Factor analysis in corporate finance

What is Factor Analysis? He was also a strong believer in the use of statistical tools and psychometrics to provide the base of theories in psychology rather than just basing them on verbal arguments and discussion.

Factor analysis in corporate finance

The reason why the father wished to close down the branch was that it appeared to be making a loss.

Journal of Corporate Finance - Elsevier

However, it is quite the reverse; if the branch was closed then, the positive contribution from the branch would be lost and overall profits would fall.

This is because the indirect costs of production do not vary with output and, therefore, closure of a section of the firm would not lead to immediate savings.

This may mean that closing the branch would be a mistake on financial grounds.

Factor analysis in corporate finance

This mistake is made due to a misunderstanding of nature of cost behavior. If the branch is closed then the only costs that would be saved are the costs directly related to the running of the branch: The costs are indirect in nature, in this example the marketing and central administration costs, would still have to be paid as they are unaffected by output.

For this decision to be made, we should use contribution as a guide for deciding whether or not to close a branch. This can also be applied to the production of certain product lines, or the cost effectiveness of departments.

On financial grounds, contribution is therefore, a better guide in making decisions.EBSCO provides on-line databases to libraries worldwide with content that includes full-text journals, books, monographs, magazines, reports, essays and other various types of publications.

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A growing number of investors are seeking to construct portfolios that simultaneously capture the 1) long-term factor premia (value, momentum, size etc.) and 2) have attractive ESG profiles.

Implications of Dynamic Factor Models for VAR Analysis James H. Stock, Mark W. Watson. NBER Working Paper No. Issued in July NBER Program(s):Economic Fluctuations and Growth This paper considers VAR models incorporating many time series that interact through a few dynamic factors.

This article examines Amazon’s current corporate strategy and evaluates its suitability going forward. This analysis is based on the drivers of corporate strategy including the need to grow quickly and more importantly sustain such growth, the need to not lose sight of either longer term profitability and the shorter term results and the balancing of both, and its focus on cost leadership.

Aims and Scope International Research Journal of Finance and Economics is a peer-reviewed international research journal, which aims to publish articles of high quality dealing with issues in international finance and economics which impact on national and global economies.

Factor investing, and the associated intellectual battles, have raged for decades in academic finance journals. However, now that factor investing has gone mainstream via ETFs, the debate has broader interest among the investing public.

Corporate Finance