Podcast
Questions and Answers
What has been the trend in China's housing market over the last three years?
What has been the trend in China's housing market over the last three years?
What word is least likely to be positively correlated with high selling prices in real estate ads?
What word is least likely to be positively correlated with high selling prices in real estate ads?
How much have housing prices dropped nationwide in China?
How much have housing prices dropped nationwide in China?
Which phrase is most indicative of a high selling price in real estate listings?
Which phrase is most indicative of a high selling price in real estate listings?
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Which factor has contributed to the decline of real estate prices in China?
Which factor has contributed to the decline of real estate prices in China?
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What system is suggested for classifying words in real estate ads?
What system is suggested for classifying words in real estate ads?
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Which of the following is NOT a common driver of real estate prices?
Which of the following is NOT a common driver of real estate prices?
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What is a potential effect of a prolonged downturn in the housing market on real estate's share of GDP?
What is a potential effect of a prolonged downturn in the housing market on real estate's share of GDP?
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What is one of Marc Arnold's main areas of interest in his research?
What is one of Marc Arnold's main areas of interest in his research?
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Which resource is suggested for further readings on corporate finance topics?
Which resource is suggested for further readings on corporate finance topics?
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Who is listed as the contact person for this course?
Who is listed as the contact person for this course?
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What is the date and time for the introductory lecture mentioned in the syllabus?
What is the date and time for the introductory lecture mentioned in the syllabus?
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Which of the following is NOT a topic of interest for Marc Arnold?
Which of the following is NOT a topic of interest for Marc Arnold?
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Which edition of the textbook 'Principles of Corporate Finance' is mentioned?
Which edition of the textbook 'Principles of Corporate Finance' is mentioned?
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What position does Marc Arnold hold at the School of Finance?
What position does Marc Arnold hold at the School of Finance?
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What kind of materials are regularly published on the learning platform (Canvas)?
What kind of materials are regularly published on the learning platform (Canvas)?
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What is the maximum timeframe for exchange students to register for the examination?
What is the maximum timeframe for exchange students to register for the examination?
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Which of the following is NOT considered a real asset?
Which of the following is NOT considered a real asset?
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What is a key characteristic of financial assets?
What is a key characteristic of financial assets?
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Which aspect of finance involves understanding leverage purchases?
Which aspect of finance involves understanding leverage purchases?
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Which of the following best describes the focus of corporate finance principles?
Which of the following best describes the focus of corporate finance principles?
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What must exchange students ensure regarding the examination format?
What must exchange students ensure regarding the examination format?
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Which of the following is a criterion for evaluation for exchange students?
Which of the following is a criterion for evaluation for exchange students?
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Which statement best reflects the relationship between real assets and economic prosperity?
Which statement best reflects the relationship between real assets and economic prosperity?
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What is one of the key financial decisions companies must make when investing in projects?
What is one of the key financial decisions companies must make when investing in projects?
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Which company invested USD 7bn to develop oil sands and later spent USD 12bn buying back shares?
Which company invested USD 7bn to develop oil sands and later spent USD 12bn buying back shares?
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What financing method did Tata Motors use to raise funds for a new production plant?
What financing method did Tata Motors use to raise funds for a new production plant?
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Which of the following represents a tangible asset investment a company might make?
Which of the following represents a tangible asset investment a company might make?
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What did Procter & Gamble do after spending USD 8bn on advertising?
What did Procter & Gamble do after spending USD 8bn on advertising?
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Which factor could influence the reliability of corporate plans according to CFOs?
Which factor could influence the reliability of corporate plans according to CFOs?
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Which of the following companies spent USD 12.7bn to open new stores and then issued USD 5bn in bonds?
Which of the following companies spent USD 12.7bn to open new stores and then issued USD 5bn in bonds?
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Which of the following is NOT a financing decision that companies can make?
Which of the following is NOT a financing decision that companies can make?
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What is a potential source of funds for financing acquisitions, as demonstrated by LVMH?
What is a potential source of funds for financing acquisitions, as demonstrated by LVMH?
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What common reason might lead a company to engage in risk management practices?
What common reason might lead a company to engage in risk management practices?
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What is primarily driving the correction in the market?
What is primarily driving the correction in the market?
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What could potentially lead to market stabilization by year-end?
What could potentially lead to market stabilization by year-end?
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By which year could the market potentially continue to struggle according to the outlook?
By which year could the market potentially continue to struggle according to the outlook?
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What do financial intermediaries primarily do?
What do financial intermediaries primarily do?
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Which of the following groups usually needs money to reduce budget deficits?
Which of the following groups usually needs money to reduce budget deficits?
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Which type of securities are built on the cash flows of underlying assets?
Which type of securities are built on the cash flows of underlying assets?
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What indicates a long-term trend rather than a cyclical change in asset values?
What indicates a long-term trend rather than a cyclical change in asset values?
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What factor significantly affected inflation rates across various countries from 1960 to 2022?
What factor significantly affected inflation rates across various countries from 1960 to 2022?
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Which of the following best describes households in financial markets?
Which of the following best describes households in financial markets?
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What was the nominal value of Swiss shares compared to the consumer price index by 2023?
What was the nominal value of Swiss shares compared to the consumer price index by 2023?
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What do national banks primarily regulate?
What do national banks primarily regulate?
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Which financial instrument is exemplified by cash flows in mortgage pass-through securities?
Which financial instrument is exemplified by cash flows in mortgage pass-through securities?
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What trend has occurred regarding inflation rates in Switzerland compared to the Euro Area and US from 1960-2022?
What trend has occurred regarding inflation rates in Switzerland compared to the Euro Area and US from 1960-2022?
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How might market participants view the prospect of further issues in urbanization and living space growth?
How might market participants view the prospect of further issues in urbanization and living space growth?
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What was the net worth of households in 2020?
What was the net worth of households in 2020?
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By what percentage did the conditional median value of assets change from 2016 to 2019?
By what percentage did the conditional median value of assets change from 2016 to 2019?
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Which type of financial asset had the highest ownership percentage in 2019?
Which type of financial asset had the highest ownership percentage in 2019?
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What was the percentage of households that owned any nonfinancial asset in 2019?
What was the percentage of households that owned any nonfinancial asset in 2019?
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Which category of assets saw an increase in ownership from 2016 to 2019?
Which category of assets saw an increase in ownership from 2016 to 2019?
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What was the conditional mean value of retirement accounts in 2019?
What was the conditional mean value of retirement accounts in 2019?
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In which year was the net worth of households lowest according to the data?
In which year was the net worth of households lowest according to the data?
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What percentage of families owned at least one financial asset in 2019?
What percentage of families owned at least one financial asset in 2019?
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How much did the value of equity in nonresidential property change from 2016 to 2019?
How much did the value of equity in nonresidential property change from 2016 to 2019?
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What percentage of households owned vehicles in 2019?
What percentage of households owned vehicles in 2019?
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Which financial asset had the lowest median value in 2019?
Which financial asset had the lowest median value in 2019?
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What was the change in the rate of household ownership of retirement accounts from 2016 to 2019?
What was the change in the rate of household ownership of retirement accounts from 2016 to 2019?
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Which of the following categories had an increase in asset values as per the data?
Which of the following categories had an increase in asset values as per the data?
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Study Notes
University of St. Gallen (HSG)
- Corporate Finance course, lecture 1: Introduction
- Lecturer: Marc Arnold
Lecturer Information
- Marc Arnold is a full professor at the School of Finance
- Director of ACA
- Research interests include Corporate Finance, Financial Intermediation, Theoretical Corporate Finance, Debt Structure, Debt Governance, and Household Investment
- Has a visiting professorship at Stern School of Business, NYU
- Also works as a Product Structurer in Derivatives Trading at Credit Suisse
General Course Information
- Resources for topics include lecture slides & research articles available on the learning platform (Canvas)
- Group assignments are available
- Current info and announcements are often provided regularly
Syllabus
- The syllabus details the dates, topics, and related literature for each class session
- Topics include Administrative Notes and Introduction, Latest Developments, Efficient Markets, Options, Capital Structure, Agency Conflicts, Corporate Governance, Trading Room Sessions, Presentations
Post-Lecture Program
- 90-minute program
- Includes lectures, trading room sessions, and presentations
- Slides/chapters in the textbook will be part of the covered material
Assessment Criteria for Group Work
- The presentation and its content are graded
- Must adhere to guidelines and have proper organization
- Quality of the learning experience is important
Important Information for Exchange Students
- Exchange students must register for the exam by November 1, 2024.
- Exchange students will follow the same exam format as regular students (90 minutes)
Objectives
- Financial Market Fundamentals
- Market Participants and Types
- Short Selling and Leverage Risks
- Corporate Finance Principles
Real Assets vs. Financial Assets
- Real assets are essential for production and services
- Real asset prosperity depends on productivity
- Examples include real estate, machinery, and knowledge
- Financial assets are utilized by companies to fund real assets
- Types include stocks, bonds, and derivatives
Financial Assets of Households
- Data displayed in graphs show the financial assets (including currency, deposits, debt securities, shares, and assets in collective investment schemes) over several years, alongside liabilities and net worth figures.
Assets and Market Participation in the USA
- Data on asset holdings and values, including percentages and conditional median/mean values, for different asset types categorized for 2016 and 2019 surveys.
What Drives Real Estate Prices?
- Factors impacting real estate prices include inflation, stock market performance, interest rate changes, land supply dynamics, demographic trends, and general economic conditions including policies, and gross domestic product
Discussion: Cracking the Real Estate Code (Levitt, 2005)
- The discussion involves analysing the correlation between real estate ad marketing phrases and sales price.
- Adjectives such as "granite," "maple," "fantastic," "attractive," "state-of-the-art," and "great neighborhood" are discussed, and students are encouraged to deduce how different word choices correlate with higher or lower sales prices.
China's Real Estate Problem
- China's housing market has been declining for several years
- New sales and construction have significantly declined
- Price drops have impacted different areas of the nation, with some reaching 75%
- Factors behind the decline include reduced living space growth, along with slowing urbanization.
Long-Term Returns (Historical Performance Switzerland)
- Data is presented in graphs showing nominal and real values of shares and bonds against the consumer price index from 1926 to 2023.
Players in the Financial Markets
- Key players in financial markets include Households, Corporations, States, Financial Intermediaries, and National Banks with their respective roles and activities
Inflation
- A graph displays historical inflation rates in various countries (e.g. UK, Euro Area, Germany, US, Japan, Switzerland, and Worldwide) from 1960 to 2022.
Asset-Backed Securities (ABS)
- Shows cash flows for a mortgage pass-through security
- Diagrams illustrating the transmission of cash flows across different entities in an ABS transaction including home owners, originators, and investors across differing assets such as equipment, credit cards, auto loans and more
Discussion on Asset-Backed Securities
- Students should discuss the pros and cons of Asset-Backed Securities using a peer-to-peer discussion format
Market Types
- Types of market types are analyzed including direct search, brokered market, dealer market, and auction market
Example: Novartis
- Data on order books/shares for Novartis
- Data presented in graphs, tables and figures
Order Types
- Market orders, limit orders, and stop-loss orders
Purchase of Shares with Debt Financing
- The exercise demonstrates purchasing shares with debt financing/margin trading, including scenarios for price increases and decreases
Shorting
- The exercise demonstrates the process of short-selling
Discussion on Short Selling
- Students should discuss the potential benefits/harm of short selling on the financial system
What Is Corporate Finance All About?
- Corporate finance encompasses decisions related to spending and collecting money for investments and their financing needs
Investment and Financing Decisions are Often Interconnected
- Data showcases examples of companies making investment and financing decisions that interconnect with each other
Reliable Planning Horizon and Project Life
- Charts illustrate the capabilities for planning and predictive lifespans of projects in industries such as retail, finance, services, technology, and manufacturing
Key Corporate Finance Principles
- Focuses on risk, investments, value, value creation, and governance.
Key Takeaways
- Financial markets involve various participants with distinct roles and objectives
- Leverage purchases impact both risk and profit potential
- Corporate finance decisions prioritize company financial well-being
- Investment and financing decisions frequently interact
Studying That Suits You
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Description
Dive into the fundamentals of Corporate Finance in this introductory lecture led by Professor Marc Arnold. This session will cover essential topics such as administrative notes, latest developments, and an overview of efficient markets. Perfect for students eager to understand the basic principles of corporate finance.
