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what are kyc documents | account owners generally must provide a government issued id as proof of identity some institutions require two forms of id such as a driver s license birth certificate social security card or passport in addition to confirming identity the address must be confirmed this can be done with proof of id or with an accompanying document confirming the address of the client the bottom lineknow your client kyc is a set of standards and requirements investment and financial services companies use to verify the identity of their customers and any associated risks with the customer relationship kyc requires customers to provide a personal identification profile and kyc ensures investment advisors are aware of their client s risk tolerance and financial position | |
what is knowledge capital | the term knowledge capital refers to the intangible value of an organization made up of its knowledge relationships learned techniques procedures and innovations in other words knowledge capital is the full body of knowledge an organization possesses a company s knowledge capital depends on the skills and talents of its workers which is what makes it an intangible asset knowledge capital provides companies with a comparative advantage over their competitors understanding knowledge capital | |
when people hear the word capital they tend to think of money while that may be true to some degree the term means more than just dollars and cents the term capital is a broad one that is used to describe anything that provides value to the owner this includes cash as well as physical property real estate machinery precious metals and assets like knowledge | knowledge capital which is also called intellectual or knowledge based capital is anything of value that results from people s experience skills knowledge and learning within an organization therefore it doesn t rely on the physical effort of its machines or other equipment as such this form of capital has immeasurable value and cannot be quantified this is why it s considered an intangible asset which is one whose value cannot be touched or measured as noted above knowledge capital largely depends on the skills and talents of individuals this gives companies an edge over their competition organizations with high knowledge capital may be more profitable or productive compared to those with lower knowledge capital businesses develop knowledge capital by encouraging employees to share information through white papers seminars and person to person communication when this capital is pooled together and shared the results can be worth a great deal knowledge capital is important because it reduces the odds that a company will have to reinvent the wheel each time a particular process is undertaken this is because its employees have access to documents detailing the necessary steps along with access to personnel who have undertaken similar activities companies must encourage their employees to share their skills and talent in order to fully exploit their knowledge capital special considerationseven though it may not be a physical asset knowledge capital still requires a significant amount of investment this means that companies may need to invest in the following in order to improve their knowledge capital keep in mind this isn t an exhaustive list and that organizations can take many other steps to invest in and improve their knowledge capital knowledge capital componentsknowledge capital has three main components human capital relational capital and structural capital each category is highlighted below in more detail human capital represents the contributions made to an organization by its employees utilizing their talents skills and expertise possessed only by individuals human capital can be harnessed and exploited by an organization it is not owned outright human capital can disappear when an employee leaves as such quality organizations focus on retaining creative and innovative workers as well as working toward creating a setting where such intelligence can be taught and learned it was not uncommon though for companies to enter into an employment contract with their employees especially senior level management to protect against the loss of knowledge capital through non competes in the event an employee leaves the company a non compete agreement or clause would typically prohibit that employee from working for a competitor for a specified period of time however in april 2024 the ftc banned the use of non competes 1relational capital is defined as the relationships between coworkers it also includes the relationships between workers and vendors customers suppliers partners and collaborators relationship capital also includes franchises licenses and trademarks as they have value only in the context of the relationship they have with customers strong relationships help corporations and other organizations boost their competitive advantage as such it allows them to access information and eases the flow of that information between individuals and may reduce risk and the chance of error it also gives them the opportunity to expand their customer supplier and resource bases this type of capital represents the non physical capital possessed by an organization such as processes methods and techniques that allow it to operate and enable it to leverage its capabilities structural capital may also include intellectual property such as databases code patents proprietary processes trademarks software and more an organization s structural capital allows it to integrate and weave everything together into a solid cohesive unit as such it encourages and promotes efficiency among all of its participants knowledge capital is unlike different physical factors of production such as land labor and capital that s because it is based on the skills that employees share with each other to improve efficiencies rather than physical items knowledge capital usesfor any business to be successful it must effectively and efficiently harness and exploit the potential of its knowledge capital this requires management to be aware of and work toward efficient knowledge management which is the act of creating disseminating managing and utilizing the talents and knowledge that exist in an organization another important caveat for companies with respect to their knowledge capital it s an asset in need of constant investment of both money and time because like everything else knowledge capital depreciates and is not finite people need to be given the opportunity to continually improve and upgrade their skills in order to maintain their talents the more a company invests in its knowledge capital the more value it holds by continuing to invest in knowledge capital companies can expand their r d operations create new business models increase their patents and designs and continue to innovate examples of knowledge capitalalthough it may not be a physical asset we can still determine the forms that knowledge capital takes it may take shape through the leadership of an executive or management team member having the confidence and drive to keep people moving toward a common goal is a very valuable asset for any company another common form of knowledge capital is practical knowledge having someone who is well versed in coding and programming for instance may be valuable to a small internet startup knowledge capital leads to some of the biggest innovations we know today consider the intellectual prowess and know how that went into developing some of the world s famous logos such as mcdonald s golden arches the nike swoosh or even the apple logo an apple with a bite out of it considerable knowledge also went into some of the food we eat and the tools we have at our disposal such as the formula for coke or the invention of the smartphone | |
what is the knowledge economy | the knowledge economy is a system of consumption and production based on intellectual capital it refers to the ability to capitalize on scientific discoveries and applied research the knowledge economy represents a large share of the activity in most highly developed economies a significant component of value might consist of intangible assets in a knowledge economy such as the value of its workers knowledge or intellectual property understanding the knowledge economydeveloping economies tend to be heavily focused on agriculture and manufacturing highly developed countries have a larger share of service related activities this includes knowledge based economic activities such as research technical support and consulting the knowledge economy is the marketplace for the production and sale of scientific and engineering discoveries this knowledge can be commodified in the form of patents or other intellectual property protections the producers of this information such as scientific experts and research labs are also considered to be part of the knowledge economy the bayh dole act of 1980 was a major turning point in the treatment of intellectual property in the u s it allowed universities to retain title to inventions or discoveries made with federal r d funding and to negotiate exclusive licenses 1the world economy has become more knowledge based thanks to globalization bringing with it the best practices from each country s economy knowledge based factors also create an interconnected and global economy where human expertise and trade secrets are considered important economic resources generally accepted accounting principles gaap don t allow companies to include these assets on their balance sheets however the modern commercialization of academic research and basic science has its roots in governments seeking military advantage knowledge economy and human capitalthe knowledge economy addresses how education knowledge and human capital can serve as a productive asset or business product to be sold and exported to yield profits for individuals businesses and the economy this component of the economy relies heavily on intellectual capabilities rather than natural resources or physical contributions products and services that are based on intellectual expertise advance technical and scientific fields in the knowledge economy this encourages innovation in the economy as a whole the world bank defines knowledge economies according to four pillars example of a knowledge economyacademic institutions companies engaging in research and development r d programmers developing software and search engines for data and health workers using digital data to improve treatments are all components of a knowledge economy these economy brokers pass on the results of their research to workers in more traditional fields such as farmers who use software applications and digital solutions to manage their crops more effectively these fields also include advanced technological based medical procedures such as robot assistant surgeries and schools that provide digital study aids and online courses for their students | |
how big is the knowledge economy | it s difficult to put a price tag on the global knowledge economy because it s not a clearly defined category such as manufacturing it s possible to gain a rough estimate by gauging some of the major components of the knowledge economy however the total intellectual property market was worth 62 18 billion in the united states in 2023 according to the u s chamber of commerce the market size of the country s higher education institutions accounted for 818 6 billion in 2023 34 | |
what are the most valuable skills in the knowledge economy | higher education and technical training are obvious assets but communication and teamwork are also essential skills for a knowledge based economy according to the organization for economic cooperation and development it s unlikely that any single knowledge worker can generate groundbreaking innovations alone so these interpersonal and workplace competencies are essential to surviving in a knowledge based workplace 5 | |
which country has the biggest knowledge economy | factors of a knowledge economy are measured by the united nations development program s global knowledge index it replaced the world bank knowledge economy index after 2012 this metric scores each country based on enabling factors for the knowledge economy these include education levels technical and vocational training innovation and communications technology switzerland was the top ranked knowledge economy with a total score of 69 1 as of 2023 the next two are sweden at 68 0 and the united states with a score of 66 9 6the bottom linethe term knowledge economy describes the commercialization of intellectual pursuits this type of economy capitalizes on research and scientific discoveries it s a significant component of highly developed economies such as switzerland sweden and the united states but it s global and not confined to just a certain handful of countries intellectual property plays a significant role in a knowledge economy unfortunately generally accepted accounting principles gaap don t recognize these assets on companies balance sheets so you won t be able to pinpoint titles to them by doing this type of research | |
what is knowledge engineering | knowledge engineering is a field of artificial intelligence ai that creates rules to apply to data to imitate the thought process of a human expert it looks at the structure of a task or a decision to identify how a conclusion is reached a library of problem solving methods and the collateral knowledge used for each can then be created and served up as problems to be diagnosed by the system the resulting software could then assist in diagnosis trouble shooting and solving issues either on its own or in a support role to a human agent understanding knowledge engineeringknowledge engineering sought to transfer the expertise of problem solving human experts into a program that could take in the same data and come to the same conclusion this approach is referred to as the transfer process and it dominated early knowledge engineering attempts it fell out of favor however as scientists and programmers realized that the knowledge being used by humans in decision making is not always explicit while many decisions can be traced back to previous experience on what worked humans draw on parallel pools of knowledge that don t always appear logically connected to the task at hand some of what ceos and star investors refer to as gut feeling or intuitive leaps is better described as analogous reasoning and nonlinear thinking these modes of thought don t lend themselves to direct step by step decision trees and may require pulling in sources of data that appear to cost more to bring in and process than it is worth the transfer process has been left behind in favor of a modeling process instead of attempting to follow the step by step process of a decision knowledge engineering is focused on creating a system that will hit upon the same results as the expert without following the same path or tapping the same information sources this eliminates some of the issues of tracking down the knowledge being used for nonlinear thinking as the people doing it are often not aware of the information they are pulling on as long as the conclusions are comparable the model works once a model is consistently coming close to the human expert it can then be refined bad conclusions can be traced back and debugged and processes that are creating equivalent or improved conclusions can be encouraged knowledge engineering to exceed human expertsknowledge engineering is already integrated into decision support software specialized knowledge engineers are employed in diverse fields that are advancing human like functions including the ability of machines to recognize a face or parse what a person says for meaning as the complexity of the model grows the knowledge engineers may not fully understand how conclusions are being reached eventually the field of knowledge engineering will go from creating systems that solve problems as well as a human to one that does it quantitatively better than humans coupling these knowledge engineering models with other abilities like natural language processing nlp and facial recognition artificial intelligence could be the best server financial adviser or travel agent that the world has ever seen | |
what is knowledge process outsourcing kpo | knowledge process outsourcing kpo is the outsourcing of core information related business activities kpo involves contracting out work to individuals that typically have advanced degrees and expertise in a specialized area the information related work can be carried out by workers in a different company or by a subsidiary of the same organization the subsidiary may be in the same country or in an offshore location to save costs or other resources understanding knowledge process outsourcingknowledge process outsourcing is the purposeful allocation of relatively high level tasks involving specialized knowledge or problem solving to an outside organization or third party that has a high level of subject matter expertise often located in a different geographic region than the company itself kpo is different from business process outsourcing bpo which involves the outsourcing of labor and other operational work to a third party to save money although kpo is a subset of bpo kpo involves far more specialized analytical and knowledge based work companies that engage in kpo look to obtain highly educated and skilled individuals without having the cost of training and developing those workers to execute one off or special projects that are not part of recurring activities through kpo a company can quickly add experts in specific fields to boost competitiveness and increase earnings or to accomplish special tasks for which there is no need to internally hire subject matter experts for permanent roles on a full time basis types of kpo servicessome common example of kpo outsourcing domains include reasons for knowledge process outsourcingcompanies utilize kpo when they are looking for specialized knowledge and expertise where that knowledge base or skills cannot be found in house however companies that engage in kpo offshore also typically do so in order to reduce costs by hiring skilled workers earning lower wages in another location instead of hiring one directly as an employee ideally companies look to kpo to simultaneously obtain a highly skilled workforce at a lower cost for example a manufacturer might use raw materials add value to those materials through various processes and then sell the result as a final product the company might look to kpo to determine how to improve efficiency in its production process so that it can deliver maximum value for the lowest possible total cost the result of kpo might also help the company create a competitive advantage advantages and disadvantages of kpokpo can help companies reduce operational or production costs by creating new processes or streamlining efficiency kpo also fills the gap or need for skilled employees in a particular field kpo also frees up existing staff including management to do other work boosting efficiency and productivity the flexibility that comes with kpo allows a company to increase or reduce staff easily for example if economic conditions worsen a company can easily reduce its kpo staff to cut costs conversely a company can quickly hire specialized staff to boost profits or revenue kpo helps a company to be more nimble and adapt to the changes in its industry and competitive landscape however disadvantages do exist with kpo privacy of intellectual property and business security can be compromised if classified or proprietary information is lost copied or brought to a competitor companies have less control over the hiring process of outsourced workers as a result a company might not be able to ensure the character of its outsourced employees or the quality of their work implementing kpo can be time and resource intensive to establish a successful operation moreover communication can be a concern and a challenge due to legal language and cultural barriers another disadvantage might be that existing employees might feel threatened by the hiring of outsourced workers and feel their jobs are at risk | |
what is a knuckle buster | knuckle buster is a slang term for a manual credit card imprinter a device merchants used to record credit card transactions before the advent of electronic point of sale terminals breaking down knuckle bustera knuckle buster is a colloquial term used to describe early manual credit card imprinting devices also sometimes known as zip zap machines the imprinters became known as knuckle busters because frequent users of these devices would often skin their knuckles and develop calluses as a result of repeated use knuckle busters were ubiquitous for retailers and businesses from the the beginnings of the credit card industry until electronic point of sale terminals began to become popular in the 1980 s the device works by placing the customer s credit card into a bed in the machine then layering carbon paper forms over the card by sliding a bar back and forth over the paper to create an impression from the embossed card data multiple copies of the transaction are created customers sign these paper forms to authenticate the transactions copies of these forms would serve as customer receipts and the the remaining copies would then be used by the business and its bank and credit card company to process and record the transactions some manual imprinters would come equipped include a plate with the merchant s name address and other identifying information other merchants would purchase carbon transaction forms pre printed with their business information the effect of technological advancements on knuckle busterselectronic point of sale terminals began to become available in 1979 and provided many advantages over knuckle busters for one thing terminals offered faster verification and approval for transactions on a credit card account they also tended to be easier on the knuckles of all involved parties carbon copies also tend to be fragile records and transaction receipts could frequently become illegible especially over time nevertheless knuckle busters remain an advantageous backup plan for businesses that would like to continue to run transactions when electricity or computer networks become unavailable they also remain useful for merchants such as fair vendors who require a portable method of recording transactions even so the ongoing utility of knuckle busters is compromised by a number of factors the availability of carbon forms is diminishing making forms more expensive and inaccessible and employees are often not trained in the use of manual imprinters even whey they are available for merchants manual entry of credit card transactions is more time consuming and each entry is at risk of not being authenticated additionally credit card companies more and more frequently issue cards which are not embossed with customer data making the knuckle buster entirely useless in capturing customer data even when running a manual transaction | |
what is the kof economic barometer | the kof economic barometer is a composite indicator that provides a reliable reading on the direction of gdp growth for the swiss economy compared with the same quarter a year earlier the kof economic barometer is based on a multi sectoral design with three modules core gdp construction and banking the barometer has a complex structure because it bundles over 500 individual indicators in several steps it is published monthly by the kof swiss economic institute understanding the kof economic barometerthe concept of the barometer is to indicate the status of the swiss business cycle as captured by a reference series that reflects the swiss gdp monthly growth rate as early as possible movements in the kof economic barometer on average lead movements in the reference series by one month the kof economic barometer demonstrates leading indicator properties with respect to both the synthetic reference time series and with actual quarterly growth rates of swiss gdp although the kof institute cautions that no conclusions can be drawn about the level of the gdp growth rate on the basis of the kof economic barometer the barometer is closely followed by participants in the financial markets barometer readings that are higher than expected may have the effect of strengthening the swiss franc while lower than anticipated readings may weaken the swiss franc the calculation of the kof economic barometer comprises two main stages first the variables are selected and then these variables are combined into one leading indicator the first step consists of identifying variables that have theoretically valid relationships to the swiss economy and empirically established leading relationship with the reference series based on monthly swiss gdp growth interpolated from quarterly data the present pool of possible factors consists of more than 500 variables the particular mix of which changes from year to year based on a standardized set of statistical criteria 1 the second step is the aggregation of the selected variables into a composite indicator by principal component analysis the kof economic barometer is generated by extracting the first principle component of the selected panel of variables to capture the co movement in the data which should reflect the swiss business cycle history of the kof economic barometerthe kof swiss economic institute has published the kof economic barometer since the 1970s the methodology was changed in 1998 and in 2006 the most recent revisions were made in 2014 in older versions of the kof economic barometer six to 25 variables were included based on data from the swiss federal statistical office in the current version adopted in 2014 over 200 variables enter the second stage the large number of component variables allows for a stable and robust final indicator the latest version of the barometer is also intended to be more transparent and less prone to frequent revision than past versions | |
what is a kondratieff wave | kondratieff wave named after russian economist nikolai kondratieff refers to cycles lasting about 40 to 60 years experienced by capitalist economies also known as kondratiev waves super cycles k waves surges and or long waves understanding kondratieff wavesa kondratieff wave is a long term economic cycle believed to be born out of technological innovation which results in a long period of prosperity this theory was founded by nikolai d kondratieff also spelled kondratiev a communist russia era economist who noticed agricultural commodity and copper prices experienced long term cycles kondratieff believed that these cycles involved periods of evolution and self correction economists have identified the following kondratieff waves since the 18th century additionally each cycle can have four sub cycles or phases that have been dubbed after seasons nikolai d kondratieff s fatekondratieff waves are relegated to a branch of economics called heterodox economics in that it does not conform to the widely accepted orthodox theories espoused by economists the theory was also not welcomed in kondratieff s russia his views were anathema to communist officials especially josef stalin because they suggested that capitalist nations were not on an inevitable path to destruction but rather that they experienced ups and downs as a result he ended up in a concentration camp in siberia and was shot by a firing squad in 1938 | |
what is a kondratiev wave | a kondratiev wave is a long term economic cycle in commodity prices and other prices believed to result from technological innovation that produces a long period of prosperity alternating with economic decline this theory was founded by nikolai d kondratiev also spelled kondratieff an agricultural economist who noticed agricultural and industrial commodity prices experienced long term cycles kondratiev believed that these cycles involved periods of evolution and self correction 12also known as kondratieff wave supercycle k wave surge or long wave understanding kondratiev waveskondratiev s research into the pricing of agricultural commodities led him to investigate historical prices of wheat and other crops in major european grain markets where price records had been maintained he managed to collect almost 150 years worth of data on commodity prices from various markets kondratiev combined these data sets of reported market prices together to make long time series of price data he then transformed the resulting data series from raw price data into moving averages as well as the rates of change of prices and their respective moving averages kondratiev hoped to explore the long term characteristics and trends in prices by doing this to the data in this way kondratiev was able to identify what he believed to be a regular wave like pattern in commodity prices with a period of approximately 50 years he asserted that two full cycles could be observed in his data the first running from 1790 1849 and a second from 1850 1896 and that world commodity markets were about mid way through a third wave he hoped to use insights gained from the patterns he observed to help with soviet planning of prices and production in the economy of the u s s r 3however kondratiev s theory was not welcomed his views were disliked by communist officials because they suggested that capitalist nations were not on an inevitable path to destruction but that they instead only experienced ups and downs kondratiev was also an enthusiastic proponent of lenin s new economic policy which reintroduced markets for some goods and services after the early disastrous failures of economic central planning in the soviet economy but was anathematized with stalin s rise to power as a result of his economic ideas kondratiev was sentenced to 8 years in a prison near moscow upon completion of his sentence he was retried and sentenced to a further 10 years but instead of being imprisoned he was shot to death by nkvd soviet secret police agents at the kommunarka execution grounds in moscow 45later application of kondratiev s theorysome later economists have taken interest in kondratiev s theory though it remains more popular with non economically trained investors that economists various proponents of these ideas often disagree on the timing direction and causal factors involved some financial and economic forecasters have attempted to make use of kondratiev waves and similar theories in their predictive models in his book economic cycles joseph schumpeter argued that a series of wave like patterns of different lengths including kondratiev waves in addition to other shorter waves could explain historical and cyclical trends in the economy he attributed technological innovation as the primary driver of kondratiev waves 1 | |
do kondratiev waves really exist | the existence of kondratiev waves is not generally accepted by economists the somewhat arbitrary and often conflicting views on the timing and nature of kondratiev s theory leads to a lack of consensus even among it s proponents as to what a kondratiev wave actually is and where the economy is on the supposed wave at any given point in time the relatively long period of the waves compared to the length of the data available only a few full waves in length makes firm conclusions on their characteristics inherently murky moreover a well known mathematical property of random time series data known as the slutsky yule effect shows that transforming the data by taking successive moving averages and rates of change between data points as kondratiev did with his raw price data creates spurious wave like patterns that do not reflect any underlying trend in the data themselves this can easily be demonstrated with any series of random numbers it means that results like kondratiev s are almost certainly inadvertent artifacts of statistical massaging of the data with no actual explanatory or predictive power outside the transformed data which are necessarily backward looking by the definition of a moving average 6 | |
what is the korea investment corporation kic | the korea investment corporation kic is a government owned investment organization that manages the sovereign wealth fund swf for the government of south korea the kic was established by law in 2005 and funded in 2006 the kic received initial deposits of 17 billion from the bank of korea and 3 billion from the korean ministry of strategy and finance the kic has approximately usd 183 1 billion in assets under management as of the end of 2020 and ranks 15th in size among sovereign wealth funds according to the sovereign wealth fund institute s rankings understanding the korea investment corporation kic the kic is restricted to investing only in assets that fall under the guidelines provided by the korea investment corporation act the kic also is involved in managing the nation s currency and but remains a separate entity from its currency reserves the kic s objectives are to enhance korea s sovereign wealth and to contribute to the development of the korean financial industry the kic is governed by a steering committee consisting of nine members plus the chair the fund now has a sustainable growth vision with a target date of the year 2035 this includes increasing exposure to sustainable and socially responsible investments kic investmentsthe kic manages a portfolio made up of 85 traditional assets e g stocks bonds and money instruments and 15 alternative assets including private equity real estate infrastructure projects and hedge funds as part of increasing its portfolio diversification the kic increased its exposure to emerging markets since 2010 kic s return on total assets in 2020 stood at 13 7 with a five year annualized return of 9 and annualized returns since inception of 5 22 regarding its investment philosophy it states that kic strives to increase returns while 1 minimizing the risks from individual markets and assets through portfolio diversification and 2 exercising flexibility to seize investment opportunities kic pursues benchmark returns beta by diversifying investments in the range of currencies and countries as outlined in its investment management guidelines kic also strives to generate excess returns over the benchmarks alpha through active management within an appropriate level of risk decisions related to strategic asset allocation are subject to evaluation by a steering committee regarding traditional assets the fund manages risk using the ex ante tracking error from active investing relative to the benchmark if the weighting of an asset class deviates from a set range compared to the benchmark adjustments are made so that exposure falls within the set range the portfolio is rebalanced at pre determined times to maintain policy weightings for each asset class any agreements signed between kic and third party portfolio managers will specify available asset classes and benchmark targets and these serve as the basis for risk management and performance evaluation | |
what is the korea stock exchange krx | the korea stock exchange is a division of the much larger korea exchange krx or the exchange previously korea s stock market was a standalone entity in 2005 the korea stock exchange merged with the korea futures exchange and the electronic market kosdaq to form the korea exchange 1the exchange is the only securities exchange operator in south korea making markets in equities bonds stock index futures stock index options and equity options krx s headquarters are in busan and it has an office for cash markets and oversight in seoul the korea stock exchange backgroundsince its inception in 1956 the korea stock exchange had operated independently prior to its 2005 merger to form krx the korea stock exchange created the korean securities dealers automated quotations kosdaq a trading platform similar to its american counterpart nasdaq of the national association of securities dealers nasd 2in addition to launching electronic trading some of the exchange s milestones include establishing a stock index futures and options market from 1996 to 1997 trading warrants in 2000 and equity options and exchange traded funds etfs in 2002 1today investors can trade various instruments on the exchange including stocks bonds etfs and real estate investment trusts reits kosdaq lists more than 1 000 high profile companies including korea new network imagine asia macrogen daewon media fnc entertainment genie music and sk broadband | |
how does the korea stock exchange work | in 2021 the krx listed 2 448 companies with a combined market capitalization market cap of 2 6 trillion 3 normal trading sessions look the same as those of other major stock markets around the world trading opens at 9 00 a m and closes at 3 30 p m the market is open every day of the week except saturday sunday and holidays of which there are 11 in 2021 as with the s p 500 in the united states an index the korea composite stock price index kospi tracks the health of the exchange the korea composite stock price index kospi the kopsi contains all of the common stocks that are traded on the exchange the kospi was introduced in 1983 with a base value of 100 and in may 2021 the index trades at around 3 188 4 as with other major indexes kopsi is calculated based on market cap and boasts daily trading volume in excess of multiple hundreds of million shares several offshoots of the index track specific sectors factor strategies and market caps the kospi 200 index for example consists of 200 large companies in the stock market division as of 2021 among the biggest holdings in the kopsi include tech giant samsung electronics automotive maker hyundai motor and lg chemical 5korea stock exchange trading considerationsthe easiest way to invest in south korea is with exchange traded funds that provide instant diversification in a single security traded on a u s stock exchange three key etfs track the south korean market in addition to the ishares msci south korea etf ewy are the korea kospi 200 etf hkor and the franklin ftse south korea etf flkr this targeted access to korean stocks extends to large and mid sized companies benefits of investing in south koreawith its rare combination of stability and rapid growth rates south korea s economy is attractive for international investors risks of investing in south koreahowever there are also many risks that investors should consider before committing capital to the region for example three of korea s largest industry sectors automakers financial services and technology could potentially experience setbacks that in turn would lead to market volatility | |
what are the korean composite stock price indexes | korean composite stock price indexes kospi refers to a series of indexes that track the overall korean stock exchange and its components each of the kospi indexes are capitalization weighted market averages the best known of these indexes is the kospi 200 which comprises the 200 largest publicly traded common stocks traded in korea tracking roughly 70 of the market value of the overall korean stock exchange 1 the kospi 200 is used as a rough benchmark when investors or traders refer to the performance of the korean exchange for this reason and because its components are large cap stocks people compare the kospi 200 to the s p 500 in the united states as of 2021 major kospi 200 components included consumer product maker samsung electronics hyundai motor semiconductor manufacturer sk hynix utility provider korea electric power and shinhan bank 2 understanding the korean composite stock price indexesthe korean composite stock price indexes kospi first debuted in the early 1980s with several variants rolled out in subsequent years including the kospi 100 which focused on mid caps and the kospi 50 which represents small caps the kospi also refers to a family of indices tracking specific industries including chemicals and banks and the kodi index which specializes in dividend stocks also the kospi appears on several other products that track the prices of futures options and sovereign bonds note that while kospi refers to the entire family of indexes many market participants call the kospi 200 simply the kospi history of the kospi 200the kospi 200 began trading at the start of january in 1983 at a value of 122 52 1 its base value indexed to january 4 1980 is 100 the kospi 200 rose more than 8 fold to a value of more than 1 000 by april of 1989 roughly two years following the asian financial crisis the index value surged to 1 997 06 by its 30th birthday at the end of 2012 trailing only the hong kong stock exchange and taiwan stock exchange over the same time frame the kospi 200 index stood at roughly 2 470 by mid 2018 up more than 20 fold since its introduction 3 notable dates for the kospi include june 17 1988 when it gained about 8 5 its largest one day percentage gain it also fell more than 12 on september 12 2001 the day following the 9 11 terrorist attack in the u s the index closed above 2 000 for the first time on july 24 2007 3 analysts market participants and the international financial news media all follow the kospi 200 to varying degrees u s based news outlets such as the wall street journal and bloomberg as well as london based reuters owned by canada based thomson reuters often quote the index and use its values when reporting on market events in korea | |
what are krugerrands | krugerrands are gold coins that were minted by the republic of south africa in 1967 to help promote south african gold to the international markets and to make it possible for individuals to own gold krugerrands are among the most frequently traded gold coins in the world market 1the coins have legal tender status in south africa although krugerrands were never assigned a rand zar value krugerrands were designed to derive their value exclusively from the price of gold at the time they are traded if the price of gold changes so does the price of krugerrands 2krugerrands the gold cointhe face of a krugerrand coin bears the image of paul kruger who was president of the south african republic from 1883 to 1900 the coin s name comes from combining paul kruger s surname with rand south africa s national currency the reverse of the coin portrays a galloping springbok antelope which is one of south africa s national symbols 4 paul kruger held office when one of the world s most profitable mines durban deep was founded in 1896 he also was president during the witwatersrand gold rush which led to the founding of johannesburg one of south africa s largest cities the johannesburg stock exchange jse trades in krugerrands through a well regulated secondary market in the same way as any listed equity market instrument with quoted prices based on the weight of the coins 5 new krugerrands are issued by the south african reserve bank sarb where they can be redeemed 6 because of its legal tender status in south africa the krugerrand was minted to be more resilient to wear than the 24 karat gold coins used for decoration medals the krugerrand is made of 22 karats or 91 67 gold with 8 33 copper alloy 7 | |
what is a ksop | a ksop is a qualified retirement plan that combines an employee stock ownership plan esop with a 401 k it is essentially an esop that operates within a 401 k as such ksops are offered by employers to their employees companies that offer these plans match employee contributions with stock rather than cash ksops are considered defined benefit plans as companies that offer them can reduce the administrative expenses of operating separate esops and 401 k plans | |
how a ksop works | individuals have several options available to them when it comes to retirement planning if their employer doesn t offer a sponsored plan they can choose to invest in accounts on their own such as an individual retirement account ira but most employers offer some type of retirement plan such as 401 k s or 403 b s some companies may decide to offer what s called a ksop in which an esop operates within a 401 k esops are benefit plans that give employees an ownership stake in the company for which they work these plans come with certain benefits including no upfront costs 401 k s on the other hand are plans that allow individuals to set aside money from their paycheck for retirement the benefits a retiree receives from a ksop depend on how much they contribute the employer contributions as well as the way the company s share performs in the market the ksop provides the features and benefits of both plans by combining them into one employees make contributions by setting aside a certain amount of money from their wages through regular payroll deductions employers make matching contributions but rather than contributing cash the employer instead offers shares in the company a ksop is a great option for companies that can help them create a market for their shares with sufficient liquidity which measures how easily a stock can be bought or sold in the market they also incentivize employees to ensure the company s profitability this could boost the share price and generate additional value down the road on the flip side employees could lose value if the share price declines leaving less incentive to outperform special considerationsksops bring additional risk to plan holders above and beyond those associated with 401 k s employees with traditional 401 k s are generally offered several options of funds with various risk and reward profiles in which to invest as employers gradually add to an employee s 401 k the employee has more money to distribute among these funds and diversify their assets there could be a variety of securities within a typical fund including stocks bonds money market instruments and cash on the other hand a ksop concentrates employee assets in company stock leaving less room for balance and spreading risk among different shares of stock and asset classes ksops vs other employer sponsored plansthere are other employer sponsored retirement plans in addition to the ksop including the sep ira and the simple ira sep iras are available for self employed individuals such as freelance writers consultants and independent contractors they can also be set up by proprietorships and partnerships participants may make tax deductible contributions on behalf of eligible employees including the business owner employers that establish sep iras are allowed to claim a tax deduction for any plan contributions that are not over the statutory limit however annual contributions are optional and if an employer does contribute they must contribute the same percentage to all eligible employees up to the contribution limit the contribution for a sep ira is the lesser of 25 of compensation or 66 000 for 2023 and 69 000 for 2024 1the simple in the name simple ira stands for savings incentive match plan for employees this type of plan is geared toward slightly larger enterprises including small businesses with 100 or fewer employees employer contributions are mandatory they have two options to help boost the retirement savings of their employees either a 2 contribution or an optional matching contribution of up to 3 in turn employees can contribute a maximum of 15 500 in 2023 and 16 000 in 2024 individuals 50 and over can contribute an additional catch up contribution of 3 500 each year 2 | |
what are the limits for a 401 k | the contribution limit for a 401 k is 22 500 in 2023 and 23 000 in 2024 if you are 50 and older you can contribute an additional 7 500 in both years as a catch up contribution 2 | |
what are the limits for an ira | in 2023 the contribution limit for an ira is 6 500 this increases to 7 000 in 2024 if you are 50 and older you can contribute an additional 1 000 in both years 2 | |
is a 401 k better or an ira | generally a 401 k is better because it has higher contribution limits no income qualifications like a roth ira and most employers offer a matching contribution however 401 k s are only offered by employers and not all offer them if you don t have access to a 401 k then an ira is a great alternative keep in mind that you can contribute to both a 401 k and an ira the bottom lineone of the most popular features of a 401 k retirement plan is the matching contribution from an employer which is essentially free money a ksop works in the same fashion but rather than the employer matching your contribution with cash it matches with stock this helps create liquidity in the market for the company s stock as well as incentivizes employees so that the company does well and the stock price increases | |
what is the kuala lumpur stock exchange klse | the kuala lumpur stock exchange klse is the former name of a malaysian stock exchange located in the capital city of kuala lumpur the klse dates back to 1930 and was specifically created to allow the trading of malaysian securities the exchange went through several name changes over the years but is now known as bursa malaysia 1 klse is one of the largest exchanges in the association of southeast asian nations asean allowing traders to trade equities exchange traded funds etfs offshore islamic assets and other securities 2 understanding the kuala lumpur stock exchange klse as noted above the kuala lumpur stock exchange is now known as bursa malaysia the exchange is fully integrated and offers clearing trading listing depository and settlement services 3 it has a fully automated trading system which launched in late 2008 1according to the exchange s website 900 companies are able to use it to raise capital through a number of different economic activities 2 its main index is the kuala lumpur composite index klci now known as ftse bursa malaysia klci which is composed of the top 30 companies on the bursa malaysia exchange 4a number of different financial securities are traded on bursa malaysia including equities bonds derivatives exchange traded products etps and real estate investment trusts reits there s also an islamic market team that promotes shariah compliant capital markets to cater to the nation s muslim majority 5 this market includes domestic and offshore islamic assets as well as islamic banking the shari ah compliant trading platform that was launched in 2009 companies that want to list on the exchange have three options available including the main or prime market for large established corporations as well as the ace market for companies that have the potential for growth 6 the final option is known as the leap market which is meant for up and coming small and mid sized companies 6bursa malaysia also works with other global corporations and exchanges to promote performance and transparency in global capital markets for instance it entered into a partnership with the chicago mercantile exchange cme to offer derivatives 7 this agreement is valid until 2025 7if you want to invest in the malaysian market consider a mutual fund exchange traded fund or an american depositary receipt special considerationstraders are only able to short sell equity based exchange traded funds but that may change in the future in july 2018 bursa malaysia released a consultation paper that sought public comment on a proposed amendment related to etfs 8 this call comes after a task force on etfs which included the securities commission malaysia sc bursa malaysia and other market participants made recommendations aimed at expanding investor interest in etfs recommendations from the task force urged including etfs such as in service of these goals the rule changes would loosen regulations on the short selling framework to allow various short selling types of etf units history of the kuala lumpur stock exchange klse the exchange dates back to 1930 when it was established as the singapore stockbrokers association this was the first securities business developed in the southeast asian nation 1 it went through a series of name changes including the malayan stock exchange and the stock exchange of malaysia 1 securities trading to the public began in 1960 and the exchange was incorporated as a company in 1976 1 in a move to become more customer focused the exchange demutualized in 2004 1 with demutualization a business that has member ownership converts into one that has shareholders with this change in ownership structure the name changed to bursa malaysia | |
what is kurtosis | kurtosis is a statistical measure used to describe a characteristic of a dataset when normally distributed data is plotted on a graph it generally takes the form of a bell this is called the bell curve the plotted data that are farthest from the mean of the data usually form the tails on each side of the curve kurtosis indicates how much data resides in the tails jessica olah investopediaunderstanding kurtosiskurtosis is a measure of the combined weight of a distribution s tails relative to the center of the distribution curve the mean for example when a set of approximately normal data is graphed via a histogram it shows a bell peak with most of the data residing within three standard deviations plus or minus of the mean however when high kurtosis is present the tails extend farther than the three standard deviations of the normal bell curved distribution kurtosis is sometimes confused with a measure of the peakedness of a distribution however kurtosis is a measure that describes the shape of a distribution s tails in relation to its overall shape a distribution can be sharply peaked with low kurtosis and a distribution can have a lower peak with high kurtosis thus kurtosis measures tailedness not peakedness distributions with a large kurtosis have more tail data than normally distributed data which appears to bring the tails in toward the mean distributions with low kurtosis have fewer tail data which appears to push the tails of the bell curve away from the mean for investors high kurtosis of the return distribution curve implies that there have been many price fluctuations in the past positive or negative away from the average returns for the investment so an investor might experience extreme price fluctuations with an investment with high kurtosis this phenomenon is known as kurtosis risk formula and calculation of kurtosisthere are several different methods for calculating kurtosis the simplest way is to use the excel or google sheets formula for instance assume you have the following sample data 4 5 6 3 4 5 6 7 5 and 8 residing in cells a1 through a10 on your spreadsheet the spreadsheets use this formula for calculating kurtosis n n 1 n 1 n 2 n 3 x i x s 4 3 n 1 2 n 2 n 3 begin aligned frac n n 1 n 1 n 2 n 3 times big sum frac x i bar x s big 4 frac 3 n 1 2 n 2 n 3 end aligned n 1 n 2 n 3 n n 1 sxi x 4 n 2 n 3 3 n 1 2 however we ll use the following formula in google sheets which calculates it for us assuming the data resides in cells a1 through a10 kurt a1 a10 begin aligned text kurt a1 a10 end aligned kurt a1 a10 the result is a kurtosis of 0 1518 indicating the curve has lighter tails and is platykurtic calculating kurtosis by hand is a lengthy endeavor and takes several steps to get to the results we ll use new data points and limit their number to simplify the calculation the new data points are 27 13 17 57 113 and 25 it s important to note that a sample size should be much larger than this we are using six numbers to reduce the calculation steps a good rule of thumb is to use 30 of your data for populations under 1 000 for larger populations you can use 10 first you need to calculate the mean add up the numbers and divide by six to get 42 next use the following formulas to calculate two sums s2 the square of the deviation from the mean and s4 the square of the deviation from the mean squared note that these numbers do not represent standard deviation they represent the variance of each data point s2 y i y 2 s4 y i y 4 where y i ith variable of the sample y mean of the sample begin aligned text s2 sum y i bar y 2 text s4 sum y i bar y 4 textbf where y i text ith variable of the sample bar y text mean of the sample end aligned s2 yi y 2s4 yi y 4where yi ith variable of the sampley mean of the sample to get s2 use each variable subtract the mean and then square the result add all of the results together 27 42 2 15 2 225 13 42 2 29 2 841 17 42 2 25 2 625 57 42 2 15 2 225 113 42 2 71 2 5 041 25 42 2 17 2 289 225 841 625 225 5 041 289 7 246 begin aligned 27 42 2 15 2 225 13 42 2 29 2 841 17 42 2 25 2 625 57 42 2 15 2 225 113 42 2 71 2 5 041 25 42 2 17 2 289 225 841 625 225 5 041 289 7 246 end aligned 27 42 2 15 2 225 13 42 2 29 2 841 17 42 2 25 2 625 57 42 2 15 2 225 113 42 2 71 2 5 041 25 42 2 17 2 289225 841 625 225 5 041 289 7 246 to get s4 use each variable subtract the mean and raise the result to the fourth power add all of the results together 27 42 4 15 4 50 625 13 42 4 29 4 707 281 17 42 4 25 4 390 625 57 42 4 15 4 50 625 113 42 4 71 4 25 411 681 25 42 4 17 4 83 521 50 625 707 281 390 625 50 625 25 411 681 83 521 26 694 358 begin aligned 27 42 4 15 4 50 625 13 42 4 29 4 707 281 17 42 4 25 4 390 625 57 42 4 15 4 50 625 113 42 4 71 4 25 411 681 25 42 4 17 4 83 521 50 625 707 281 390 625 50 625 25 411 681 83 521 26 694 358 end aligned 27 42 4 15 4 50 625 13 42 4 29 4 707 281 17 42 4 25 4 390 625 57 42 4 15 4 50 625 113 42 4 71 4 25 411 681 25 42 4 17 4 83 52150 625 707 281 390 625 50 625 25 411 681 83 521 26 694 358 so our sums are s2 7 246 s4 26 694 358 begin aligned text s2 7 246 text s4 26 694 358 end aligned s2 7 246s4 26 694 358 now calculate m2 and m4 the second and fourth moments of the kurtosis formula m2 s2 n 7 246 6 1 207 67 begin aligned text m2 frac text s2 n frac 7 246 6 1 207 67 end aligned m2 ns2 67 246 1 207 67 m4 s4 n 26 694 358 6 4 449 059 67 begin aligned text m4 frac text s4 n frac 26 694 358 6 4 449 059 67 end aligned m4 ns4 626 694 358 4 449 059 67 we can now calculate kurtosis using a formula found in many statistics textbooks that assumes a perfectly normal distribution with a kurtosis of zero k m4 m2 2 3 where k kurtosis m4 fourth moment m2 second moment begin aligned k frac text m4 text m2 2 3 textbf where k text kurtosis text m4 text fourth moment text m2 text second moment end aligned k m22m4 3where k kurtosism4 fourth momentm2 second moment so the kurtosis for the sample variables is 4 449 059 67 1 458 466 83 3 05 begin aligned frac 4 449 059 67 1 458 466 83 3 05 end aligned 1 458 466 834 449 059 67 3 05 types of kurtosisthere are three categories of kurtosis that a set of data can display mesokurtic leptokurtic and platykurtic all measures of kurtosis are compared against a normal distribution curve investopediathe first category of kurtosis is mesokurtic distribution this distribution has a kurtosis similar to that of the normal distribution meaning the extreme value characteristic of the distribution is similar to that of a normal distribution therefore a stock with a mesokurtic distribution generally depicts a moderate level of risk the second category is leptokurtic distribution any distribution that is leptokurtic displays greater kurtosis than a mesokurtic distribution this distribution appears as a curve with long tails outliers the skinniness of a leptokurtic distribution is a consequence of the outliers which stretch the horizontal axis of the histogram graph making the bulk of the data appear in a narrow skinny vertical range a stock with a leptokurtic distribution generally depicts a high level of risk but the possibility of higher returns because the stock has typically demonstrated large price movements while a leptokurtic distribution may be skinny in the center it also features fat tails the final type of distribution is platykurtic distribution these types of distributions have short tails fewer outliers platykurtic distributions have demonstrated more stability than other curves because extreme price movements rarely occurred in the past this translates into a less than moderate level of risk kurtosis vs skewnesskurtosis and skewness are both statistical measures used to describe the shape of a probability distribution but they focus on different aspects kurtosis measures the tailedness of a distribution skewness measures the asymmetry of a distribution skewness indicates the direction and degree to which the data deviates from a symmetrical bell curve a distribution with zero skewness is perfectly symmetrical meaning the left and right sides of the distribution are mirror images positive skewness means that the right tail is longer or fatter than the left suggesting that the data has a tendency to have higher values negative skewness indicates that the left tail is longer or fatter implying a tendency towards lower values while skewness focuses on the balance of data around the mean kurtosis focuses on the distribution s peak and the weight of its tails a dataset can have high kurtosis with many outliers but still be symmetric and thus have zero skewness on the other hand a dataset can be skewed with either positive or negative skewness but has low kurtosis indicating fewer extreme values using kurtosiskurtosis is used in financial analysis to measure an investment s risk of price volatility kurtosis measures the amount of volatility that an investment s price has experienced regularly high kurtosis of the return distribution implies that an investment will yield occasional extreme returns be mindful that this can swing both ways meaning high kurtosis indicates either large positive returns or extreme negative returns for example imagine a stock had an average price of 25 85 per share if the stock s price swung widely and often enough the bell curve would have heavy tails high kurtosis this means that there is a lot of variation in the stock price an investor should anticipate wide price swings often on the other hand a portfolio with a low kurtosis value indicates a more stable and predictable return profile which may indicate lower risk in this light investors may intentionally seek investments with lower kurtosis values when building safer less volatile portfolios kurtosis can also be used to strategically implement an investment allocation approach for example a portfolio manager who specializes in value investing may prefer to invest in assets with a negative kurtosis value as a negative kurtosis value indicates a flatter distribution with more frequent small returns conversely a portfolio manager who specializes in momentum investing may prefer to invest in assets with a positive kurtosis value with peaked distributions of less frequent but larger returns kurtosis vs other commonly used measurementskurtosis risk differs from more commonly used measurements alpha measures excess return relative to a benchmark index while kurtosis measures the nature of the peak or flatness of the distribution alpha measures the skewness or asymmetry of the distribution beta measures the volatility of a stock compared to the broader market each security or investment has a single beta that indicates whether or not that security is more or less volatile compared to a market benchmark again beta measures the degree of asymmetry of the distribution while kurtosis measures the peak or flatness of the distribution r squared measures the percent of movement a portfolio or fund has that can be explained by a benchmark though r squared is used in regression analysis to assess the goodness of fit of a regression model kurtosis is used in descriptive statistics to describe the shape of a distribution lastly the sharpe ratio compares return to risk the sharpe ratio is used by investors to better understand whether the level of returns they are receiving is commensurate with the level of risk incurred while kurtosis analyzes the distribution of a dataset the sharpe ratio more commonly is used to evaluate investment performance | |
why is kurtosis important | kurtosis explains how often observations in some datasets fall in the tails vs the center of a probability distribution in finance and investing excess kurtosis is interpreted as a type of risk known as tail risk or the chance of a loss occurring due to a rare event as predicted by a probability distribution if such events are more common than predicted by a distribution the tails are said to be fat | |
what is the kuwait investment authority | the term kuwait investment authority kia refers to a government owned corporation responsible for managing the sovereign wealth fund of kuwait founded out of the kuwait investment board in 1982 it was established to manage government revenue derived primarily from the excess proceeds kuwait earns from its oil reserves the fund the world s first and oldest was created to lessen the country s dependence on oil understanding the kuwait investment authoritycrude oil was first discovered in kuwait in 1938 the country exported its first shipment of the commodity in 1946 which put kuwait on the map as one of the world s major crude oil producers 1 this boosted the country s economy leading its leaders to look for ways to invest its excess revenue sheikh abdullah al salem al sabah created the kuwait investment board in 1953 eight years before the country s independence the board was established to manage the nation s surplus oil revenue it also aimed to decrease kuwait s dependence on a single resource this paved the road for the creation of the kuwait investment authority kia in 1982 as an autonomous government body in charge of managing the assets of the country the kia is located in kuwait city with additional offices in london and shanghai 2interested in investing in kuwait consider a mutual fund or an exchange traded fund the kia which created the world s very first and oldest sovereign wealth fund is managed by a board of directors this board has the authority and independence over the fund s asset allocation strategy it is also responsible for the fund s performance the fund invests mostly in private and public equity real estate fixed income and alternative investment markets 2 according to the sovereign wealth fund institute the kia has a total of 750 billion in assets 3there are three different principles that make up the kia s mission statement the fund is one of the members of the international forum of sovereign wealth funds and is among those that signed up to the santiago principles which consists of 24 best practices for these types of funds the principles aim to promote accountability and transparency along with sound investment decisions among the world s sovereign wealth funds 24special considerationsthe fund is divided into two segments the general reserve fund grf and the future generations fund fgf the country s oil revenues and any income earned from the fund s investments are held in the grf its assets and income may be freely used by the national government this segment invests in domestic companies along with corporations in other middle eastern and northern african countries 5 ten percent of the country s revenue is transferred to the future generations fund as well as 10 of the grf s net income if there is a surplus and approved by the minister 6the fgf is considered an intergenerational long term saving platform this segment established in 1976 was created with a 50 transfer from the grf the fund invests outside of kuwait with strategic asset allocation all income from fgf s investments is reinvested any transfers from the fund require a specific legislation 52 | |
what is the kwd kuwaiti dinar | the kuwaiti dinar kwd is the national currency of the state of kuwait the dinar name derives from the roman denarius the kwd subdivides into 1000 fils which is a coin used in many arab countries 1kuwait is a small nation located between iraq and saudi arabia on the persian gulf its economy is heavily reliant on oil making it one of the wealthiest nations in the world as measured by gdp per capita 23understanding the kwd kuwaiti dinar the introduction of the kuwaiti dinar kwd in 1961 was a replacement for the gulf rupee the gulf rupee was a currency pegged at parity to the indian rupee issued in 1959 by the indian government the gulf rupee was for use outside of india particularly in the persian gulf region like the indian rupee the gulf rupee was pegged to the british pound sterling gbp 1in 1961 kuwait gained independence from the united kingdom with the end of treaties put in place after the defeat of the ottoman empire 5 kuwaiti currency law created the kuwaiti currency board which later became the central bank of kuwait with the purpose of establishing a kuwaiti currency the central bank of kuwait introduced the kuwaiti dinar as a replacement for the gulf rupee 6 until 1966 both currencies circulated but the use of the rupee ended after its devaluation 7between 1975 and 2003 the kuwaiti dinar was pegged to a weighted currency basket the content of the currency basket was mandated by the central bank of kuwait in 2003 the kwd was pegged to the u s dollar usd at 0 29963 dinars to the dollar this valuation continued until 2007 when it was formally re pegged to an undisclosed basket of currencies 8as of december 2023 one kuwaiti dinar is worth about usd 3 25 making it one of the most valuable currencies in the world 94the state of kuwait has a petroleum product based economy with 90 of government revenues coming from the oil industry 10 the state of kuwait is a tax free country with one of the lowest unemployment rates in the world 1112the kuwait investment authority kia is the oldest sovereign wealth fund in the world and the investment industry of the country manages more assets than any other member of the gulf cooperative council gcc a regional economic and political union 1314issuance of the kwd kuwaiti dinar there have been six official issues of the kuwaiti dinar banknotes since the first circulation in 1961 there have also been two commemorative sets circulated the third series released in 1980 upon the crowning of emir jaber al ahmad al jaber al sabah was in use until iraq invaded kuwait in 1990 upon invasion the iraqi government installed the iraqi dinar as the official currency for the area 15the gdp of kuwait in 2021 which increased to 184 56 billion in 2022 16the invading iraqi forces stole an enormous number of kuwaiti dinar banknotes with the liberation of kuwait the invalidation of the third dinar issue forced the replacement with the fourth issue of the currency in 1991 the 1994 series implemented enhanced security features the sixth series came in 2014 with bills specially textured so blind and vision impaired persons can identify them by touch 15kwd kuwaiti dinar exchange ratebetween december 2016 and december 2021 the kuwaiti dinar fluctuated between 3 17 and 3 33 that means that it cost between 3 17 and 3 33 u s dollars to buy one kuwaiti dinar 17 the higher rate 3 33 means that the kuwaiti dinar appreciated in value or the u s dollar had fallen in value relative to the dinar if the rate falls that means that the kuwaiti dinar is losing value or that the u s dollar is gaining value relative to it due to its relatively low volatility and limited global trade the kuwaiti dinar is not typically used as a speculative trading instrument if it were a trader would attempt to buy near the lower end of its historical range and try to sell near the top of it buying at 3 17 and selling at 3 33 the price range over five years represents only a 5 profit minus fees and commissions this is why most traders and investors stay away from trading this currency unless they feel a major fundamental shift may be forthcoming that could cause a major shift in the value of the currency | |
how is kuwaiti currency pegged | the kuwaiti currency is pegged to a basket of currencies as opposed to one currency 8 the basket of currencies is not disclosed but is expected to be heavily weighted towards the u s dollar | |
why is the kwd so valuable | the kwd is so valuable because the demand for the currency is very high the economy of kuwait is primarily dependent on oil but not only that it is a stable country that uses its oil revenue efficiently unlike many oil rich countries in addition it is a large exporter of oil because demand for global oil is high the demand to pay for it in kuwaiti currency is also high making the kwd a very valuable currency | |
is kuwait s currency more valuable than the u s dollar | yes kuwait s currency is more valuable than the u s dollar because the demand for the kwd is high due to kuwait being a large producer of oil that being said the u s dollar is the world s reserve currency and is accepted more widely 18 | |
what is the cayman islands dollar kyd | kyd is the currency abbreviation or currency symbol for the cayman islands dollar kyd the currency for the cayman islands the cayman islands are a british overseas territory that includes grand cayman little cayman and cayman brac the cayman islands are a well established offshore financial center the cayman islands dollar comes in denominations of 1 5 10 25 50 and 100 dollars as well as coins the cayman islands monetary authority manages the currency understanding the cayman islands dollar kyd the cayman islands dollar was first seen in 1972 replacing the jamaican dollar on a one to one basis both jamaican and cayman island currency was used until 1972 when the jamaican currency was discontinued kyd is the abbreviation of the cayman islands dollar which is the currency that replaced the former island currency the jamaican dollar in 1972 the kyd in circulation is made up of coins minted by the world coin corporation in denominations of 1 cent 5 cents 10 cents and 25 cents the banknotes or paper currency were originally produced by thomas de la rue and company in denominations of 1 5 10 and 25 the kyd has two recognized symbols and ci the british royal mint was responsible for minting the currency in 40 50 and 100 denominations in 1974 the 1971 currency law was updated to reflect the parity between the kyd and the us dollar which is kyd 1 us 1 20 this law is called the 1974 currency law and it still stands today since 1997 the cayman islands monetary authority has been responsible for the issuing of all currency within the cayman islands about the cayman islandsthe cayman islands are a group of island territories belonging to the united kingdom located in the caribbean sea the islands of grand cayman cayman brac and little cayman make up the island chain christopher columbus initially named the island chain las tortugas due to the number of turtles in the region the islands are mainly known for their tourist attractions and international financial services thanks to picturesque beaches and very little regulatory oversight in the banking sector the cayman islands wrote their constitution into law in 2009 which states that an appointed governor is the head of the state acting on behalf of the monarch the islands are still represented by the british monarchy the capital of the islands is george town where the cayman islands national museum can be found there visitors can learn all about the islands and their histories schooling on the islands is both free and mandatory at a primary level the islands have three colleges available to residents looking to pursue higher education the islands were hit hard by hurricane ivan in 2004 and a national disaster was declared with an economy that relies so heavily on tourism the resulting damages limited their desirability as a tourist attraction after a strong effort by the government to repair the damages the island has regained most of its lost revenues over the ensuing years the cayman islands makes a substantial amount of money from fees associated with registering and renewing offshore companies and hedge funds the financial services industry in the cayman islands generates roughly 55 of the nation s economy example of kyd exchangethe kyd is pegged to the u s dollar whereby one cayman dollar is equal to 1 20 u s dollars for example let s say you were sending a wire transfer to the cayman islands and wanted to convert 1 000 to kyd the exchange would result in 833 60 in cayman dollars 1 000 1 20 | |
what is the kyoto protocol | the kyoto protocol was an international agreement that aimed to reduce carbon dioxide emissions and the presence of greenhouse gases ghg in the atmosphere the essential tenet of the kyoto protocol was that industrialized nations needed to reduce their co2 emissions the protocol was adopted in kyoto japan in 1997 as greenhouse gas emissions threatened climate stability 1 it was effectively replaced by the paris agreement which went into effect in 2016 2understanding the kyoto protocolthe kyoto protocol mandated that industrialized nations cut their greenhouse gas emissions at a time when the threat of global warming was growing rapidly the protocol was linked to the united nations framework convention on climate change it was adopted in kyoto japan on december 11 1997 and became international law on february 16 2005 1countries that ratified the kyoto protocol were assigned maximum carbon emission levels for specific periods and participated in carbon credit trading if a country emitted more than its assigned limit then it would be penalized by receiving a lower emissions limit in the following period developed industrialized countries made a promise under the kyoto protocol to reduce their annual hydrocarbon emissions by an average of 5 2 by the year 2012 3 targets depended on the individual country as a result each nation had a different target to meet by that year members of the european union eu pledged to cut emissions by 8 while the u s and canada promised to reduce their emissions by 7 and 6 respectively by 2012 4the amount of the kyoto protocol fund that was meant to aid developing countries in selecting industrialized processes and technologies that did not emit ghgs 5kyoto protocol mechanismsthe kyoto protocol established three different mechanisms to enable countries to meet their targeted emissions limits the three mechanisms were the kyoto protocol recognized that developed countries are principally responsible for the high levels of ghg emissions in the atmosphere as a result of more than 150 years of industrial activity 8 as such the protocol placed a heavier burden on developed nations compared to less developed nations the kyoto protocol mandated that 37 industrialized nations and the eu cut their ghg emissions 9 developing nations were asked to comply voluntarily and more than 100 developing countries including china and india were exempted from the kyoto agreement altogether 10the protocol separated countries into two groups annex i contained developed nations and non annex i referred to developing countries the protocol placed emission limitations on annex i countries only non annex i nations participated by investing in projects designed to lower emissions in their countries 11for these projects developing countries earned carbon credits which they could trade or sell to developed countries allowing the developed nations a higher level of maximum carbon emissions for that period in effect this function helped the developed countries to continue emitting ghg vigorously 6the u s which ratified the original kyoto protocol dropped out of the protocol in 2001 the u s believed that the agreement was unfair because it called only for industrialized nations to limit emissions reductions and it felt that doing so would hurt the u s economy 12additional kyoto protocol changesglobal emissions were still on the rise by 2005 the year the kyoto protocol became international law 13 in fact there was an increase of about 40 in emissions globally between 1990 and 2009 14the eu was able to exceed its initial target and said it was on track to meet its goals to continue reducing emissions in the future 15 however the united states and china two of the world s biggest emitters produced enough greenhouse gases to mitigate any of the progress made by other nations that met their targets 16in december 2012 after the first commitment period of the protocol ended parties to the kyoto protocol met in doha qatar to adopt an amendment to the original kyoto agreement this so called doha amendment added new emission reduction targets for the second commitment period 2012 2020 for participating countries 17the doha amendment had a short life in 2015 at the sustainable development summit held in paris all unfccc participants signed yet another pact the paris climate agreement which effectively replaced the kyoto protocol the paris climate agreement is a landmark environmental pact that was adopted by nearly every nation in 2015 to address climate change and its negative effects the agreement includes commitments from all major ghg emitting countries to cut their climate altering pollution and to strengthen those commitments over time 18a major directive of the deal calls for reducing global ghg emissions to limit the earth s temperature increase in this century to well below 2 degrees celsius with an aim for below 1 5 degrees celsius relative to preindustrial levels the paris agreement also provides a way for developed nations to assist developing nations in their efforts to adapt climate control and it creates a framework for monitoring and reporting countries climate goals transparently 2every five years countries engage in the global stocktake which is an assessment of their progress under the paris climate agreement 19the kyoto protocol todayin 2016 when the paris climate agreement went into force the united states was one of the principal drivers of the agreement and president obama hailed it as a tribute to american leadership 20in the same period presidentidal candidate donald trump criticized the agreement as a bad deal for the american people and pledged to withdraw the country from the agreement if elected in 2017 then president trump announced that the u s would withdraw from the paris climate agreement the former president did not begin the formal withdrawal process until november 4 2019 21 the u s formally withdrew from the paris climate agreement on november 4 2020 the day after the 2020 presidential election in which donald trump lost his reelection bid to joseph biden 2223on january 20 2021 his first day in office president biden began the process of rejoining the paris climate agreement which officially took effect on february 19 2021 24kyoto protocol timelinebelow are some relevant dates relating to the development implementation and revisions to the kyoto protocol | |
what was the primary purpose of the kyoto protocol | the kyoto protocol was an agreement among developed nations to reduce carbon dioxide emissions and greenhouse gases in an effort to minimize the impacts of climate change | |
why didn t the u s sign the kyoto protocol | the united states backed out of the kyoto protocol agreement in 2001 on the basis that it unfairly burdened developed nations the treaty called only for developed nations to reduce emissions which the u s believed would unfairly stifle its economy 12 | |
how many countries signed the kyoto protocol | after becoming a signatory in 2013 afghanistan became the 192nd and last signatory of the kyoto protocol 27 | |
why was the kyoto protocol created | the kyoto protocol was created in response to concerns surrounding climate change the treaty was an agreement between developed nations to reduce carbon dioxide emissions and greenhouse gases the framework implemented the united nations target of reducing global warming consequences including a general rise in sea levels disappearance of some island states melting of glaciers and an increase in extreme climate related events the bottom linethe kyoto protocol is largely considered a landmark legislative achievement as one of the more prominent international treaties in regards to climate change though the treaty has been superseded by the paris agreement the kyoto protocol remains an important part of environmental and conservation history | |
what is the l share annuity class | the l share annuity class is a version of a variable annuity that has a shorter surrender period duration and will start paying out earlier than other annuity classes l share annuities have relatively high administrative costs it is designed for investors who want to be able to begin withdrawing funds from an account after a comparatively short period of time other share classes offered by variable annuities are a share b share c share o share and x share annuity classes | |
how the l share annuity class works | a variable annuity in general is a long term investment vehicle set up by an insurance company for an investor planning for retirement the investor pays an annual premium fee which is invested in any combination of assets like stocks bonds and money market funds the wealth that accumulates from these investments is tax deferred until the money is withdrawn and the value of the variable annuity is correlated with the performance of the underlying investments in addition to the premium paid the annuitant or purchaser of the annuity also pays a mortality risk and expense m e fee to compensate the insurance company for the risk that the annuitant will outlive his or her life expectancy the insurance company makes guaranteed annuitized periodic payments to the annuity investor variable annuities are regulated by state insurance regulators the securities exchange commission sec and the financial industry regulatory authority finra special considerationsthe l share is most valuable to investors who want access to their investment funds after just four years without being penalized consider the following example a standard variable annuity with a 100 000 initial investment offers a growth rate of 10 over five years the surrender period is eight years under the standard contract with annual mea fees of 1 1 after five years the investment grows to 153 157 90 but the annuitant cannot access the funds without being penalized for another three years an annuitant with an l share annuity class with a four year surrender period and annual mea fees of 1 90 will see that the investment value after five years is 147 614 30 lower than the standard annuity contract above but the annuitant can withdraw some of these funds during this time which would not be possible under another annuity class so the annuitant will pay higher administrative fees but has earlier access to the income advantages and disadvantages of l share annuity classthe l share annuity class offers some advantages versus other annuity classes including earlier access to funds and no sales charge there are various share classes available in variable annuities one of which is the l share class the l share class differs from other annuity classes in terms of surrender charges administrative and expense fees and the m e fee schedule the surrender period is the period of time during which an annuitant may not withdraw funds from the account otherwise a surrender charge or penalty will be applied the l share class has a surrender period of three to four years which indicates that the owner may start withdrawing money after three or four years depending on the financial institution s contractual agreement conversely the average surrender period for a variable annuity is six to eight years which makes the l share annuity an advantageous option another advantage of the l share class is that it does not have an upfront sales charge like the a and o share classes the front end sales charge associated with a shares is a fee paid when share purchases are made and is deducted from the investment amount of the portfolio o share classes charge a premium based sales charge equal to a fixed percentage of the invested amount of an account however there are disadvantages to l share annuity classes l share annuity classes offer a relatively higher mortality risk and expense m e charge compared to other variable annuity classes the m e charge is a percentage of the annuitant s account value and is an ongoing cost that continues even past the surrender period the higher the percentage the smaller the value of the investments m e charges for variable annuities typically range from 0 9 to 1 95 with l share class fees in the higher spectrum of that range the administrative and distributive fees are the charges for servicing and distributing annuity payments some of these charges relate to the cost of transferring funds between accounts and the cost of preparing monthly statements and confirmation reports variable annuity administrative fees range from 0 0 to 0 6 annually with l shares offering the higher percentage of the account value some financial institutions combine the m e and administration fees into one and classify the combination as an mea fee meaning annual mortality and expense fee and administrative charge other fees that may be charged under the l share annuity class include an annual service charge and fees for special features such as long term care insurance and a stepped up death benefit it is important that investors read the contractual agreements rigorously to know and understand what costs will be associated with their annuity accounts | |
what is labor intensive | the term labor intensive refers to a process or industry that requires a large amount of labor to produce its goods or services the degree of labor intensity is typically measured in proportion to the amount of capital required to produce the goods or services the higher the proportion of labor costs required the more labor intensive the business matthew collins investopediaunderstanding labor intensivelabor intensive industries or processes require large quantities of physical effort to complete necessary tasks in labor intensive industries the costs associated with securing the necessary personnel outweigh the capital costs in regard to importance and volume while many labor intensive jobs require low levels of skill or education this is not true of all labor intensive positions advances in technology and worker productivity have moved some industries away from labor intensive status but many remain labor intensive industries include restaurants hotels agriculture and mining as well as healthcare and caregiving less developed economies as a whole tend to be more labor intensive this situation is rather common because low income means that the economy or business cannot afford to invest in expensive capital but with low income and low wages a business can remain competitive by employing many workers in this way firms become less labor intensive and more capital intensive before the industrial revolution 90 of the workforce was employed in agriculture producing food was very labor intensive technological development and economic growth have increased labor productivity reduced labor intensity and enabled workers to move into manufacturing and more recently services as real wages rise in the economy it creates an incentive for firms to invest in more capital to raise labor productivity so the firm can continue to afford the cost of more expensive labor special considerationsa prime example of a labor intensive industry is the agricultural industry jobs in this industry which is closely related to the cultivation of foodstuffs that must be picked with minimal damage to the plant as a whole such as fruit from fruit trees are particularly labor intensive the construction industry is considered labor intensive as most of the required work is hands on even with the use of certain tools a person must be involved with the vast majority of the work many positions that are part of the service industry are also labor intensive these positions include those within the hospitality industry and the personal care industry labor costs encompass all of the costs necessary to secure the human capital necessary to complete work these costs can include funds directed toward base wages along with any benefits that may be given labor costs are considered variable while capital costs are considered fixed because labor costs can be adjusted during market downturns through layoffs or reductions in benefits labor intensive industries have some flexibility in controlling their expenses disadvantages of labor costs in labor intensive industries include limited economies of scale as a firm cannot pay its workers less by hiring more of them and susceptibility to wage forces within the labor market | |
how is labor intensity measured | labor intensity is usually measured proportional to the amount of capital required to produce the goods or services the higher the proportion of labor costs required the more labor intensive the business | |
what does labor intensity require | labor intensive industries or processes require a large amount of physical effort to complete necessary tasks | |
which industries are labor intensive | labor intensive industries include the bottom line labor intensive is a term referring to an industry or a process that requires a large amount of labor to produce its goods or services labor intensity is typically measured in a degree proportional to how much capital is required to produce the goods or services the higher the proportion of labor costs required the more labor intensive the business | |
what is the labor market | the labor market also known as the job market refers to the supply of and demand for labor for which employees provide the supply and employers provide the demand it is a major component of any economy and is intricately linked to markets for capital goods and services understanding the labor marketit s important and useful to study both the macroeconomic and the microeconomic views of the labor market each view can inform government and business outlooks policies and actions regarding employment and the labor market plays a major role in any economy at the macroeconomic level supply and demand are influenced by domestic and international market dynamics as well as factors such as immigration the age of the population and education levels relevant measures include unemployment productivity participation rates total income and gross domestic product gdp at the microeconomic level individual firms interact with employees hiring them firing them and raising or cutting wages and hours the relationship between supply and demand influences the number of hours employees work and the compensation they receive in wages salary and benefits the u s labor marketthe macroeconomic view of the labor market can be difficult to capture but a few data points can give investors economists and policymakers an idea of its health the first is unemployment during times of economic stress the demand for labor lags behind supply driving unemployment up high rates of unemployment exacerbate economic stagnation contribute to social upheaval and deprive large numbers of people of the opportunity to lead fulfilling lives in the u s unemployment was around 4 to 5 before the great recession when large numbers of businesses failed many people lost their homes and demand for goods and services and the labor to produce them plummeted as of april 2023 the unemployment rate in the u s is 4 8 youth unemployment rate workers aged 15 24 is 10 2 the lowest value since 2005 1labor productivity is another important gauge of the labor market and of broader economic health it measures the output produced per hour of labor productivity has risen in many economies the u s included due to advancements in technology and other improvements in efficiency in the u s growth in output per hour has not translated into similar growth in income per hour in other words workers have been creating more goods and services per unit of time but they have not been earning much more in compensation what is called a productivity gap is created when labour productivity increases more rapidly than wages in the u s between 1979 and 2021 productivity has increased by 64 6 while hourly salaries have only increased 17 3 meaning that productivity has grown 3 7 times more than pay 2the fact that productivity growth has outstripped wage growth means that the supply of labor has outpaced the demand for it the labor market in macroeconomic theoryaccording to macroeconomic theory the fact that wage growth lags productivity growth indicates that the supply of labor has outpaced demand when that happens there is downward pressure on wages as workers compete for a scarce number of jobs and employers have their pick of the labor force conversely if demand outpaces supply there is upward pressure on wages as workers have more bargaining power and are more likely to be able to switch to a higher paying job while employers must compete for scarce labor 3some factors can influence labor supply and demand for example an increase in immigration to a country can grow the labor supply and potentially depress wages particularly for unskilled jobs 4 an aging population can deplete the supply of labor and potentially drive up wages these factors don t always have such straightforward consequences though a country with an aging population will see demand for many goods and services decline while demand for healthcare increases not every worker who loses their job can simply move into healthcare work particularly if the jobs in demand are highly skilled and specialized such as those for doctors and nurses for this reason demand can exceed supply in certain sectors even if supply exceeds demand in the labor market as a whole factors influencing supply and demand don t work in isolation either if it weren t for immigration the u s would be a much older and potentially less dynamic society so while an influx of unskilled workers might exert downward pressure on wages it likely offsets declines in demand other factors influencing contemporary labor markets and the u s labor market in particular include the threat of automation as advanced technologies gain the ability to do more complex tasks the effects of globalization as enhanced communication and better transport links allow work to be moved across borders the price quality and availability of education and a whole array of policies including the minimum wage the labor market in microeconomic theorythe microeconomic theory analyzes labor supply and demand at the level of the individual firm and worker 5 supply or the hours an employee is willing to work initially increases as wages increase no workers will work voluntarily for nothing unpaid interns are in theory working to gain experience and increase their desirability to other employers and more people are willing to work for 20 an hour than 7 an hour gains in supply may accelerate as wages increase as the opportunity cost of not working additional hours grows however supply may then decrease at a certain wage level the difference between 1 000 an hour and 1 050 is hardly noticeable and the highly paid worker who s presented with the option of working an extra hour or spending their money on leisure activities may well opt for the latter demand at the microeconomic level depends on two factors marginal cost of production and marginal revenue product if the marginal cost of hiring an additional employee or having existing employees work more hours exceeds the marginal revenue product it will cut into earnings and the firm would theoretically reject that option if the opposite is true it makes rational sense to take on more labor 5the neoclassical microeconomic theories of labor supply and demand have received criticism on some fronts most contentious is the assumption of rational choice maximizing money while minimizing work which to critics is not only cynical but not always supported by the evidence homo sapiens unlike homo economicus may have all sorts of motivations for making specific choices the existence of some professions in the arts and nonprofit sector undermines the notion of maximizing utility defenders of neoclassical theory counter that their predictions may have little bearing on a given individual but are useful when taking large numbers of workers in aggregate 6 | |
how does a minimum wage affect the labor market | the effects of a minimum wage on the labor market and the wider economy are controversial classical economics and many economists suggest that a minimum wage like other price controls can reduce the availability of low wage jobs on the other hand some economists say that a minimum wage can increase consumer spending thereby raising overall productivity and leading to a net gain in employment 7 | |
how does immigration affect the labor market | the effects of immigration are difficult to measure precisely due to the size and complexity of the modern economy the classical model of economics predicts that high levels of immigration may cause wages to fall due to an increased supply of labor however some studies suggest that immigration can also have a positive effect on aggregate demand depending on the skillset of the new arrivals because new workers are also consumers the research found that immigration can increase the demand for labor as well as the supply 8 | |
how does the government calculate the unemployment rate | the bureau of labor statistics compiles a monthly employment report based on a survey of around 60 000 representative households in the united states data from the survey are used to estimate the employment figures for the entire country the unemployment rate is based on the percentage of people who are not employed but actively looking for a job as a percentage of the total labor force those who have no job and are no longer looking are not included in the unemployment rate 9the bottom linethe labor market is an economic term for the availability of workers and the cost of employment it plays a major role in the overall economy as in other markets the price for labor is largely determined by supply and demand although the labor market is also heavily regulated in many countries | |
what is labor market flexibility | labor market flexibility is an important aspect of the labor market it allows companies to make certain decisions about changing their labor force in response to fluctuations in the market and to help boost production organizations can make changes to their labor pool based on factors such as employee hiring and firing compensation and benefits and working hours and conditions companies do not have carte blanche however to implement a flexible labor market because of laws and policies that protect employees and the labor pool | |
how labor market flexibility works | labor market flexibility refers to how quickly a firm responds to changing conditions in the market by making modifications to its workforce a flexible labor market allows employers to make changes in response to supply and demand issues the economic cycle and other market conditions but a truly flexible labor market only exists when there are few labor force regulations in place when this is the case employers are able to set wages fire employees and change employee work hours at will and the changes can go either way during tough economic times for example an employer that has high flexibility can cut wages and increase the number of hours that employees are expected to work to boost productivity conversely when the economy is strong the same employer may decide to give employees a slight raise and cut back on their hours labor unions can limit labor market flexibility by negotiating higher wages benefits and better working conditions with employers less flexible labor markets are subject to more rules and regulations including minimum wages restrictions on firing and other laws involving employment contracts labor unions often have considerable power in these markets some of the other factors that affect labor market flexibility include employee skills and training occupational mobility minimum wages part time and temporary work and job related information that employers make available to their employees advantages and disadvantages of labor market flexibilitysupporters of increased labor market flexibility argue that it leads to lower unemployment rates and higher gross domestic product gdp due to the unintended consequences of tight labor market restrictions a firm may consider hiring a full time employee for example but be concerned that the employee would be extremely difficult to fire should that prove necessary and could claim costly worker s compensation or sue based on alleged unfair treatment the firm may choose instead to take on short term contract workers such a system benefits the relatively small number of full time employees with especially secure positions but hurts those on the outside those who must move between unreliable short term gigs proponents of tough labor market regulations on the other hand claim that flexibility puts all the power in the hands of the employer resulting in an insecure workforce the labor movement began in the late 18th and 19th centuries in the u s and europe in response to dangerous and dirty workplace conditions extremely long shifts exploitative practices by management and owners wage garnishment threats and other abuse and arbitrary dismissals 1employers had little incentive to ensure that workplace injuries and deaths were rare since they faced no consequences for creating hazardous conditions and employees who could no longer work were easy to replace factors impacting labor market flexibilityas mentioned earlier unions employee skills and training minimum wage regulations and job related information can all have an impact on flexibility in the labor market also called trade unions these organizations represent the collective interests of a group of workers employees can band together through their union to initiate negotiations for better wages working conditions benefits and working hours making the market less flexible | |
when employees are skilled and have ready access to training to improve on or add to their skills they are better able to respond to changes in the market for example a customer service representative who goes back to school to get training in the information technology it sector is able to respond to the growing demand for it technicians when vacancies arise | state and federal regulations limit how low employers can set the base pay per hour for employees these minimums are based on changes in the cost of living and inflation 2 some employers feel higher minimum wages cut into their productivity as well as their bottom line people rely on the information provided by employers about the jobs available in the market the more informed job seekers are about open positions the easier it is for employees to respond to fluctuating conditions within a company s workforce and in the market making it much more flexible | |
what are ways to make labor markets more flexible | ways to make labor markets more flexible include reducing or abolishing the minimum wage reducing the power of labor unions providing education and skills training to workers to improve mobility making it easier to lay off workers removing labor protection laws and reducing unemployment | |
what are the different labor categories | labor is generally categorized into unskilled semi skilled and skilled unskilled labor is that which does not require any skill or education and that can be performed by almost anyone unskilled labor tends to focus on physical labor as opposed to mental labor semi skilled labor requires some skills and education but not as much as skilled labor skilled labor requires extensive education such as a college degree with jobs that are in need of judgment decision making and complex thought | |
what is the difference between the labor market and the financial market | the labor market is where employees and jobs interact whereas the financial market involves saving borrowing and investing | |
what is labor productivity | labor productivity measures the hourly output of a country s economy specifically it charts the amount of real gross domestic product gdp produced by an hour of labor growth in labor productivity depends on three main factors saving and investment in physical capital new technology and human capital investopedia paige mclaughlinunderstanding labor productivitylabor productivity also known as workforce productivity is defined as real economic output per labor hour growth in labor productivity is measured by the change in economic output per labor hour over a defined period labor productivity should not be confused with employee productivity which is a measure of an individual worker s output | |
how to calculate labor productivity | to calculate a country s labor productivity you would divide the total output by the total number of labor hours for example suppose the real gdp of an economy is 10 trillion and the aggregate hours of labor in the country is 300 billion the labor productivity would be 10 trillion divided by 300 billion equaling about 33 per labor hour if the real gdp of the same economy grows to 20 trillion the next year and its labor hours increase to 350 billion the economy s growth in labor productivity would be 72 percent the growth number is derived by dividing the new real gdp of 57 by the previous real gdp of 33 growth in this labor productivity number can sometimes be interpreted as improved standards of living in the country assuming it keeps pace with labor s share of total income the importance of measuring labor productivitylabor productivity is directly linked to improved standards of living in the form of higher consumption as an economy s labor productivity grows it produces more goods and services for the same amount of relative work this increase in output makes it possible to consume more of the goods and services for an increasingly reasonable price growth in labor productivity is directly attributable to fluctuations in physical capital new technology and human capital if labor productivity is growing it can usually be traced back to growth in one of these three areas physical capital is the tools equipment and facilities that workers have available to use to produce goods new technologies are new methods to combine inputs to produce more output such as assembly lines or automation human capital represents the increase in education and specialization of the workforce measuring labor productivity gives an estimate of the combined effects of these underlying trends labor productivity can also indicate short term and cyclical changes in an economy possibly even turnaround if the output is increasing while labor hours remains static it signals that the labor force has become more productive in addition to the three traditional factors outlined above this is also seen during economic recessions as workers increase their labor effort when unemployment rises and the threat of lay offs looms to avoid losing their jobs 1 policies to improve labor productivitythere are a number of ways that governments and companies can improve labor productivity | |
what is the labor theory of value | the labor theory of value ltv was an early attempt by economists to explain why goods were exchanged for certain relative prices on the market it suggested that the value of a commodity was determined by and could be measured objectively by the average number of labor hours necessary to produce it in the labor theory of value the amount of labor that goes into producing an economic good is the source of that good s value the best known advocates of the labor theory were adam smith david ricardo and karl marx since the 19th century the labor theory of value has fallen out of favor among most mainstream economists understanding the labor theory of valuethe labor theory of value suggested that two commodities will trade for the same price if they embody the same amount of labor time or else they will exchange at a ratio fixed by the relative differences in the two labor times for instance if it takes 20 hours to hunt a deer and 10 hours to trap a beaver then the exchange ratio would be two beavers for one deer the labor theory of value was first conceived by ancient greek and medieval philosophers later in developing their labor theory of value both smith in the wealth of nations and ricardo began by imagining a hypothetical rude and early state of humanity consisting of simple commodity production 12 this was not meant to be an accurate or historical reality it was a thought experiment to derive the more developed version of the theory in this early state there are only self producers in the economy who all own their own materials equipment and tools needed to produce there are no class distinctions between capitalist laborer and landlord so the concept of capital as we know it has not come into play yet they took the simplified example of a two commodity world consisting of beaver and deer if it is more profitable to produce deer than beaver there would be a migration of people into deer production and out of beaver production the supply of deer will increase in kind causing the incomes in deer production to drop with a simultaneous rise in beaver incomes as fewer choose that employment it is important to understand that the incomes of the self producers are regulated by the quantity of labor embodied in the production often expressed as labor time smith wrote that labor was the original exchange money for all commodities and therefore the more labor employed in production the greater the value of that item in exchange with other items on a relative basis 3while smith described the concept and underlying principle of the ltv ricardo was interested in how those relative prices between commodities are governed take again the example of beaver and deer production if it takes 20 labor hours to produce one beaver and 10 labor hours to produce one deer then one beaver would exchange for two deer both equal to 20 units of labor time the cost of production not only involves the direct costs of going out and hunting but also the indirect costs in the production of the necessary implements the trap to catch the beaver or the bow and arrow to hunt the deer the total quantity of labor time is vertically integrated including both direct and indirect labor time so if it requires 12 hours to make a beaver trap and eight hours to catch the beaver that equals 20 total hours of labor time examplehere is an example where beaver production initially is more profitable than that of deer because it s more profitable to produce beaver people will move out of deer production and choose instead to produce beaver creating a process of equilibration the labor time embodied indicates that there should be an equilibrium ratio of 2 1 so now the income of beaver producers will tend to drop to 10 an hour while the income of deer producers will tend to rise to 10 an hour as the cost of production drops in beaver and rises in deer bringing back the 2 1 ratio so that the new costs of production would be 200 and 100 this is the natural price of the commodities it was brought back in line due to the arbitrage opportunity that presented itself in having the income of beaver producers at 11 causing the profit rate to exceed the natural exchange ratio of 2 1 although the market price may fluctuate often due to supply and demand at any given moment the natural price acts as a center of gravity consistently attracting the prices to it if the market price overshoots the natural price people will be incentivized to sell more of it while if the market price underestimates the natural price the incentive is to buy more of it over time this competition will tend to bring relative prices back into line with the natural price this means that the labor that is used to produce economic goods is what determines their value and their market prices because it determines the natural price labor theory and marxismthe labor theory of value interlaced nearly every aspect of marxian analysis marx s economic work das kapital was almost entirely predicated on the tension between capitalist owners of the means of production and the labor power of the proletariat working class marx was drawn to the labor theory because he believed human labor was the only common characteristic shared by all goods and services exchanged on the market for marx however it was not enough for two goods to have an equivalent amount of labor instead the two goods must have the same amount of socially necessary labor marx used the labor theory to launch a critique against free market classical economists in the tradition of adam smith if he asked all goods and services in a capitalist system are sold at prices that reflect their true value and all values are measured in labor hours how can capitalists ever enjoy profits unless they pay their workers less than the real value of their labor it was on this basis that marx developed the exploitation theory of capitalism critiques of the labor theory of valuethe labor theory of value leads to obvious problems theoretically and in practice one critique is that it is possible to expend a large quantity of labor time on producing a good that ends up having little or no value however a closer reading points to the fact that commodities conforming to the ltv would have both a use value and an exchange value and be reproduceable therefore something that has no demand in the market or with little or no use value would not be considered a commodity according to the ltv the same would go for a unique object such as a work of fine art which would too be excluded it may take one person longer than another to produce some commodity marx s concept of socially necessary labor time does also get around this problem a second critique is that goods that require the same amount of labor time to produce often have widely different market prices on a regular basis moreover the observed relative prices of goods fluctuate greatly over time regardless of the amount of labor time expended upon their production and often do not maintain or tend toward any stable ratio or natural price according to the labor theory of value this should be impossible yet it is an easily observed daily norm however market price and value are two different although closely related concepts while market price is driven by the immediate supply and demand for a commodity these prices act as signals to both producers and consumers when prices are high it incentivizes producers to make more increasing the supply and discourages buyers reducing demand or vice versa as a result over the long run prices should tend to fluctuation around the value the subjectivist theory takes overthe labor theory s problems were finally resolved by the subjective theory of value this theory stipulates exchange value is based on individual subject evaluations of the use value of economic goods value emerges from human perceptions of usefulness people produce economic goods because they value them this discovery also reversed the relationship between input costs and market prices while the labor theory argued input costs determined final prices the subjectivist theory showed the value of inputs was based on the potential market price of final goods the subjective theory of value says that the reason people are willing to expend labor time producing economic goods is for the usefulness of the goods in a sense this theory is the exact reverse of the labor theory of value in the labor theory of value labor time expended causes economic goods to be valuable in the subjective theory of value the use value people get from goods causes them to be willing to expend labor to produce them the subjective theory of value was developed in the middle ages by priests and monks known as the scholastics including st thomas aquinas and others later three economists independently and almost simultaneously rediscovered and extended the subjective theory of value in the 1870s william stanley jevons l on walras and carl menger this watershed change in economics is known as the subjectivist revolution | |
what is a labor union | a labor union is an organization of workers in a trade industry or company that is created to represent the workers in negotiations with management over issues of pay benefits and working conditions the labor union representatives negotiate with employers in a process known as collective bargaining the process results in a tentative agreement that requires a vote of the full membership to be finalized unions have a long history in the united states the first union was established by philadelphia shoemakers in 1794 the federation of organized trades and labor unions was formed in 1881 followed five years later by the american federation of labor afl 12 | |
how a labor union works | labor unions generally have a democratic structure holding elections to choose officers to make decisions that are beneficial to the members employees pay dues to the union in return the labor union acts as an advocate on the employees behalf labor unions are often industry specific and tend to be most common today among public sector government employees and those in transportation and utilities 34to form a union a locally based group of employees obtains a charter from a national level labor organization two large organizations oversee most of the labor unions in the u s the change to win federation ctw and the american federation of labor and congress of industrial organizations afl cio the afl cio was formed in 1955 after the two groups merged the ctw spun off from the afl cio in 2005 562nearly all unions are structured and work in similar ways u s law requires an employer to actively bargain with a union in good faith however the employer is not required to agree to any specific terms multiple negotiation rounds are conducted between the union s bargaining unit a group of members whose duty is to assure that its members are properly compensated and represented and the employer a collective bargaining agreement cba is eventually agreed upon and signed the cba outlines pay scales and includes other terms of employment such as vacation and sick days benefits working hours and working conditions 7after signing the cba an employer cannot change the agreement without a union representative s approval however cbas eventually expire at which time the labor union and management must negotiate and sign a new agreement 8despite being a boon to workers labor unions have seen membership decrease significantly since their heyday in the mid 20th century 9example of a labor unionthe national education association nea represents teachers and other education professionals and is the largest labor union in the united states with nearly 3 million members 10it represents public school teachers substitute teachers higher education faculty members education support workers administrators retired teachers and students working to become teachers the nea works with local and state educational systems to set adequate wages and working conditions for its members among other activities 11history of labor unionslabor unions have played a critical role in the workforce of the united states in the industrial space labor unions fought for safer conditions better working hours and better pay labor unions also worked to stop child labor the history of labor unions in the u s pre date the country the first strike occurred in 1768 when new york journeyman tailors protested against a wage reduction as a result the federal society of journeyman cordwainers was created in 1794 in philadelphia and is considered to be the beginning of trade union organization 12refusal to admit black people women and immigrant groups were common in labor unions in the 19th and early 20th century and excluded groups formed their own unions today labor union membership is very diverse including more women and black and latinx workers than ever before though asian workers are underrepresented 1314the right to form unions was established in 1935 by the national labor relations act also known as the wagner act it gave unionized employees the right to strike and bargain jointly for working conditions the act encouraged collective bargaining stopped unfair tactics by employers and set up enforcement in a new independent agency the national labor relations board 15the number of u s wage and salary workers who were members of unions in 2023 9in recent years legislation and court decisions have weakened the ability of unions to organize today right to work laws in 27 states prohibit contracts that require workers to join a labor union to get or keep a job 16public employees cannot be required to pay dues to a union to support its collective bargaining activities on their behalf according to a 2018 u s supreme court decision in janus v american federation of state county and municipal employees 17in march 2021 the united states house of representatives passed the protecting the right to organize act pro act the pro union legislation aims to make it easier to form unions and overrides right to work laws as of september 2022 the legislation has been stalled by the senate with most republicans opposing the act and referring it to the committee on health education labor and pensions 1819labor unions todayunion membership in the u s reached its peak in the 1950s when nearly a third of the workforce was represented by unions unions have been in a steady decline ever since for a number of reasons not least of which is the collapse of domestic manufacturing that provided many blue collar jobs 20in a report released in late 2023 the u s department of the treasury draws a strong correlation between declining union representation and the growing income equality between middle class americans and the top paid tier 20today only about 10 of american workers are represented by unions government and public sector jobs including teachers police and firefighters are most likely to be unionized accounting for about a third of union members 9industries with relatively high rates of unionization include utilities transportation and warehousing educational services and the entertainment industries 21criticisms of labor unionssome business owners industry associations and think tanks support right to work laws on the grounds that requiring union membership to obtain a job reduces competition in the free market economy some labor union contracts such as those of the teacher and police unions have been criticized for making it too difficult to fire incompetent and even violent employees 2223for example according to a 2019 study of 656 police union contracts across the country 73 included an appeals process in which final decisions on firing and disciplining officers were in the hands of arbitrators selected in part by the local police union the result is that many disciplinary actions taken against abusive police officers have been overturned 2425some in the labor movement have called for the expulsion of police unions on the grounds that they protect violent officers the afl cio s recommendations in 2020 on police reform said the best way to address police brutality was to engage police affiliates not isolate them 26at times labor unions have been found complicit in organized criminal activity the u s department of justice reports as of 2020 the united states had obtained relief in 24 civil rico cases involving labor organizations affiliated with the international brotherhood of teamsters ibt the laborers international union of north america liuna the former hotel employees and restaurant employees international union hereiu and the international longshoreman s association ila 27political role of labor unionslabor unions play a significant role in politics endorsing candidates in local and national elections and representing their members interests in occupational safety issues the 2018 supreme court decision banning mandatory dues for public workers protected by unions undermined the unions ability to fund political advocacy 17the democratic party expresses support for the labor movement in its platform and wins many labor union endorsements some unions including law enforcement groups tend to support republican candidates traditionally the republican party has viewed unions as a threat to freedom in the workplace and opposes legislation that makes it easier for unions to organize such as the pro act 282930 | |
what do labor unions do | labor unions represent their members collectively and individually negotiators for labor unions meet with negotiators for management to agree on pay benefits and working conditions for the workers they represent the talks result in a contract that must receive the approval of the membership from day to day labor unions may represent individual workers who have grievances against their employers or who face firing or disciplinary action they also have a role in ensuring that the terms of the contract between employees and employers are followed usually through rank and file members who hold positions in the union 4 | |
what are examples of labor unions | trade unions represent workers who do a particular type of job the american federation of labor congress of industrial organizations afl cio is a trade union industrial unions represent workers in a particular industry such as the national education association nea nea is the largest labor union in the u s 106 | |
how many u s workers belong to labor unions | in 2023 about 14 4 million workers in the u s were members of labor unions that is about 10 of the working population 9the bottom linea labor union is an organization formed by workers to negotiate for better pay safer working conditions and better benefits a labor union chooses representatives to negotiate on its members behalf with the employer labor unions have a long and storied history of fighting for employee rights and protections in the u s | |
what is laddering | in finance the term laddering is used in a variety of ways depending on the industry its two most common usages relate to retirement planning and the underwriting of new securities issues generally laddering is used to describe different investing strategies that aim to produce steady cash flow by deliberately planning investments creating an influx of liquidity at a predetermined time and or matching a desired risk profile although these strategies can vary substantially in their execution what they have in common is the practice of carefully combining a series of investments to produce a desired outcome for fixed income investors laddering can help manage interest rate risk and reinvestment risk | |
how laddering works | the most common usage of the term laddering is found in retirement planning there it refers to buying multiple fixed income financial products of the same type such as bonds or certificates of deposit cds each with different maturity dates by spreading their investment across various maturities investors obtain ongoing cash flow as they manage their interest rate and reinvestment risks in addition to managing those two risks an investor s purpose in creating for example a bond ladder is to obtain a total return no matter the interest rate rate environment similar to the total return of a long term bond to build a bond ladder investors purchase a series of individual bonds each of which matures in a different year for example you could buy five bonds that mature in 1 2 3 4 and 5 years as the first bond matures investors reinvest the proceeds in a new five year bond this process repeats itself with each maturity thus the maturity length of the ladder is maintained the practice of laddering can help investors manage reinvestment risk because as mentioned as the shortest term bond on the ladder matures the cash is reinvested in a longer term bond on the ladder longer term bonds tend to have higher interest rates similarly the practice of bond laddering can also reduce interest rate risk if one has to sell due to the variety of maturities shorter term bond prices fluctuate less than longer term bond prices due to years to maturity and the effects of duration 1importantly the whole idea behind the ladder is to hold the bonds to maturity rather than to sell them therefore the current price of their bonds due to any change in interest rates isn t an issue investors capital is preserved reinvestment risk is the risk that investors won t be able to reinvest bond income payments and the principal they receive upon maturity at the same rate as that of the maturing bond interest rate or market price risk is the risk that the price of a bond will change as interest rates change 2laddering as a term is also used in the context of the underwriting of initial public offerings ipos here it refers to an illegal practice in which underwriters offer a below market price to investors prior to the ipo if those same investors agree to buy shares at a higher price after the ipo is completed this practice can provide unfair advantages to insiders at the expense of regular investors and is therefore prohibited under u s securities law 3example of ladderingmichaela is a diligent investor who is saving for her retirement at 55 years of age she has saved approximately 800 000 in combined retirement assets she is gradually shifting those assets toward less volatile investments michaela decides to invest 500 000 in various bonds which she has carefully combined or laddered to reduce her reinvestment and interest rate risks specifically michaela s bond portfolio consists of the following investments each year michaela takes the money from the bond that matures and reinvests it in a new bond that matures in five years by doing so she effectively ensures that she is exposed to interest rate risk only when she has to buy the new bond plus she manages a potentially lower reinvestment rate by buying the longer term higher interest rate bond by contrast if she had invested 500 000 in a single five year bond she would have risked a greater opportunity cost if interest rates had ended up rising during those five years frequently asked questions faqs | |
what is interest rate risk | interest rate risk is also known as market price risk it is the risk that the price of a fixed income investment will change as interest rates change for example in a rising rate environment bond prices fall when rates fall prices rise so if your circumstances force you to sell bonds as rates rise you may receive less for them than you paid however if you hold bonds to maturity and aren t worried about selling them interest rate risk won t affect those bonds 4 | |
why do investors ladder bonds | one reason investors ladder bonds or buy individual bonds of different maturities and reinvest in new bonds as each matures is to take advantage of the fixed income cash flows they offer when held to maturity laddering protects against market price risk the risk that their price will drop as interest rates rise since an investor doesn t plan to sell the bonds it also helps manage reinvestment risk since the investor reinvests proceeds from each maturity back into the longer term bond higher yield end of the ladder 2 | |
is a shorter term bond ladder better than a longer term one | that depends on what an investor seeks generally speaking in a typical yield environment long term bonds offer higher yields than short term bonds so a longer ladder can increase the yields an investor can obtain as they reinvest however longer term bonds are more volatile than shorter term bonds so changing prices could be an issue inflation would be too shorter ladders tend to have lower yields and have less volatile price fluctuations 1 they can be less susceptible to inflation that could mean investors end up reinvesting a greater proportion of total capital the bottom linein retirement planning laddering describes when an investor buys bonds with various ascending maturity years as the bonds reach maturity one by one the investor reinvests them into bonds of equal maturity length when these bonds mature they are reinvested and the cycle continues using this strategy investors can maintain a steady cash flow and reduce interest rate and reinvestment risk investors can create short or long term ladders depending on the bond maturity length they select while long term bonds tend to have higher yields than short term ones they are also subject to more unpredictable price changes | |
what is the laffer curve | the laffer curve is a curve depicting the relationship between tax rates and revenue based on a theory by economist arthur laffer created in 1974 the curve visually represents total tax revenue collected by governments as varying depending on the tax rate the curve is often used to illustrate the argument that cutting tax rates can result in increased total tax revenue investopedia michela buttignolunderstanding the laffer curveamerican economist arthur laffer developed a bell curve analysis in 1974 that plotted the relationship between changes in the government tax rate and tax receipts the analysis is known as the laffer curve it suggests that taxes could be too low or too high to produce maximum revenue and that both a 0 income tax rate and a 100 income tax rate generate 0 in receipts arthur laffer argued that tax cuts have two kinds of effects on the federal budget the arithmetic and the economic the arithmetic effect is immediate every dollar in tax cuts translates directly to one less dollar in government revenue and it decreases the stimulative effect of government spending by exactly one dollar the economic effect is longer term and has a multiplier effect as a tax cut increases income for taxpayers they will spend it the increase in demand creates more business activity spurring an increase in production and employment charting the curvetax revenue reaches an optimum tax rate t that s represented by t on the graph both a decrease in the tax rate moving t to the left of t and an increase in the tax rate moving t to the right of t will result in a net decrease in tax revenue the laffer curve and the tax ratethe laffer curve follows certain logic because tax revenue does not always increase whenever the tax rate increases of course the government collects no income when the tax rate is 0 but imagine a situation where the government collects 100 tax revenue all earnings would then be remitted to the government so there would be no incentive for workers to remain employed total revenue actually falls in this case as shown by the diminishing portion of the curve even though the rate is highest and further along the x axis it may seem counterintuitive but tax revenue is most often not maximized when tax rates are highest due to extenuating circumstances the laffer curve s theory is that it s more efficient and ideal for a government to set a rate somewhere between 0 and 100 this may seem simplistic but finding the exact point where total revenue is maximized is subject to great political debate the graphical depiction above shows it somewhere in the middle but the true ideal rate can be skewed in one direction or the other different circumstances for different countries will also yield different outcomes history of the laffer curvearthur laffer presented his ideas in 1974 to staff members of president gerald ford s administration most believed at the time that an increase in tax rates would increase tax revenue 1laffer countered that taking more money from a business in the form of taxes means the less money the business will be willing to invest a business will find ways to protect its capital from taxation or to relocate all or a part of its operations overseas workers lose the incentive to work harder when they see a greater portion of their paychecks taken for taxation laffer argued that this means less total revenue as tax rates rise and that the economic effects of reducing incentives to work and invest by raising tax rates would damage an economy laffer s findings influenced president ronald reagan s economic policy known as reaganomics based on supply side and trickle down economics it resulted in one of the biggest tax cuts in history yet annual federal government current tax receipts still grew during reagan s time in office total federal tax revenue was 517 billion in 1980 total federal tax revenue had nearly doubled to 909 billion by 1988 2marginal tax rates decreased in the economic policy under president reagan tax revenues increased inflation decreased and the unemployment rate fell the laffer curve in u s economics and politicspoliticians heavily debate the best way to change the effective tax rate republicans tend to lean toward lower corporate and high earner taxes with the argument that these parties create jobs for the less wealthy they often lean toward shedding public policy for low income individuals including minimizing or eliminating tax credits or rates for the lowest earners democrats tend to lean toward redistributing wealth from high earners to low earners by increasing tax rates for higher tax brackets and establishing tax breaks for lower tax brackets each side of the aisle is attempting to do what they think is best for their country but each has a different approach regarding the laffer curve republicans most often believe that governments should have minimal interference with business thus their ideal laffer curve often has a smaller peak democrats most often believe that governments play a crucial part in generating programs that benefit low earners so their ideal laffer curve is higher each political party strives to reach peak efficiency along the laffer curve although they use very different methods criticisms of the laffer curvefour often cited problems have been associated with the laffer curve the tax system is complex raising the rate of one tax can impact or offset the benefits or negatives of reducing another the laffer curve overly simplifies the relationship between taxes by allocating a simplistic single tax rate the laffer curve sets the ideal tax rate anywhere between 0 and 100 however this rate may change due to economic circumstances the laffer curve assumes an exact t for maximizing government revenue and it requires tax cuts for the wealthy the laffer curve assumes that higher taxes result in lower revenues because employees will work fewer hours however employees may work harder or longer for career progression businesses don t rely solely on the tax rate for making decisions but also look for a skilled workforce and infrastructure both of which offset an increased tax rate 3 | |
what can prevent tax cuts from stimulating economic growth | tax cuts and their effect on the economy depend on the timeline for growth the availability of an underground economy the availability of tax loopholes and the economy s productivity level | |
what is trickle down economics | arthur laffer s idea that tax cuts could boost growth and tax revenue was quickly labeled trickle down both president herbert hoover s stimulus efforts during the great depression and president ronald reagan s use of income tax cuts were described as trickle down measures tax breaks and benefits for corporations and the wealthy would trickle down to individuals and boost the economy | |
what is lacking in the laffer curve | actual numbers are missing from the curve so the actual suggested tax rates and the percentage increase in revenue generated are missing this leaves policymakers to guess which rates work | |
what is a laggard | a laggard is a stock or security that is underperforming relative to its benchmark or peers a laggard will have lower than average returns compared to the market a laggard is the opposite of a leader understanding laggardsin most cases a laggard refers to a stock the term can also however describe a company or individual that has been underperforming it is often used to describe good vs bad as in leaders vs laggards investors want to avoid laggards because they achieve less than desired rates of return in broader terms the term laggard connotes resistance to progress and a persistent pattern of falling behind as an example of a laggard consider stock abc that consistently posts annual returns of only 2 percent when other stocks in the industry post average returns of 5 percent stock abc would be considered a laggard if an investor s portfolio contains laggards these are most likely to be sold off first holding a stock that returns 2 percent instead of one that returns 5 percent costs you 3 percent each year unless there is some solid reason to believe that a catalyst will lift shares of a stock that has historically lagged its competition continuing to hold the laggard costs money the reason for a laggard s subpar performance is usually specific to the company maybe they lost a big contract maybe they are currently dealing with management or labor issues maybe their earnings are eroding in an increasingly competitive environment and they haven t found a way to counteract the trend risks of buying laggard stocks | |
how does a stock become a laggard perhaps the company continually misses earnings or sales estimates or shows shaky fundamentals lower priced stocks also carry more risk because they often feature less dollar based trading liquidity and exhibit bigger spreads between the bid and ask prices | everybody loves a bargain but when it comes to investing a cheap or laggard stock may not be the best deal you could very well end up getting what you paid for while a stock share at 2 5 or 10 may seem like it has lots of upside most stocks selling for 10 or less are cheap for a reason they have had some sort of deficiency in the past or they have something wrong with them now a better strategy may be to to buy fewer shares of an institutional quality stock that s rising soundly rather than thousands of shares of a cheap stock top mutual funds and other big players prefer companies with sound earnings and sales track records and share prices of at least 15 on the nasdaq and 20 on the nyse they also prefer volumes to be at least 400 000 shares a day which allows funds to make trades with less impact on the share price | |
what is a lagging indicator | a lagging indicator is an observable or measurable factor that changes sometime after the economic financial or business variable with which it is correlated changes lagging indicators confirm trends and changes in trends lagging indicators can be useful for gauging the trend of the general economy as tools in business operations and strategy or as signals to buy or sell assets in financial markets understanding lagging indicatorsa lagging indicator is a financial sign that becomes apparent only after a large shift has taken place therefore lagging indicators confirm long term trends but they do not predict them this is useful because oftentimes many leading indicators are volatile and short term fluctuations in them can obscure turning points or lead to false signals looking at lagging indicators is one way to confirm whether a shift in the economy has actually occurred economic lagging indicatorsthe u s conference board publishes a monthly index of lagging indicators along with its index of leading indicators these include lagging indicators such as the average duration of unemployment the average prime rate charged by banks and the change in the consumer price index for services some general examples of lagging indicators include the unemployment rate corporate profits and labor cost per unit of output interest rates can also be good lagging indicators since rates change as a reaction to severe movements in the market other lagging indicators are economic measurements such as gross domestic product gdp the consumer price index cpi and the balance of trade bot these indicators differ from leading indicators such as retail sales and the stock market which are used to forecast and make predictions business lagging indicatorslagging indicators in business are a kind of key performance indicator kpi which measure business performance after the fact such as sales customer satisfaction or revenue churn they can be difficult or impossible to influence directly businesses use tools to measure track and compare various leading and lagging indicators of performance because they are at least partially the outcome of business decisions and operations they provide insight into the results achieved by how a business is being run businesses can also track leading indicators that measure internal performance such as customer engagement or employee satisfaction which can be influenced more directly and lead to changes in lagging indicators businesses can use business intelligence tools such as dashboards to measure track and compare various leading and lagging indicators of performance technical lagging indicatorsanother type of lagging indicator is a technical indicator that lags the current price of an asset which occurs after a certain price move has already happened one example of a lagging technical indicator is a moving average crossover unlike other lagging indicators that compare different economic variables to each other a technical indicator compares the value of a given variable to its own moving average over a given interval or other historical characteristics technical traders use a short term average crossing above a long term average as confirmation when placing buy orders since it suggests an increase in momentum the drawback of using this method in asset trading is that a significant move may have already occurred resulting in the trader entering a position too late note that similar technical approaches can be applied to economic indicators such as gdp or other measures of economic performance as lagging indicators to confirm a change in trend | |
what is a lagging vs a leading indicator | leading indicators are forward looking they provide information about likely future outcomes lagging indicators are backward looking and provide information about the effects of past inputs | |
is macd a leading or lagging indicator | the moving average convergence divergence macd or mac d is a lagging technical indicator that is used in investing it shows the relationship between two exponential moving averages for a security s price because this price information is historical data macd is a lagging indicator | |
is inflation a leading or lagging indicator | inflation is a lagging economic indicator it is reported after prices have already risen which means the data it uses is historical this type of lagging indicator provides important information about the economy that is used to set public policy the bottom linelagging indicators are correlated to economic financial or business inputs they are based on historical data which means they change after a change has already happened in those inputs this is different from leading indicators which provide information about likely future changes economic lagging indicators such as the unemployment rate or inflation provide information about past economic changes business lagging indicators usually provide information about how a change in management or strategy has impacted performance technical indicators are used in investing they provide information about market trends momentum and the prices of securities | |
what is laissez faire | laissez faire is an economic theory dating back to the 18th century that opposes any government intervention in business affairs the driving principle behind laissez faire economics is that the less the government is involved in the economy the better off business and society as a whole will be it is a french term that translates to leave alone or more literally to let you do laissez faire economics is a key component of free market capitalism investopedia sydney saporitounderstanding laissez fairethe underlying beliefs that make up the fundamentals of laissez faire economics include the idea that economic competition constitutes a natural order that rules the world because this natural self regulation is the best type of regulation laissez faire economists argue that there is no need for business and industrial affairs to be complicated by government intervention as a result they oppose any sort of federal involvement in the economy which includes any type of legislation or oversight they are against minimum wages duties trade restrictions and corporate taxes in fact laissez faire economists see such taxes as a penalty for production laissez faire is often associated with libertarian views on the economy where government plays an extremely limited role in fact one of the key characteristics of laissez faire economics is that the government should only be involved with the following three functions history of laissez fairepopularized in the mid 1700s the doctrine of laissez faire is one of the first articulated economic theories it originated with a group known as the physiocrats who flourished in france from about 1756 to 1778 1 these thinkers tried to apply scientific principles and methodology to the study of wealth and economic production these economists argued that a free market and free economic competition were extremely important to the health of a free society 2 they believed the government should only intervene in the economy to preserve property life and individual freedom otherwise the natural unchanging laws that govern market forces and economic processes what later british economist adam smith dubbed the invisible hand should be allowed to proceed unhindered unfortunately an early effort to test laissez faire theories did not go well as an experiment in 1774 turgot louis xvi s controller general of finances abolished all restraints on the heavily controlled grain industry allowing imports and exports between provinces to operate as a free trade system but when poor harvests caused scarcities prices shot through the roof merchants ended up hoarding supplies or selling grain in strategic areas even outside the country for better profit while thousands of french citizens starved riots ensued for several months in the middle of 1775 order was restored and with it government controls over the grain market 3despite this inauspicious start laissez faire practices developed further by such british economists as smith and david ricardo ruled during the industrial revolution of the late 18th and early 19th century and as its detractors noted it resulted in unsafe working conditions and large wealth gaps only at the beginning of the 20th century did developed industrialized nations like the u s begin to implement significant government controls and regulations to protect workers from hazardous conditions and consumers from unfair business practices however it s important to note that these policies were not intended to restrict business practices and competition criticism of laissez fairelaissez faire advocates argue that if individuals serve their own interests first societal benefits will follow one of the chief criticisms of laissez faire is that capitalism as a system has moral ambiguities built into it it does not inherently protect the weakest in society as such detractors feel laissez faire actually leads to poverty and economic imbalances the idea of letting an economic system run without regulation or correction in effect dismisses or further victimizes those most in need of assistance they say the 20th century british economist john maynard keynes was a prominent critic of laissez faire economics and he argued that the question of market solutions versus government intervention needed to be decided on a case by case basis 4reduces government involvement in business which is thought to be inefficient and stiflingencourages self responsibility and innovationpromotes free markets and competitionlack of regulations can harm consumers and the environmentcan generate negative externalitiescompetition naturally leads to wealth inequalitymay incentivize bad actors | |
what does laissez faire mean literally | laissez faire in french literally means let you do legend has it that the origins of the phrase laissez faire in an economic context came from a 1681 meeting between the french finance minister jean baptise colbert and a businessman named le gendre as the story goes colbert asked le gendre how best the government could help commerce to which le gendre replied laissez nous faire meaning let us do the physiocrats popularized the phrase using it to name their core economic doctrine 5 | |
what is an example of laissez faire | an economy would follow the principles of laissez faire if it followed an approach where the government was not at all involved in the workings of the economy business or markets instead the free market would regulate not only prices but also discipline producers to remain good actors in reality such an economy does not exist all economies even in countries with highly libertarian values have some degree of government regulation and intervention | |
what is laissez faire capitalism | in laissez faire capitalism companies could operate with a pure profit motive and not have to worry about government regulation or taxation this of course could create negative externalities and information asymmetries that can allow producers to behave as bad actors and get away with it proponents of laissez faire say that costly and exhaustive regulation is not needed since the market would weed out such bad actors in reality however bad actors may continue operating for a long while the bottom linelaissez faire refers to an economic theory opposed to government intervention in the market a central element of free market capitalism laissez faire posits that businesses and society as a whole are significantly better off without government involvement the idea dates back to 18th century france and is popular in countries with libertarian values in the present | |
what is lambda | in options trading lambda is the greek letter assigned to a variable that tells the ratio of how much leverage an option is providing as the price of that option changes this measure is also referred to as the leverage factor or in some countries effective gearing understanding lambdalambda tells what ratio of leverage the option will provide as the price of the underlying asset changes by 1 lambda is a measurement considered to be one of the minor greeks and it isn t widely used because most of what it identifies can be discovered by using a combination of the other option greeks however the information it provides is useful for understanding how much leverage a trader is employing in an option trade where leverage is a key factor for a particular trade lambda becomes a useful measure the full equation of lambda is as follows c c s s s c c s ln c ln s where c price of the option s price of the underlying security change begin aligned lambda frac partial c c partial s s frac s c frac partial c partial s frac partial text ln c partial text ln s textbf where c text price of the option s text price of the underlying security partial text change end aligned s s c c cs s c ln s ln c where c price of the options price of the underlying security change the simplified lambda calculation reduces to the value of delta multiplied by the ratio of the stock price divided by the option price delta is one of the standard greeks and represents the amount an option price is expected to change if the underlying asset changes by one dollar in price 1lambda in actionassuming a share of stock trades at 100 and the at the money call option with a strike price of 100 trades for 2 10 and also assuming that the delta score is 0 58 then the lambda value can be calculated with this equation lambda 0 58 100 2 10 27 62 text lambda 0 58 times left frac 100 2 10 right 27 62 lambda 0 58 2 10100 27 62this lambda value indicates the comparable leverage in the option compared to the stock therefore a 1 increase in the value of stock holdings would yield a 27 62 increase in the same dollar value being held in the option consider what happens to a 1 000 stake in this 100 stock the trader holds 10 shares and if the stock in this example were to increase by 1 from 100 to 101 per share the trader s stake increases in value by 10 to 1 010 but if the trader held a similar 1 050 stake in the option five contracts at 2 10 the resulting increase in value of that stake is much different because the value of the option would increase from 2 10 to 2 68 based on the delta value then the value of the 1 050 held in those five option contracts would rise to 1 340 a 27 62 increase lambda and volatilityacademic papers have in some cases equated lambda and vega the confusion created by this would suggest that the calculations of their formulae are the same but that is incorrect however because the influence of implied volatility on option prices is measured by vega and because this influence is captured in changing delta values lambda and vega often point to the same or similar outcomes in price changes for example lambda s value tends to be higher the further away an option s expiration date is and falls as the expiration date approaches this observation is also true for vega lambda changes when there are large price movements or increased volatility in the underlying asset because this value is captured in the price of the options if the price of an option moves higher as volatility rises then its lambda value will decrease because the greater expense of the options means a decreased amount of leverage 2 | |
what is lancaster university management school lums | the lancaster university management school lums is lancaster university s business school in the united kingdom lums offers a wide range of subjects from undergraduate degrees to postgraduate degrees as well as executive education lums s master of business administration mba program consistently ranks highly in several disciplines including corporate strategy and because it also provides the best value for the money in the world 1understanding lancaster university management school lums lancaster university management school is one of the four faculties of lancaster university in the u k lancaster university accepted its first undergraduate students in october 1964 business studies were among the first subjects to be taught at the school 2the lums campus is home to six different departments accounting and finance economics entrepreneurship and strategy management science marketing and organisation work and technology 3 the school has programs for undergraduate graduate mba and doctorate students it also provides courses for working executives who want to continue their education while they work staff and students come from more than 100 different countries and its alumni network is comprised of more than 50 000 graduates the school s vision includes lums is one of a small group of business schools in the world to have achieved quadruple accreditation by the leading international business school accreditation organizations including aacsc equis association of mbas and small business charter 5 the school appointed claire leitch as executive dean in may 2022 she served as interim executive dean as of november 2021 6lums is accredited by four bodies these include the aacsb equis amba and the small business charter 5programs offered at lancaster university management school lums lancaster university management school offers a wide variety of degree programs at the undergraduate graduate and doctorate levels undergraduate students can choose between a bachelor of arts or a bachelor of science graduate degree offerings include the master of arts master of science or master of research the following table highlights a sample of some of the disciplines offered to students lums also offers executive education for working professionals these include tuition and fees depend on the course and level of study the school also charges fees based on residency status so students who are from the u k pay a different fee than international students for instance the tuition cost for a student enrolled in the undergraduate honors degree for business analytics is lower for students from the united kingdom compared to international students the tuition fees listed in the chart above are for one year of study and were set for the 2023 2024 academic year rankings of the lancaster university management school lums as noted above lancaster university management school ranks highly in several categories among business schools in the united kingdom and the world according to the economist lums came in 77th out of 100 mba schools in the world and 22nd in the region as much as 71 of the graduating pool received a job offer within three months of completing their programs 8the financial times s rankings placed the school in the 55th spot in european business schools its graduate degree in finance pre experience came in the 46th spot among similar programs while its customized executive education programs placed 55 among similar programs 9 | |
is lancaster university management school a good school | lancaster university management school consistently ranks among the top schools in the united kingdom and the world for business studies according to the financial times lums is among the top schools in a number of disciplines including corporate strategy the publication also noted that the school provides some of the greatest value for students when compared to others around the world 1 | |
what s the application process for lancaster university management school | prospective students must complete an application online through the school s web portal they must submit supporting documents which vary based on the area of study transcripts and proof of ability in english are general requirements for all programs graduate and doctorate students may also require references a personal statement and research proposals an application fee and deposit is also required | |
what programs are offered at lancaster university management school | lancaster university management school offers courses for undergraduate graduate and doctorate students there are also opportunities for working professionals to continue their education while they work disciplines vary ranging from accounting finance business administration economics human resources management cyber security and marketing the bottom linechoosing the right business school can help you get your foot in the door some schools have a great reputation and may guarantee you a greater degree of success after you graduate keep in mind though that some of these schools come at a high cost that s why it s important to keep your financial situation in line with your goals lancaster university management school has a solid reputation among business schools providing students with value especially in certain disciplines | |
what is land | land in the business sense can refer to real estate or property without buildings and equipment that is designated by fixed spatial boundaries land ownership might offer the titleholder the right to any natural resources that exist within the boundaries of their land in traditional economics land is a factor of production along with capital and labor the sale of land results in a capital gain or loss under internal revenue service irs tax laws land is not a depreciable asset and qualifies as a fixed asset instead of a current asset understanding landthe basic concept of land is that it is a specific area of earth property with clearly delineated boundaries that has an owner you can view the concept of land in different ways depending on its context and the circumstances under which it s being analyzed | |
when one owns land one owns the surface area and everything on it such as trees buildings and animals one also owns the area below and the airspace above its boundaries 1 | legally and economically a piece of land is a factor in some form of production although the land is not consumed during this production no other production food for example would be possible without it therefore we may consider land as a resource with no cost of production despite the fact that people can always change the land use to be less or more profitable we cannot increase its supply land ownership can be transferred by the terms of a will by deed when given as a gift and through a business transaction 2characteristics of land and land ownershipland can include anything that s on under or above the ground this means that buildings trees and water that are a part of land are an asset the term land encompasses all physical elements bestowed by nature on a specific area or piece of property the environment fields forests minerals climate animals and bodies or sources of water a landowner may be entitled to a wealth of natural resources on their property including plants human and animal life soil minerals geographical location electromagnetic features and geophysical occurrences lenders of money are extremely attracted to land because it is one of the oldest forms of collateral and unlike a home or a car land for the most part cannot be moved or stolen air and space rights both above and below a property attach to ownership however the right to use the air and space above land may be subject to height limitations dictated by local ordinances as well as state and federal laws land valuationland value is the amount of money that a piece of land is worth this value can be arrived at by an independent real estate appraiser land valuation can be one of a variety of important indicators of a community s financial well being precise land valuation plays a role in various types of financial activities including real estate transactions local government taxes and property investments land must be valued properly in order for these activities to occur and for buyers and sellers to have confidence in them land valuation can also help landowners deal effectively with those who wish to enter a business transaction with them to make use of their land knowing the land value and the expenses associated with ownership in addition to the type of use sought can help the landowner pinpoint what to charge land valuation can be affected by a property s location climate size condition the physical structures on it the natural resources contained within its boundaries such as the presence of water minerals or oil and more for example land near a city public transportation healthcare facilities schools supermarkets and other shopping and a variety of other businesses as opposed to being far from such attractions can command a higher valuation that s because the location can make the land more appealing to those who might want to live in the house that s on it or to those who might wish to develop it for residential or commercial purposes the greater the appeal the higher the land s valuation could be as for natural resources affecting valuation take gas and oil because natural gas and oil in the u s are being depleted the land that contains these resources can be of great value in many cases drilling and oil companies pay landowners substantial sums of money for the right to use their land to access such natural resources particularly if the land is rich in a specific one land useland use refers to the use of land by human beings for their business and cultural activities land s primary use is for residential commercial industrial recreational agricultural and tranportational purposes ongoing land use can affect the condition of the land its natural resources and the environment these condition changes in turn can pose problems for the health of humans and other animals living on the land as well as the viability of the land itself agriculture and development uses are areas of concern for the u s environmental protection agency 3land use is governed by municipal regulations and local zoning laws town and city planners and other organizations focus on how land is used to understand the outcomes of such use they can then provide guidance for its future use and potentially effect change in land use laws investing in land for developmentland s main economic benefit is its scarcity many investors purchase land with the intent of developing it development can be for commercial or residential use and is subject to the aforementioned zoning ordinances and local regulations raw land investments can produce significant future cash flows that are easy to predict once secured but developing land can be very costly and uncertain the associated risks of developing land can stem from taxation regulatory usage restrictions leasing and selling a property political events and even natural disasters | |
what is land in economics | in economics land is considered a factor of production similar to labor as one of the crucial elements in creating goods and services land resources specifically are raw materials in the production process such as trees oil and metals | |
why is owning land important | owning land is important because it is a source of wealth land can be harvested and the materials grown on it sold for profit factories warehouses and buildings that will facilitate business can be built on land land can be leased in return for income land is also a tangible good that does not depreciate in addition land cannot easily be tampered with in that there is nothing to steal from it for the most part it can be polluted and or destroyed but that can be prevented to a degree | |
what are the main uses of land | the main uses of land are for transportation residences commercial activity production agriculture and recreation the bottom lineland is considered real estate or property defined by specific borders it can serve a commercial purpose and be seen as a factor of production and it can serve a residential purpose supporting people with shelter and other buildings and attachments investors may be interested in land for its development potential or the existing commercial activities taking place on it land development as an investment has its hazards due to the risks related to local regulations taxes political situations and natural disasters | |
what is a land contract | a land contract is an agreement between a buyer and seller pertaining to a specific tract of land developers advertise and sell tracts of land similar to the process of selling a real estate property land contracts can be broad in scope and may include both the land and real estate on the land many land contracts involve seller financed purchases some borrowers buying land may also choose to finance the purchase through a bank loan land contract explaineda land contract details the specific terms associated with buying a piece of property land contracts can be broad in scope with certain states having more generous legal rights for land contract holders than others as a result the world of land contracts can be difficult to navigate as such a buyer of land must be very careful to ensure that the terms of the contract are legally binding in case a dispute arises in the future seller financingland contracts are often structured with seller financing this can provide for a broader universe of eligible borrowers since seller financing can sometimes allow for purchasers that would not otherwise qualify for a mortgage or for investors who wish to complete a purchase faster than a regular mortgage would allow seller financing reduces the number of entities involved in selling a property seller financing allows the buyer to purchase the property directly from the seller over a period of time rather than paying one up front payment in a seller financing deal the seller determines the interest rate required duration of the deal and any down payment required seller financed land contracts may include a tract of land or they may also include land and any assets located on the land assets included in a land contract may include residential homes pools tennis courts basketball courts barns or horse tracks any assets located on the land and included in a land contract will affect the price the seller holds the title on all assets until full payment is made at which time the title is transferred bank financingland contracts are often seller financed however in some cases a borrower may seek traditional bank financing for a land contract a borrower seeking to build on a piece of land may wish to finance the property through a bank loan terms of a loan for land will generally include a higher interest rate and are usually based on a shorter term loans for land will also often be structured with a balloon payment rather than regular installment payments often builders receiving a loan for land will refinance or pay off the loan with a takeout loan once the real estate is built and greater collateral value is established | |
what is a land trust | a land trust is a legal entity that takes ownership of or authority over a piece of property at the request of the property owner land trusts are living trusts that allow for the management of property while the owner is alive however like other types of trusts each land trust s terms are unique and can be tailored to individual needs the main positives of land trusts are that they generally protect landowner anonymity and keep property out of probate however these protections aren t always guaranteed and there is a risk of losing redemption rights and being disqualified from secondary market loans land trusts are similar to other trusts but are meant exclusively for real estate land trusts can also hold other property related assets such as mortgages and notes any land can be used for a land trust although they re mostly used for land conservation or developmental property | |
how a land trust works | land trusts which are trusts tied to real estate are often used for estate planning they are revocable trusts meaning they can be terminated or changed and are meant to be used during your lifetime for managing properties 1land trusts can include real estate e g buildings or homes or property notes and mortgages 2 they are typically used for the land involved in conservation or wildlife purposes or for real estate development purposes 1land trusts have three key parts the grantor trustee and beneficiary the grantor is the person who creates the trust and transfers the property the trustee manages the trust and the beneficiary is the one that benefits from the land trust 3grantors handle the transferring of assets into the trust and set the terms of the trust while trustees handle the intimate details of the property for example if a rental property is held in a land trust a trustee might be responsible for overseeing maintenance and collecting rent payments types of land truststhere are two key types of land trusts title holding and conservation land trusts title holding trusts allow individuals or entities to hold land anonymously the big difference with a conservation land trust is that the owner must give up some land use and development rights a title holding trust allows the property owner to anonymously maintain all rights over the property and direct the actions of the land trust these trusts are also commonly called illinois land trusts because they were first popularized in chicago during the 1800s at that time property owners were not allowed to vote on city projects in the same places they owned land to circumvent this law wealthy businessmen and politicians would use land trusts to purchase land anonymously thereby protecting their voting rights 4not all 50 states have a legal structure in place for title holding land trusts however most states defer to the illinois land trust laws if they don t have their own 5in a title holding land trust the landowner signs a document called a deed in trust which transfers legal ownership of the property when setting up the trust the landowner who is both the trust grantor and the beneficiary can specify how the land is to be managed who has control over it and how any income it produces is distributed this means that while the trust is the title holder on paper the landowner maintains complete control over the property title holding trusts are used as a way for property owners to maintain anonymity and keep valuable assets out of probate they can also provide a number of other estate planning benefits and protect assets from judgments or liens this can be especially useful for the very wealthy celebrities and large companies who may want to keep development plans under wraps 6conservation land trusts require that the property owner give up some rights over land use and development the goal of a conservation land trust is to protect wildlife historical or cultural sites and natural resources from commercial development or other activities that may lead to disruption or pollution 7in a conservation land trust the trust doesn t necessarily take over the land title unless the property is donated in its entirety instead a landowner can enter into a legally binding agreement called a conservation easement thereby donating their development rights to the trust the trust is tasked with ensuring that the easement is enforced and in some cases managing the property conservation easements can be tailored so that the landowner retains ownership and usage rights such as the right to continue farming or raising livestock while still ensuring that the land remains undeveloped in perpetuity conservation easements follow the land which means that the terms of the easement remain in force even if the land is sold or passed to heirs 8the total number of acres of undeveloped land managed by private conservation land trusts throughout the u s 9examples of land trustsan example of a title holding land trust is the walt disney company s dis resort in florida the walt disney world resort in orlando florida was initially purchased in 1965 using a title holding land trust the original owners of the florida swamplands where the resort was built had no idea that disney already a household name at the time was behind the purchase had they been aware of the buyer s identity they likely would have increased their asking price 10meanwhile there are plenty of examples of conservation land trusts across the u s including the ozark land trust which covers dozens of projects across 28 000 acres through the ozark region the trust is a non profit organization that helps landowners preserve land in the ozark area and protect it from urban development the ozark land trust helps accomplish this with nature preserves and conservation easements 11advantages and disadvantages of land truststhe key advantage of land trusts is that they provide liability and privacy protections allowing real estate investors to keep property separate from personal finances using a land trust helps keep the details of net worth private real estate investors often use land trusts to keep property separate from other assets however there are downsides to a property trust firstly if you purchase the property under a land trust any redemption rights are lost that is the right to reclaim the property just before or after foreclosure second most land trusts are automatically disqualified from secondary market loans 12the other issue with land trusts is that they give the illusion that there is no liability land trusts still have liability even in illinois the real property owner and not just the trust or trustee can be found liable for things privacy isn t guaranteed either as court orders can pierce the privacy veil separate personal finances from real estateprivacy anonymous property ownershipcertain liability protectionsease of probate processlose redemption rightsmay not qualify for secondary market loansno foolproof liability protectionsprivacy veil can be pierced | |
what s unique about land trusts | there is one other important distinction between title holding and conservation land trusts a donation to the latter could earn you a big tax break if a landowner donates their development rights to a conservation trust they can receive a tax deduction equal to the difference between the value of the land as encumbered with the easement in place and what it could be worth if it were developed for its highest and best use in some cases this deduction can be worth millions of dollars 13typically landowners are either farmers and ranchers who have owned the property for generations or very wealthy individuals families or businesses that can afford to buy tracts outright recently however an investment niche has developed that is designed to open up the tax benefits of conservation to a larger portion of the population using a multi member partnership or syndicate these investment companies allow multiple accredited investors to pool their money to purchase land for conservation after donating the property development rights to a land trust via a conservation easement the members of the partnership split the tax deduction pro rata thanks in part to these conservation partnerships it is estimated that land conservation increased by 58 between 2010 and 2020 14of course any time there s the potential for profit someone will abuse the system there have been some high profile cases of people taking very large deductions for donating easements on golf courses housing developments and other properties that don t actually have much ecological or cultural value 1516in response there has been an aggressive backlash against syndicated investments specifically and the land trusts that accept their easement donations however this singular focus may not paint a complete picture of the issues at play whether donated by farmers billionaires or syndicated investors it is clear that conservation easement donation laws require a closer look to ensure that the risk of abuse is minimized without removing the incentive to conserve | |
how does a land trust work | land trusts work like other trusts allowing grantors to set unique terms and conditions that fit their needs land trusts have three key parts the grantor trustee and beneficiary grantors create the trust and transfer the property into it trustees manage the trust and the beneficiary benefits from the trust | |
what is the purpose of a land trust | land trusts are meant to create liability and privacy protections for landowners real estate investors individuals and entities use land trusts to help create separation for personal finances and property who purchases the land in a land trust the land is generally purchased by an individual or business that will then transfer the property into a land trust the grantor of the land trust is the individual or entity that creates the trust and transfers the property | |
how long does a land trust last | land trusts generally last for a set period of time such as 20 years it s up to the beneficiary to extend the trust term when it expires if they do not the property is sold 17 | |
what is land value | land value is the value of a piece of property including both the value of the land itself as well as any improvements that have been made to it this is not to be confused with site value which is the reasonable value of the land assuming that there are no leases mortgages or anything else present that would otherwise change the site s value land values increase when demand for land exceeds the supply of available land or if a particular piece of land has intrinsic value greater than neighboring areas e g oil can be found on the land understanding land valueproperty owners use land value to determine how much to charge other parties for its use for example an individual who rents out several acres of farmland to ranchers for grazing cattle will determine an amount to charge by looking at the market value of the land compared to land taxes and the capitalization rate land value may be determined by real estate appraisals conducted by third parties an appraiser s assessment can be crucial to a lender s decisions on offering to finance a prospective buyer or refinancing for a property holder appraisal of the land can include a comparison of its condition to similar real estate this is not the same as comparative market analysis wherein the prices of recently sold similar properties are compared it is always a good idea to use an appraiser as they will also look into any flaws or defects with the property that may affect its value the position and location of the land can have a direct influence on its value for example a remote parcel of land may have limited value because it does not have access to amenities utilities transportation or other resources that could make the property useful the value of the land might increase if the property is located near a popular destination such as a city entertainment venue or services that are in demand special considerationsland that is in a region that faces environmental risks could lose some of its value for example if a property is located in an area prone to flooding mudslides or earthquakes those hazards might deter potential buyers from taking an interest in it the potential for recurring destruction would make it a challenge to maintain a safe and consistent presence on the property any improvements made to the property could be lost in an ensuing environmental calamity the risk to residents and employees who may be present at such a site could outweigh any gains from using the land even if the land is located in a prime place and has access to desirable resources there could be mitigating circumstances that prevent the land from being developed or used to its fullest potential restrictive covenants might bar property owners from tapping into resources such as oil that is discovered there | |
what is a land value tax | a land value tax is a more predictable way to tax property based solely on the value of a parcel of land and not any associated buildings 1 the concept of a land value tax dates back to the beginning of agrarian societies when deciding how to tax landowners fairly for the benefit of the larger community was a common social goal 2 understanding the land value taxa land value tax lvt is intended to fairly value land which is a finite asset with a base value that does not change as dramatically as the structures built upon the land 3 fluctuations in land values are determined in great part by what happens with and around the land for example an acre of land in a rural setting may not contribute as much to the surrounding economy as the same sized plot in a downtown urban location where the location might be next to a new food distribution center needing an additional loading dock from the earliest times land has been seen by societies as an asset that cannot be owned by an individual in the traditional sense of ownership but rather something to be treated as a rental passing from generation to generation it is the human activity undertaken on a parcel of land that largely determines its overall value and that activity is almost always linked to the wealth of the landowner so a land value tax is viewed as a fairer basis for determining tax liability this has led us to our modern day system of assessing land and buildings separately for taxation purposes lvt is also known as a site valuation tax an example of an ad valorem tax ad valorem is the latin phrase meaning according to value 4 modern examples of these are most commonly found in the municipal land assessments homeowners receive annually in which their land is valued separately from the various buildings on their land 5 a homeowner can make improvements to the buildings on the land changing the taxable value but the land itself tends to maintain a more stable value over time the opposite is also true in the case of a landowner who lets his buildings fall into disrepair in this case the overall property taxes paid to the community will be less than before yet the land itself maintains more or less its original worth which will be important when a potential buyer is considering their tax burden and the real value of what they are purchasing deadweight loss and the land value taxchanges in property values are largely determined by market swings and can be extremely volatile these changes create what economists call deadweight loss which is the measure of the loss to society at large 6 these losses have far reaching adverse effects in funding the basic services any prosperous society needs such as police fire and rescue the land value tax helps mitigate these market swings by separating the more stable value of the land from the buildings in creating a manageable system for real estate taxation |
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