Rate of Return as a Criterion for Investment Decisions

Purpose This study aims to make investment decisions in stock markets using forecasting-Markowitz based decision-making approaches. Design/methodology/approach The authors’ approach offers the use of time series prediction methods including autoregressive, autoregressive moving average and artificial neural network, rather than calculating the expected rate of return based on distribution. Findings The results show that using time series prediction methods has a significant effect on improving investment decisions and the performance of the investments. Originality/value In this study, in contrast to previous studies, the alteration in the Markowitz model started with the investment expected rate of return. For this purpose, instead of considering the distribution of returns and determining the expected returns, time series prediction methods were used to calculate the future return of each asset. Then, the results of different time series methods replaced the expected returns in the Markowitz model. Finally, the overall performance of the method, as well as the performance of each of the prediction methods used, was examined in relation to nine stock market indices.

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ANALISIS PORTOFOLIO SEBAGAI DASAR PENGAMBILAN KEPUTUSAN INVESTASI SAHAM YANG TERDAFTAR DI BEI

IQTISHODUNA ◽

10.18860/iq.v0i0.2282 ◽

2013 ◽

Author(s):

Sri Yati

Keyword(s):

Stock Market ◽

Stock Returns ◽

Analytical Method ◽

Stock Exchange ◽

Investment Decisions ◽

Portfolio Analysis ◽

Rate Of Return ◽

Expected Returns ◽

Risk Level ◽

Expected Return

This study aims to analyze rate of return and risk as the tools to form the portfolio analysis on 15 the most actives stocks listed in Indonesian Stock Exchange. Descriptive analytical method is used to describe the correlation between three variables: stock returns, expected returns of stock market, and beta in order to measure the risk of stocks to help the investors in making the investment decisions. The research materials are 15 the most actives stocks listed in Indonesian Stock Exchange during 2008-2009. The results show that PT. Astra International Tbk. has the highest average expected return of individual stock (Ri) of 308,3355685, while PT. Perusahaan Gas Negara Tbk. has the lowest of -477,0827847. The average expected return of stock market (Rm) is 0,00247163. PT. Astra International Tbk. has the highest systematic risk level of 20229,14205, while the lowest of -147,5793279 is PT. Kalbe Farma Tbk. Furthermore, the results also indicate that there are 9 stocks can be combined to form optimal portfolio because they have positive expected returns.

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Application of Capital Budgeting Method to Evaluate Investment Decisions on Additions to Fixed Assets at PT Hatten Bali

Journal of Applied Sciences in Accounting, Finance and Tax ◽

10.31940/jasafint.v4i1.2426 ◽

2021 ◽

Vol 4 (1) ◽

pp. 69-76

Author(s):

Ni Luh Gede Wahyu Pradnyawati ◽

◽

I M A Putrayasa ◽

I G A O Sudiadnyani ◽

◽

...

Keyword(s):

Net Present Value ◽

Average Rate ◽

Investment Decision ◽

Investment Decisions ◽

Capital Budgeting ◽

Rate Of Return ◽

Study Approach ◽

Fixed Assets ◽

Research Analysis

This research was conducted to evaluate the investment decision to add fixed assets by PT Hatten Bali using the capital budgeting method. The results of this study are expected to be used as material for evaluating the application of the capital budgeting method in making investment decisions on fixed assets at PT Hatten Bali. The data used for this study were obtained from interviews and documentation and were analyzed using descriptive qualitative research analysis techniques with a case study approach. Based on the results of research using the capital budgeting method which consists of the method of calculating the payback period, net present value, profitability index, internal rate of return and average rate of return, all of which have shown a favorable results. From these results it can be concluded that the investment decision to add fixed assets in the form of distribution vehicles made by PT Hatten Bali can benefit the company in stable sales conditions and the application of capital budgeting methods can reduce the risk of errors or failures in making investment decisions and improve subsequent investment decisions.

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Risk Manage Capital Investment Decisions: A Lease vs. Purchase Illustration

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v25i3.1031 ◽

2011 ◽

Vol 25 (3) ◽

Author(s):

Thomas L. Zeller ◽

Brian B. Stanko

Keyword(s):

Capital Investment ◽

Net Present Value ◽

Investment Decisions ◽

Capital Budgeting ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Wealth Creation ◽

Font Size ◽

Present Value ◽

Internal Rate

This paper demonstrates how to build risk into capital investment decisions.  We illustrate how to combine distribution theory, technology, and a business professional’s skills and insight into a capital investment analysis.  In addition, we show how management can approximate the risk of each cash flow estimate and display the overall capital investment results.  This framework is extended by showing how a mutually exclusive decision can be improved, using a lease versus purchase example.<a style="mso-footnote-id: ftn1;" name="_ftnref1" href="http://journals.cluteonline.com/index.php/JABR/author/saveSubmit/#_ftn1">[1]</a>  An Excel template is readily available from the authors allowing a hands-on application of the framework presented in this paper.  In addition, this paper positions the reader to comfortably use more advanced analytics, such as Monte Carlo simulation, a tool that is readily available in commercial software applications.<div style="mso-element: footnote-list;"> <hr size="1" /><div id="ftn1" style="mso-element: footnote;">This paper focuses on the application of net present value.  The advantage of using net present value in a capital budgeting decision is that it shows the potential stakeholder wealth creation and wealth destruction.  An internal rate of return analysis is intentionally left out of this paper.  According to Brealey, Myers and Allen, Principles of Corporate Finance, New York, NY: McGraw-Hill/Irwin 2006, pp. 91-99, internal rate of return should not be used to evaluate mutually exclusive capital investments.  </div></div>

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Average Internal Rate of Return and Investment Decisions: A New Perspective

The Engineering Economist ◽

10.1080/00137911003791856 ◽

2010 ◽

Vol 55 (2) ◽

pp. 150-180 ◽

Cited By ~ 74

Author(s):

Carlo Alberto Magni

Keyword(s):

Investment Decisions ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Internal Rate ◽

New Perspective

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Addendum to “Average Internal Rate of Return and Investment Decisions: A New Perspective”

The Engineering Economist ◽

10.1080/0013791x.2011.573658 ◽

2011 ◽

Vol 56 (2) ◽

pp. 181-182 ◽

Cited By ~ 6

Author(s):

Carlo Alberto Magni

Keyword(s):

Investment Decisions ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Internal Rate ◽

New Perspective

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Formation of innovation and investment development directions of the Samara Region systemic enterprises

Vestnik of Samara University. Economics and Management ◽

10.18287/2542-0461-2021-12-2-67-77 ◽

2021 ◽

Vol 12 (2) ◽

pp. 67-77

Author(s):

Kristina Yu. Orlova

Keyword(s):

Investment Decisions ◽

Payback Period ◽

Rate Of Return ◽

Investment Behavior ◽

Real Situation ◽

Investment Activity ◽

Investment Projects ◽

Loan Rate ◽

Economic Justification ◽

Strategic Goals

The article discusses the directions of innovation and investment development of the strategic, system-forming, enterprises of the Samara Region, which were determined on the basis of an analysis of information about the real situation (20182020) and the planned future (from 2021), obtained as a result of a questionnaire survey of managers about the directions of investment, criteria for making investment decisions, as well as the strategic goals of investment plans. The analysis of investment directions was carried out, on the basis of which the types of investment activity of enterprises were identified as active, proactive and passive. Criteria for making investment decisions are considered, on the basis of which the types of investment behavior of enterprises were divided into leader behavior associated with the economic justification of investment decisions, and follower behavior characterized by an empirical decision rule. The average values of the investment projects characteristics the payback period of investments, the excess of the rate of return over the loan rate, and the discount rate required for making a decision on investment, as well as the volumes of investment projects in different periods are given. On the basis of the investment objectives considered, three types of strategies of system-forming enterprises are formulated: aggressive, moderate and conservative. Based on the analysis of the results of the survey, the features of innovative activity, as well as the directions and prerequisites for the innovative development of the Samara Region strategic enterprises are determined.

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INVESTORS CONSIDERATIONS TOWARDS INVESTMENT DECISIONS IN STOCK MARKET

International Journal of Advanced Research ◽

10.21474/ijar01/11906 ◽

2020 ◽

Vol 8 (10) ◽

pp. 820-829

Author(s):

Kuldeep Singh ◽

◽

S.S. Narta ◽

Keyword(s):

Risk Factors ◽

Stock Market ◽

Investment Decision ◽

Investment Decisions ◽

Careful Analysis ◽

Rate Of Return ◽

Future Prospects ◽

Effective Use ◽

Future Growth

Investment decisions are made keeping in view the return and risk factors in mind. Every investment decision involves the effective use of funds for future growth of funds. An investors decision to make investment requires a careful analysis of prevailing condition and future prospects of market. Investment decision basically taken by investors depends upon the various factors. Normally investment decision is an attempt to plan properly, evaluate and allocate funds into various investment outlets that ensure investors safety and expected rate of return. Investors decision toward buying, selling and to keep/hold on particular security depend upon the various factors that affect the stock market. Present chapter deals with the factors that are taken into account while making investment in stock market.

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Metode Penilaian Investasi dengan Analisis Sensitivitas Pada Pendirian UMKM “Premier Crepes”

Jurnal Ilmiah Akuntansi dan Keuangan ◽

10.32639/jiak.v7i2.273 ◽

2018 ◽

Vol 7 (2) ◽

pp. 43-56

Author(s):

Tuti Zakiyah

Keyword(s):

System Performance ◽

Net Present Value ◽

Investment Decisions ◽

Payback Period ◽

Careful Consideration ◽

High Rate ◽

Rate Of Return ◽

Internal Rate Of Return ◽

Present Value ◽

Production Parameters

The main purpose of the investment is to earn a profit or a high rate of return. That is, no investor wants to lose even loss of funds or capital that has been invested in certain instruments. Well, to make no mistake in taking investment decisions, obligatory for investors to conduct investment feasibility analysis. Investment feasibility can not be judged solely on the basis of assumptions or beliefs, but must be analyzed in depth from various aspects. Without careful consideration, investing is like buying a cat in a sack. That is, investors do not know clearly whether the investment is profitable or not. Sensivitas analysis is an analysis conducted to determine the effect of changes in production parameters on changes in production system performance in generating profit. By conducting a sentiment analysis then the likely effect of these changes can be known and anticipated beforehand. An approach based on the Cash flow concept of Payback Period Method, Net Present Value (NPV) Method and Internal Rate of Return (IRR) Method. Minimum Acceptable Rate of Return or Minimum Atractive Rate of Return (MARR). MARR is the minimum rate of return on an investment that a brave investor would undertake.Keywords : NPV, IRR, MARR, sensitivity.

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Using E-GARCH to Analyze the Impact of Investor Sentiment on Stock Returns Near Stock Market Crashes

Frontiers in Psychology ◽

10.3389/fpsyg.2021.664849 ◽

2021 ◽

Vol 12 ◽

Author(s):

Sze Ting Chen ◽

Kai Yin Allison Haga

Keyword(s):

Stock Market ◽

Stock Returns ◽

Policy Making ◽

Composite Index ◽

Investor Sentiment ◽

Investment Decisions ◽

Rate Of Return ◽

Market Participants ◽

Rational Investment ◽

The Impact

Purpose: Investor sentiment, the willingness of market participants to invest, is a difficult concept to measure. Exploring the relationship between investor sentiment and stock returns can reveal how investor sentiment affects the operation of the stock market. Such an understanding can assist market participants in making more rational investment decisions based on market laws. Such an understanding can also assist regulators in their roles of supervision and policy making.Methodology: Although the E-GARCH model has the advantage of considering volatility clustering, it has not previously been used to investigate the impact of investor sentiment changes on the Shanghai Composite Index's market return. This research therefore applies the E-GARCH approach to data from 2015 to 2018, to explore the influence of investor sentiment on the return rate of the Shanghai Composite Index.Main Findings: There are three main findings. First, when the investor sentiment is increased by the same amount, the rate of return before a stock market crash will have a smaller increase than the rate of change after the crash, which is a new finding. Second, the rate of return on stocks is susceptible to emotional sentiment, rather than simply depending on stock price. Third, the tendency of retail investors to follow the crowd is less in periods of pessimism than it is in periods of optimism, which, in turn, can push up stock yields.Application: Based on these research results, this article can provide insights to understand how investors' subjective judgments on future earnings affect their investment behavior and how great the impact is on the market. At the same time, it can help investors make more rational investment decisions based on an understanding of market laws, and help regulators with guidance for their supervision and policy making.Originality/Value: This paper contributes to the theory of the investor sentiment index, improving the index construction method by adding two sentiment proxy indicators: investor activity ACT and stock market leverage level. After constructing the sentiment index and comparing it with the stock market index (Shanghai Composite Index), the fit is found to be improved.

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