MK 1 Kuliah 2 Financial Environment

Why Corporations Need Financial Markets and

Institutions

Review:Roles of Financial Manager

1. Investment Decisions

2. Financing Decisions

3. Dividend PolicyThe Objective of Financial Management

Max. Value ≠ Max. Profit Max. Value = Max. Shareholders Wealth

= Max. Market Value of Stock

Agency Conflict1. Manager vs. Shareholders

2. Managers/Shareholders vs Debtholders

Beberapa Pertanyaan Mendasar Jika Anda sebagai Seorang Investor Manakah yang lebih menarik bagi Anda, investasi pada deposito, saham,

obligasi, reksa dana, forex, opsi, kontrak berjangka atau real estat? Jika Anda akan berinvestasi pada saham atau obligasi atau pada aset riil,

apa yang menjadi pertimbangan Anda? Jika Anda akan menilai saham suatu perusahaan, apa yang menjadi dasar

analisis Anda?

Jika Anda sebagai Seorang Manajer Keuangan Apa yang harus Anda persiapkan agar investor tertarik berinvestasi pada

perusahaan Anda? Apakah untuk pendanaan perusahaan Anda, manakah yang paling optimal:

pendanaan dengan saham, hutang bank atau obligasi? Apakah pendanaan perusahaan Anda sebaiknya menggunakan pendanaan

jangka pendek atau jangka panjang? Jika transaksi bisnis Anda menggunakan valas, bagaimanakah Anda

melakukan manajemen risiko?

PROCESS FINANCIAL INTERMEDIARY

FINANCIAL MARKETS

SURPLUS UNITS

(INVESTORS)

DEFICIT UNITS

(BORROWERS)

1

43

2

SECURITIES SECURITIES

FUNDS FUNDS

FINANCIAL MARKETSources of Longterms vs Short-term Capital1. Capital Market (Stock Market and Bond Market)2. Money Market

Financial Intermediaries/Institutions1. Bank 4. Insurance2. Venture Capital 5. Pension Funds3. Mutual Funds 6. Factoring and Leasing

Speculation and Hedging1. Option Market 3. Futures Market2. Forex Market

Flow of Savings

FINANCIAL MARKETS (STOCK MARKET)

Primary

Markets

Secondary

Markets

OTC

Markets

Money

Irwin/McGraw-Hill

Financial Markets (Debt Market)

Company

Issue Debt

CashInvestors

Irwin/McGraw-Hill

Financial Markets (Mutual Fund)

Bank of AmericaBank of America

Windsor Fund

Windsor Fund

Investors

Investors

$ $

Sells shares

Issues shares

Open-EndClose-End

Irwin/McGraw-Hill

Financial Markets

Funds

Funds

Banks

Insurance Cos.

Brokerage Firms

Obligations

Depositors

Policyholders

Investors

Obligations

Company

Intermediary

Investor

Irwin/McGraw-Hill

Financial Markets (Bank)

Banks

Depositors

$2.5 mil

Cash

Loan

Deposits

Company

Intermediary

Investor

Irwin/McGraw-Hill

Financial Markets (Insurance)

Insurance Company

Policyholders

$250 mil

Cash

Loan

Sell policies Issue Stock

Company

Intermediary

Investor

Function of Financial Markets1. Transporting cash across time

2. Risk transfer and diversification

3. Liquidity

4. Payment mechanism

5. Provide information Commodity prices Interest rates Company values

TRANSACTION COSTS

RISK AND RETURN PENGERTIAN RETURN DAN RISIKO

ESTIMASI RETURN DAN RISIKO ASET TUNGGAL

ANALISIS RISIKO PORTOFOLIO

DIVERSIFIKASI

ESTIMASI RETURN DAN RISIKO PORTOFOLIO 4-14

PENGERTIAN RETURN Return adalah imbalan atas keberanian

investor menanggung risiko, serta komitmen waktu dan dana yang telah dikeluarkan oleh investor.

Return juga merupakan salah satu motivator orang melakukan investasi.

Sumber-sumber return terdiri dari dua komponen:

1. Yield2. Capital gains (loss)

Dengan demikian, return total investasi adalah:

Return total = yield + capital gains (loss) (4.1)

Tks untuk Eduardus Tandelilin 4-15

PENGERTIAN RISIKO

Risiko adalah kemungkinan perbedaan antara return aktual yang diterima dengan return yang diharapkan.

Sumber-sumber risiko suatu investasi terdiri dari: 1. Risiko suku bunga2. Risiko pasar3. Risiko inflasi4. Risiko bisnis5. Risiko finansial6. Risiko likuiditas7. Risiko nilai tukar mata uang8. Risiko negara (country risk)

4-16

Tks untuk Eduardus Tandelilin

PENGERTIAN RISIKO

Risiko juga bisa dibedakan menjadi dua jenis:1. Risiko dalam konteks aset tunggal.

- Risiko yang harus ditanggung jika berinvestasi hanya pada satu aset saja.

2. Risiko dalam konteks portofolio aset.a. Risiko sistematis (risiko pasar/risiko

umum).- Terkait dengan perubahan yang terjadi di

pasar dan mempengaruhi return seluruh saham yang ada di pasar.

b. Risiko tidak sistematis (risiko spesifik).

- Terkait dengan perubahan kondisi mikro perusahaan, dan bisa

diminimalkan dengan melakukan diversifikasi. 4-17


ESTIMASI RETURN SEKURITAS

Untuk menghitung return yang diharapkan dari suatu aset tunggal kita perlu mengetahui distribusi probabilitas return aset bersangkutan, yang terdiri dari:

1. Tingkat return yang mungkin terjadi

2. Probabilitas terjadinya tingkat return tersebut

4-18



Dengan demikian, return yang diharapkan dari suatu aset tunggal bisa dihitung dengan rumus:

(4.2)

dimana: E(R) = Return yang diharapkan dari suatu

sekuritasRi = Return ke-i yang mungkin

terjadipri = probabilitas kejadian return ke-

i n = banyaknya return yang

mungkin terjadi

4-19

n

iii

1

pr R (R) E



Di samping cara perhitungan return di atas, kita juga bisa menghitung return dengan dua cara:

1. Arithmetic mean2. Geometric mean

Rumus untuk menghitung arithmetic mean:

(4.3)

Rumus untuk menghitung geometric mean:G = [(1 + R1) (1 + R2) …(1 + Rn)]

1/n – 1(4.4)

4-20

nX

X


ESTIMASI RETURN SEKURITAS: ASET ABC

Berdasarkan tabel distribusi probabilitas di atas, maka tingkat return yang diharapkan dari aset ABC tersebut bisa dihitung dengan menerapkan rumus 4.2:E(R) = [(0,30) (0,20)] + [(0,40) (0,15)] + [(0,30) (0,10)]

= 0,15 atau 15%

4-21

Kondisi Ekonomi Probabilitas Return

Ekonomi kuat 0,30 0,20

Ekonomi sedang 0,40 0,15

Resesi 0,30 0,10


ARITHMETIC MEAN: CONTOH

Berdasarkan data dalam tabel di atas, arithmetic mean bisa dihitung dengan menggunakan rumus 4.3 di atas:

4-22

Tahun Return (%) Return Relatif (1 + return)

1995 15,25 1,1525

1996 20,35 1,2035

1997 -17,50 0,8250

1998 -10,75 0,8925

1999 15,40 1,1540

5

15,40] (-10,75) (-17,50) 20,35 [15,25 X

% 4,55 2,75][

5

2X Tks untuk Eduardus

Tandelilin

GEOMETRIC MEAN: CONTOH

Berdasarkan data dalam tabel di atas, geometric mean bisa dihitung dengan rumus 4.4:

G= [(1 + 0,1525) (1 + 0,2035) (1 – 0,1750) (1- 0,1075) (1 + 0,1540)]1/5 – 1

= [(1,1525) (1,2035) (0,8250) (0,8925) (1,1540)]1/5 – 1= (1,1786) 1/5 – 1= 1,0334 – 1 = 0,334 = 3,34%

4-23


MENGHITUNG RISIKO ASET TUNGGAL

Risiko aset tunggal bisa dilihat dari besarnya penyebaran distribusi probabilitas return. Ada dua ukuran risiko aset tunggal, yaitu:

1. Varians2. Deviasi standar

Di samping ukuran penyebaran tersebut, kita juga perlu menghitung risiko relatif aset tunggal, yang bisa diukur dengan ‘koefisien variasi’.

Risiko relatif ini menunjukkan risiko per unit return yang diharapkan.

4-24


MENGHITUNG RISIKO ASET TUNGGAL

Rumus untuk menghitung varians, standar deviasi, dan koefisien variasi adalah:

Varians return = 2 = [Ri – E(R)]2 pri

(4.5)Standar deviasi = = (2)1/2

(4.6)

(4.7)

dimana:2 = varians return = standar deviasi

E(Ri) = Return ke-i yang mungkin terjadi

pri = probabilitas kejadian return ke-I(R) = Return yang diharapkan dari suatu sekuritas

4-25

)(RiE

i

diharapkan yang return return deviasi standar

variasi Koefisien


PERHITUNGAN VARIANS & STANDAR DEVIASI: CONTOH

Tabel 4.3. Penghitungan varians dan standar deviasi saham DEF

Eduardus Tandelilin © 2001

4-26

(2) (3) (4) (5) (6)

[(Ri – E(R)]2 pri

0,2 0,014 -0,010 0,0001 0,00002

0,2 0,002 -0,070 0,0049 0,00098

0,3 0,024 0,000 0,0000 0,00000

0,1 0,010 0,020 0,0004 0,00004

0,2 0,030 0,070 0,0049 0,00098

1,0 E(R) = 0,080

Varians = 0,00202

Standar deviasi = = (2)1/2 = (0,00202)1/2 = 0,0449 = 4,49%

(1)

Return (R)

0,07

0,01

0,08

0,10

0, 15

Probabilitas (pr)

(1) X (2) R – E(R) [(R-E(R)]2

CV = 0,0449/0,080 = 0,56125


1-27

GAMBAR 1.1. HUBUNGAN RISIKO DAN RETURN

Profit+

-Losses

Return RiskHigh Return

High Risk

Low Risk

Low potential for fluctuation

Low risk investments tend to have a low potential for fluctuation

High risk investments tend to have a great potential for fluctuation

Risk increase in proportion to the Y axis

High potential for fluctuation

Sumber: http://www.softcapital.co.jp/eigo/return1.html

Return increase in proportion

GAMBAR 1.2. HUBUNGAN RISIKO DAN RETURN PADA BERBAGAI ASET


1-28

Risiko tinggi

Ekuitas Internasional

Risiko diatas rata-rata

Risiko sedang

Risiko moderat

Obligasi perusahaan

Risiko rendah

Tingkat bunga bebas

risiko

Kontrak ‘futures’Opsi ‘put’

& ‘call’

Saham

Obligasi pemerint

ah

Return yang

diharapkan

Risiko

RF

Sumber: Farrel, James L., 1997, “Portfolio Management: Theory and Application”, McGraw- Hill, Singapore, hal. 11.

PORTFOLIO MANAGEMENT

DON’T PUT YOUR ALL EGGS INTO ONE BASKET

(TRADE OFF BETWEEN RISK AND RETURN)

EFFICIENT PORTFOLIO OPTIMAL PORTFOLIO

CHAPTER 8Risk and Rates of Return

Stand-alone risk Portfolio risk Risk & return: CAPM / SML

Investment returns

The rate of return on an investment can be calculated as follows:

(Amount received – Amount invested)

Return = ________________________

Amount invested

For example, if $1,000 is invested and $1,100 is returned after one year, the rate of return for this investment is:

($1,100 - $1,000) / $1,000 = 10%.

What is investment risk?

Two types of investment risk– Stand-alone risk– Portfolio risk

Investment risk is related to the probability of earning a low or negative actual return.

The greater the chance of lower than expected or negative returns, the riskier the investment.

Probability distributions

A listing of all possible outcomes, and the probability of each occurrence.

Can be shown graphically.

Expected Rate of Return

Rate ofReturn (%)100150-70

Firm X

Firm Y

Selected Realized Returns, 1926 – 2004

Average Standard Return Deviation

Small-company stocks 17.5% 33.1%Large-company stocks 12.4 20.3L-T corporate bonds 6.2 8.6L-T government bonds 5.8 9.3U.S. Treasury bills 3.8 3.1

Source: Based on Stocks, Bonds, Bills, and Inflation: (Valuation Edition) 2005 Yearbook (Chicago: Ibbotson Associates, 2005), p28.

Investment alternatives

Economy Prob. T-Bill HT Coll USR MP

Recession

0.1 5.5% -27.0%

27.0% 6.0% -17.0%

Below avg

0.2 5.5% -7.0% 13.0% -14.0%

-3.0%

Average 0.4 5.5% 15.0% 0.0% 3.0% 10.0%

Above avg

0.2 5.5% 30.0% -11.0%

41.0% 25.0%

Boom 0.1 5.5% 45.0% -21.0%

26.0% 38.0%

Why is the T-bill return independent of the economy? Do T-bills promise a

completely risk-free return?

T-bills will return the promised 5.5%, regardless of the economy.

No, T-bills do not provide a completely risk-free return, as they are still exposed to inflation. Although, very little unexpected inflation is likely to occur over such a short period of time.

T-bills are also risky in terms of reinvestment rate risk.T-bills are risk-free in the default sense of the word.

How do the returns of HT and Coll. behave in relation to the market?

HT – Moves with the economy, and has a positive correlation. This is typical.

Coll. – Is countercyclical with the economy, and has a negative correlation. This is unusual.

Calculating the expected return

12.4% (0.1) (45%)

(0.2) (30%) (0.4) (15%)

(0.2) (-7%) (0.1) (-27%) r

P r r

return of rate expected r

HT

^

N

1iii

^

^

Summary of expected returns

Expected returnHT 12.4%Market 10.5%USR 9.8%T-bill 5.5%Coll. 1.0%

HT has the highest expected return, and appears to be the best investment alternative, but is it really? Have we failed to account for risk?

Calculating standard deviation

deviation Standard

2Variance

i2

N

1ii P)r(rσ

ˆ

Standard deviation for each investment

15.2%

18.8% 20.0%

13.2% 0.0%

(0.1)5.5) - (5.5

(0.2)5.5) - (5.5 (0.4)5.5) - (5.5

(0.2)5.5) - (5.5 (0.1)5.5) - (5.5

P )r (r

M

USRHT

CollbillsT

2

22

22

billsT

N

1ii

2^

i

21

Comparing standard deviations

USR

Prob.T - bill

HT

0 5.5 9.8 12.4 Rate of Return (%)

Comments on standard deviation as a measure of risk

Standard deviation (σi) measures total, or stand-alone, risk.

The larger σi is, the lower the probability that actual returns will be closer to expected returns.

Larger σi is associated with a wider probability distribution of returns.

Comparing risk and return

Security Expected return, r

Risk, σ

T-bills 5.5% 0.0%

HT 12.4% 20.0%

Coll* 1.0% 13.2%

USR* 9.8% 18.8%

Market 10.5% 15.2%

* Seem out of place.

^

Coefficient of Variation (CV)

A standardized measure of dispersion about the expected value, that shows the risk per unit of return.

r

return Expecteddeviation Standard

CV ˆ

Risk rankings, by coefficient of variation

CVT-bill 0.0HT 1.6Coll. 13.2USR 1.9Market 1.4

Collections has the highest degree of risk per unit of return.

HT, despite having the highest standard deviation of returns, has a relatively average CV.

Illustrating the CV as a measure of relative risk

σA = σB , but A is riskier because of a larger probability of losses. In other words, the same amount of risk (as measured by σ) for smaller returns.

0

A B

Rate of Return (%)

Prob.

Investor attitude towards risk

Risk aversion – assumes investors dislike risk and require higher rates of return to encourage them to hold riskier securities.

Risk premium – the difference between the return on a risky asset and a riskless asset, which serves as compensation for investors to hold riskier securities.

Portfolio construction:Risk and return

Assume a two-stock portfolio is created with $50,000 invested in both HT and Collections.

A portfolio’s expected return is a weighted average of the returns of the portfolio’s component assets.

Standard deviation is a little more tricky and requires that a new probability distribution for the portfolio returns be devised.

Calculating portfolio expected return

6.7% (1.0%) 0.5 (12.4%) 0.5 r

rw r

:average weighted a is r

p

^

N

1i

i

^

ip

^

p

^

An alternative method for determining portfolio expected return

Economy Prob.

HT Coll Port.

Recession

0.1 -27.0%

27.0% 0.0%

Below avg

0.2 -7.0% 13.0% 3.0%

Average 0.4 15.0% 0.0% 7.5%

Above avg

0.2 30.0% -11.0%

9.5%

Boom 0.1 45.0% -21.0%

12.0%6.7% (12.0%) 0.10 (9.5%) 0.20

(7.5%) 0.40 (3.0%) 0.20 (0.0%) 0.10 rp

^

Calculating portfolio standard deviation and CV

0.51 6.7%3.4%

CV

3.4%

6.7) - (12.0 0.10

6.7) - (9.5 0.20

6.7) - (7.5 0.40

6.7) - (3.0 0.20

6.7) - (0.0 0.10

p

21

2

2

2

2

2

p

Comments on portfolio risk measures

σp = 3.4% is much lower than the σi of either stock (σHT = 20.0%; σColl. = 13.2%).

σp = 3.4% is lower than the weighted average of HT and Coll.’s σ (16.6%).

Therefore, the portfolio provides the average return of component stocks, but lower than the average risk.

Why? Negative correlation between stocks.

General comments about risk

σ 35% for an average stock.Most stocks are positively (though not

perfectly) correlated with the market (i.e., ρ between 0 and 1).

Combining stocks in a portfolio generally lowers risk.

Returns distribution for two perfectly negatively correlated stocks (ρ = -1.0)

-10

15 15

25 2525

15

0

-10

Stock W

0

Stock M

-10

0

Portfolio WM

Returns distribution for two perfectly positively correlated stocks (ρ = 1.0)

Stock M

0

15

25

-10

Stock M’

0

15

25

-10

Portfolio MM’

0

15

25

-10

Creating a portfolio:Beginning with one stock and adding randomly selected stocks to portfolio

σp decreases as stocks added, because they would not be perfectly correlated with the existing portfolio.

Expected return of the portfolio would remain relatively constant.

Eventually the diversification benefits of adding more stocks dissipates (after about 10 stocks), and for large stock portfolios, σp tends to converge to 20%.

Illustrating diversification effects of a stock portfolio

# Stocks in Portfolio10 20 30 40 2,000+

Diversifiable Risk

Market Risk

20

0

Stand-Alone Risk, sp

sp (%)35

Breaking down sources of risk

Stand-alone risk = Market risk + Diversifiable risk

Market risk – portion of a security’s stand-alone risk that cannot be eliminated through diversification. Measured by beta.

Diversifiable risk – portion of a security’s stand-alone risk that can be eliminated through proper diversification.

Failure to diversify If an investor chooses to hold a one-stock portfolio

(doesn’t diversify), would the investor be compensated for the extra risk they bear?– NO!– Stand-alone risk is not important to a well-

diversified investor.– Rational, risk-averse investors are concerned with

σp, which is based upon market risk.– There can be only one price (the market return) for

a given security.– No compensation should be earned for holding

unnecessary, diversifiable risk.

Capital Asset Pricing Model (CAPM)

Model linking risk and required returns. CAPM suggests that there is a Security Market Line (SML) that states that a stock’s required return equals the risk-free return plus a risk premium that reflects the stock’s risk after diversification.

ri = rRF + (rM – rRF) bi

Primary conclusion: The relevant riskiness of a stock is its contribution to the riskiness of a well-diversified portfolio.

Beta

Measures a stock’s market risk, and shows a stock’s volatility relative to the market.

Indicates how risky a stock is if the stock is held in a well-diversified portfolio.

Comments on beta

If beta = 1.0, the security is just as risky as the average stock.

If beta > 1.0, the security is riskier than average. If beta < 1.0, the security is less risky than

average. Most stocks have betas in the range of 0.5 to 1.5.

Can the beta of a security be negative?

Yes, if the correlation between Stock i and the market is negative (i.e., ρi,m < 0).

If the correlation is negative, the regression line would slope downward, and the beta would be negative.

However, a negative beta is highly unlikely.

Calculating betas

Well-diversified investors are primarily concerned with how a stock is expected to move relative to the market in the future.

Without a crystal ball to predict the future, analysts are forced to rely on historical data. A typical approach to estimate beta is to run a regression of the security’s past returns against the past returns of the market.

The slope of the regression line is defined as the beta coefficient for the security.

Illustrating the calculation of beta

.

.

.ri

_

rM

_-5 0 5 10 15 20

20

15

10

5

-5

-10

Regression line:

ri = -2.59 + 1.44 rM^ ^

Year rM ri

1 15% 18%

2 -5 -10

3 12 16

Beta coefficients for HT, Coll, and T-Bills

ri

_

kM

_

-20 0 20 40

40

20

-20

HT: b = 1.30

T-bills: b = 0

Coll: b = -0.87

Comparing expected returns and beta coefficients

Security Expected Return Beta HT 12.4% 1.32Market 10.5 1.00USR 9.8 0.88T-Bills 5.5 0.00Coll. 1.0 -0.87

Riskier securities have higher returns, so the rank order is OK.

The Security Market Line (SML):Calculating required rates of return

SML: ri = rRF + (rM – rRF) bi

ri = rRF + (RPM) bi

Assume the yield curve is flat and that rRF

= 5.5% and RPM = 5.0%.

What is the market risk premium?

Additional return over the risk-free rate needed to compensate investors for assuming an average amount of risk.

Its size depends on the perceived risk of the stock market and investors’ degree of risk aversion.

Varies from year to year, but most estimates suggest that it ranges between 4% and 8% per year.

Calculating required rates of return

rHT = 5.5% + (5.0%)(1.32)

= 5.5% + 6.6% = 12.10% rM = 5.5% + (5.0%)(1.00) = 10.50%

rUSR = 5.5% + (5.0%)(0.88) = 9.90%

rT-bill = 5.5% + (5.0%)(0.00) = 5.50%

rColl = 5.5% + (5.0%)(-0.87) = 1.15%

Expected vs. Required returns

r) r( Overvalued 1.2 1.0 Coll.

r) r( uedFairly val 5.5 5.5 bills-T

r) r( Overvalued 9.9 9.8 USR

r) r( uedFairly val 10.5 10.5 Market

r) r( dUndervalue 12.1% 12.4% HT

r r

^

^

^

^

^

^

Illustrating the Security Market Line

..Coll.

.HT

T-bills

.USR

SML

rM = 10.5

rRF = 5.5

-1 0 1 2

.

SML: ri = 5.5% + (5.0%) bi

ri (%)

Risk, bi

An example:Equally-weighted two-stock portfolio

Create a portfolio with 50% invested in HT and 50% invested in Collections.

The beta of a portfolio is the weighted average of each of the stock’s betas.

bP = wHT bHT + wColl bColl

bP = 0.5 (1.32) + 0.5 (-0.87)

bP = 0.225

Calculating portfolio required returns

The required return of a portfolio is the weighted average of each of the stock’s required returns.

rP = wHT rHT + wColl rColl

rP = 0.5 (12.10%) + 0.5 (1.15%)

rP = 6.63% Or, using the portfolio’s beta, CAPM can be used to

solve for expected return.

rP = rRF + (RPM) bP

rP = 5.5% + (5.0%) (0.225)

rP = 6.63%

Factors that change the SML

What if investors raise inflation expectations by 3%, what would happen to the SML?

SML1

ri (%)SML2

0 0.5 1.0 1.5

13.510.5

8.5 5.5

D I = 3%

Risk, bi

Factors that change the SML

What if investors’ risk aversion increased, causing the market risk premium to increase by 3%, what would happen to the SML?

SML1

ri (%) SML2

0 0.5 1.0 1.5

13.510.5

5.5

D RPM = 3%

Risk, bi

Verifying the CAPM empirically

The CAPM has not been verified completely.

Statistical tests have problems that make verification almost impossible.

Some argue that there are additional risk factors, other than the market risk premium, that must be considered.

More thoughts on the CAPM

Investors seem to be concerned with both market risk and total risk. Therefore, the SML may not produce a correct estimate of ri.

ri = rRF + (rM – rRF) bi + ???

CAPM/SML concepts are based upon expectations, but betas are calculated using historical data. A company’s historical data may not reflect investors’ expectations about future riskiness.

MK 1 Kuliah 2 Financial Environment

Documents

return ke

risiko bisnis

risiko inflasi

risiko finansial

risiko likuiditas

yang terdiri dari

risiko suku bunga

yang mungkin terjadi4