institutions incurs a significant financial loss to investors and can damage the u s economy and investor confidence corporate fraud gathers the widest group of partners for investigations including the fbi the u s securities and exchange commission sec the commodity futures trading commission cftc the financial industry regulatory authority the internal revenue service the department of labor federal energy regulatory commission and the u s postal inspection service 3the majority of corporate fraud cases involve accounting schemes that are conceived to deceive investors auditors and analysts about the true financial condition of a corporation or business by manipulating financial data share price or other measurements to inflate the financial performance of the business in 2014 credit suisse pleaded guilty to helping u s citizens avoid taxes by hiding income from the internal revenue service and paid penalties of 2 6 billion bank of america sold billions in mortgage backed securities mbs tied to properties with inflated values without proper collateral and agreed to pay 16 65 billion in damages 45self dealing occurs when a fiduciary acts in their own best interest rather than in the best interest of their clients considered a conflict of interest this illegal activity can lead to litigation penalties and termination of employment for those who commit it self dealing includes front running when a broker enters into a trade with the foreknowledge of a non publicized transaction that will influence the price of the asset resulting in a financial gain for the broker it also occurs when a broker or analyst buys or sells shares for their account ahead of their firm s buy or sell recommendation to its clients insider trading occurs when individuals act upon or divulge to others information that is not yet public and is likely to affect share price and company valuations once it is known insider trading provides an unfair advantage for individuals to profit and does not matter how the material nonpublic information was received or if the person is employed by the company money launderingmoney laundering is accepting cash earned from illicit activities such as drug trafficking and making the cash appear as earnings from legal business activity criminals often filter money from crimes such as human and narcotics trafficking public corruption and terrorism in a three step process a cash based business such as a restaurant that is owned by a criminal organization is a common tool for laundering illegal money daily cash receipts may be inflated to funnel illegal cash through the restaurant and into the bank for distribution to the owners the anti money laundering act of 2020 assists financial institutions in their efforts to meet their obligations under laws and regulations designed to combat money laundering by targeting foreign and domestic terrorist financing transnational criminal organizations drug trafficking organization activity human trafficking and human smuggling and proliferation financing 67securities and commodities fraudthe perpetrator of a securities fraud can be an individual such as a stockbroker or an organization such as a brokerage firm corporation or investment bank and includes crimes such as | |
what are well known securities fraud cases investigated by the fbi | examples of cases of securities fraud are the enron tyco adelphia and worldcom scandals | |
what are the penalties for white collar crime | if convicted an individual may be sentenced to time in county jail state prison or federal prison depending on the severity of the crime additionally fines may be imposed as well as required restitution to the victim who investigates securities fraud allegations of securities fraud are investigated by the securities and exchange commission sec and financial industry regulatory authority finra often in concert with the fbi state authorities can also investigate investment scams in a unique attempt to protect its citizens the state of utah established the nation s first online registry for white collar criminals where photos of individuals who are convicted of a fraud related felony rated as second degree or higher are featured on the registry 8 | |
what are anti money laundering rules used in banking | many companies especially those involved in finance and banking have anti money laundering aml rules in place to detect and prevent money laundering for banks compliance starts with verifying the identity of new clients a process sometimes called know your client kyc and customer due diligence detects money laundering strategies like breaking up large money laundering transactions into smaller ones to evade reporting limits and avoid scrutiny | |
what is intellectual property theft | intellectual property theft is a white collar crime that robs people or companies of their ideas inventions and creative expressions known as intellectual property and may include trade secrets and proprietary products or movies music and software the bottom linesecurities fraud embezzlement corporate fraud and money laundering are considered white collar crimes perpetrated traditionally by those in corporate or office settings the sec nasd the fbi and state authorities work in concert to investigate white collar crimes which are often prosecuted at the federal level penalties for committing a white collar crime include prison fines and restitution | |
what is a white elephant | a white elephant is something whose cost of upkeep is not in line with its usefulness or value from an investment perspective the term refers to an asset property or business that is so expensive to operate and maintain that it is extremely difficult to actually make a profit from it white elephants also tend to be illiquid assets meaning they cannot be easily or quickly exchanged or sold for cash without the seller experiencing a significant loss understanding white elephantsa white elephant is a burdensome possession when applied to investments it can be used to describe anything that is expensive to maintain unprofitable and impossible to sell in other words a white elephant is a name given to undesirable investments that are more trouble than they are worth corporations may invest money in property plant and equipment pp e with the goal of using these fixed assets to improve the company s bottom line in the future however if economic conditions change these assets can become white elephants for example suppose a company builds a factory to meet anticipated demand for its new product line if the product fails to sell that new factory becomes an expensive property that does not help the company generate enough revenue to cover the cost of its maintenance over the years the term white elephant has also been linked to various government funded construction projects governments look to these endeavors to generate rapid economic growth by funneling lots of money into subsidized building and infrastructure projects in the united states funding for these projects sometimes comes in the form of controversial earmarks which refers to spending provisions slipped into legislation that allocates money for a project favored by a particular politician or government official critics of these white elephant projects point out they are frequently ill conceived poorly planned and a waste of taxpayer money history of white elephantsthe term white elephant derives from asia the white elephant is an icon with roots in siam now commonly known as thailand these rare animals were regarded as holy in ancient times and automatically gifted to the reigning monarch the story goes that the monarch would give the white elephant as a gift of either good or bad fortune if he liked the recipient he would gift land along with the elephant to help pay for the cost of the elephant if he did not like you he would not include land turning the gift into a money pit examples of white elephantswhite elephants are common in real estate as the following examples illustrate the empire state building is an example of a property that initially seemed destined to stay a white elephant but eventually became a source of positive cash flow and growth the property did not become profitable until the 1950s more than 20 years after it was completed built against the backdrop of the great depression the building struggled to become an office building despite being planned for that purpose now owned by a real estate investment trust reit the building provides multiple sources of revenue in 2019 the building s observation deck generated approximately 128 8 million equal to about 39 of the building s total revenue 1 the building generates additional sources of revenue from leases of office and retail space along with fees generated from third party television and radio broadcasters for use of its broadcasting mast another example is the t mobile center formerly known as the sprint center owned by the city of kansas city mo the multi purpose arena opened in 2007 hosting a concert by elton john as its first event at a cost of roughly 276 million the t mobile center was supposed to house a major sports anchor team 2 kansas city did enter discussions with the national basketball association and national hockey league teams however as of 2020 neither league has agreed to relocate to the arena finally there s the ryugyong hotel originally intended to hold five revolving restaurants and over 3 000 hotel rooms the ryugyong hotel stands 105 stories tall as a pyramid shaped skyscraper in pyongyang north korea developers began construction on the tallest structure in north korea in 1987 but plans were later halted in 1992 due to a lack of funds eventually in 2008 work on the building resumed with a view to unveil its grand opening in 2012 the centenary of kim il sung s birth as of 2020 the building still remains unfinished earning it the nickname the hotel of doom and the dubious distinction as the tallest unfinished building in the world | |
what is a white knight | a white knight is a defense strategy used by a target firm that doesn t want to be acquired in a hostile takeover rather it seeks out a white knight a friendly individual or corporation that buys it at fair consideration just before being taken over by the unfriendly bidder an acquisition by a white knight is preferred to being taken over by a hostile acquirer because the target firm s management generally remains in place and its investors investors receive better compensation for their shares | |
how a white knight works | takeovers can be friendly or uninvited when the acquiring company tries to assume control of another with the consent of the target s board of directors the takeover is considered hostile the acquiring company may use certain strategies to try to gain control but the target also has a few tricks it can use to prevent a takeover the white knight strategy is one defense officials from the target firm may seek out a white knight to preserve the company s core business or to negotiate better takeover terms the strategy is named so because a white knight is commonly seen as a savior the white knight is a third party that offers to buy the target firm with its approval here s how it works another key facet of this strategy is that the white knight may also choose to keep the target s business operations as is after the deal goes through the terms white knight and black knight can find their origin in the adversarial game of chess while a white knight is considered a savior a black knight is akin to an adversary special considerationsa few of the most hostile takeover situations include however successful hostile takeovers are rare no takeover of an unwilling target has amounted to more than 10 billion in value since 2000 an acquiring company primarily raises its price per share until shareholders and board members of the targeted company are satisfied it is especially hard to purchase a large company that does not want to be sold mylan a global leader in generic drugs experienced this when it unsuccessfully attempted to purchase perrigo the world s largest producer of drugstore brand products for 26 billion in 2015 5white knight vs other knightsin addition to white knights there are other so called knights in the business world the most common ones are a black knight is a party that initiates a hostile takeover bid by trying to take control of the target company the target may try to initiate a line of defense such as a poison pill golden parachute or golden handshake to prevent the black knight from completing the acquisition richard gere s character in the film pretty woman was considered a black knight corporate raider edward lews had a change of heart and decided to work with the head of a company he originally planned to ransack white knight vs white squiresimilar to a white knight a white squire is an investor or friendly company that buys a stake in a target company to prevent a hostile takeover but unlike the white knight the target firm does not have to give up its independence because the white squire only buys a partial share of the company rather than a controlling interest the white squire s stake is large enough to prevent the acquirer from taking over the target in exchange for taking this action the white squire may be offered discounted shares or even a seat on the company s board some white squires may sell their stake in the company after the hostile takeover fails and the acquirer backs off examples of white knightssome notable examples of white knight rescues are united paramount theaters 1953 acquisition of the nearly bankrupt abc bayer s 2006 white knight rescue of schering from merck kgaa and jpmorgan chase s 2008 acquisition of bear stearns that prevented their complete insolvency | |
what s the difference between a white knight and poison pill | white knights and poison pills are two defensive strategies that target firms can use to avoid being taken over by an unfriendly acquirer a white knight involves a friendly investor or company who makes a better offer to purchase the target and prevent the unfriendly bidder from gaining control a poison pill on the other hand is used by a target by buying back enough outstanding shares to block an acquirer from gaining a majority and therefore control | |
what is a hostile takeover | a hostile takeover is a type of acquisition that occurs when a company tries to gain control over another without the approval of the target s board the target firm which doesn t want to be purchased may do what it can to prevent being acquired this includes using defensive strategies such as white knights and poison pills or rejecting any offers outright the acquirer on the other hand may try to purchase a controlling interest in the company if unsuccessful the acquirer may circumvent the target s board and go public with its offer to try to get the word out to investors and force the board to consider its offer | |
what are some defense strategies against hostile takeovers | target firms that face hostile takeovers have different strategies available to them including the white knight poison pill golden parachute crown jewel or a pac man defense the bottom lineas the name implies a white knight defense involves a savior who comes in to save a company from being acquired by an unfriendly bidder it s just one of many strategies that corporations have at their disposal to prevent them from being the subject of a hostile takeover although the white knight strategy doesn t mean the target remains independent it does ensure that the company is acquired on its terms by a friendly acquirer |
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