Risk Premiums and Efficient Market Hypothesis - Free Essay Example

1. Introduction An attempt to elaborate the relationship between the bad model problem and the Efficient Market Hypothesis or the Equity Risk Premium needs to necessarily commence with a short overview of the hypothesis. The Efficient Market Hypothesis, (EMH) was first developed by Eugene Fama of the University of Chicago, in the 1960s, to explain the behaviour of prices in equity markets. It has now been generalised to determine price behaviour patterns in other asset markets and has become one of the central research paradigms in financial economics. The EMH postulates that security markets are very efficient in absorbing and reflecting information about traded stocks and, as such, new information about stocks affect share prices as soon as they occur. The absence of delay in stock price adjustment makes the use of technical or fundamental analyses in predicting price movements for the use of investors redundant. It does not thus matter whether investors hold a randomly selected portfolio or choose shares after studying fundamentals or technicals; as share price behaviour will remain random and unpredictable. The EMH is well known for its association with the concept of â€Å"random walk†, a term used to evocatively describe a series of price changes, where the price movements that take place have no connection with any definable trend and represent random departures from previous prices. Random walk works on the logic that future changes in price will depend upon future information and thus should have no connection with existing prices. As news, by its very nature is totally unpredictable, the behaviour of prices must therefore necessarily be beyond prediction. Also, as existing prices reflect all available information there should not be any difference in the returns achieved by an amateur investor picking up shares at random from the montage of shares available in the market, and those achieved by experts crunching numbers on their laptops. Using an oft repeated example it also indicates â€Å"that a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the expert†[1] The efficient market hypothesis has three manifestations, the weak, semi strong and strong forms. The weak form postulates that prices of shares reflect all information in past and existing prices and business volumes, thus making movements random and the probability of making gainful trades just about even. The semi strong form takes a stride further to stipulate that prices have by now factored in supplementary information such as company and business data, as well as broad financial data including interest and currency fluctuations, and inflation. These two hypotheses, in effect, state that as existing share prices account for the variables used in technical and fundamental analyses, future movement is innately volatile and investment decisions of fund managers nothing more than shots in the dark. Finally the strong form hypothesis states that all information, public and private is reflected in stock prices. Subjected to extensive investigation and research, the EMH has continuously stood up to empirical testing and is still regarded by many to be the definitive theory on market behaviour. Revolutionary theories, however strong t hey may, be have life cycles of cerebral domination and the EMH has had to face severe challenges in the last five years. Investment consultants and stock brokers, people whose businesses and professions depend upon continued investor interest and activity, as well as a new breed of economists have been exceptionally harsh on the hypothesis stating that stock returns, to some extent and in certain circumstances are definitely predictable. A new breed of economists’ emphasized psychological and behavioral elements of stock-price determination, and came to believe that future stock prices are somewhat predictable based on past stock price patterns as well as certain â€Å"fundamental† valuation metrics.[2] These conclusions have also led to the claim that investors should be able to make use of the probability and earn risk adjusted higher rates of return. Current research, moreover, states that the EMH does not account for some disturbing aspects of asset market b ehaviour and share prices some times appear to be subject to misalignments that persist for long periods of time. The issue of bad models and its relationship with the EMH, as well as the Equity Risk Premium are part of the research and questioning directed at the Efficient Markets Hypothesis and relate to situations wherein actual stock behaviour does not correspond with the postulates of the hypothesis. 2. Bad Model Problem The Efficient Markets Hypothesis is under constant investigation and challenge by economists who assert that a number of cases exist and continue to occur, which empirically indicate that markets sometimes do not behave efficiently. Various occurrences like the US stock markets crash of 1987, the internet and dotcom valuations of the 1990s, short-term momentum movements, the so-called January effect, wherein stock prices rise without reason in the first month of every year, and other behavioural irrationalities have indicated inefficient market behaviour. Some patterns of market predictability, detailed by Burton Malkiel [3] are as follows. Short term momentum including under reaction to new information Long term return reversals Seasonal and day of the week patterns Predictable patterns based on valuation parameters Predicting future returns from initial dividend yields Predicting market returns from initial Price Earnings multiples Other predictable time series patterns Cross-Sectional Predictable Patterns Based on Firm Characteristics and Valuation Parameters The size effect Value stocks The Equity Risk Premium puzzle The debate over the validity of the EMH also includes findings of evidence of individual stocks over reacting to information, successful strategies of earning abnormal returns through selling past winners and buying past losers, the ability of various ratios including stock prices to signal future stock performance, and the persistent under reaction of individual stocks to earnings announcements. [4] Researchers like Malkiel and Maxym have provided cogent and logical explanations to account for these apparent anomalies in behaviour. In fact, Malkiel takes up each of these issues individually and provides reasons for the anomalies, using empirical evidence to suggest that the EMH is, by and large, extremely robust and each of the predictability patterns suggested above do not withstand empirical verification. In spite of these consistently rational explanations these anomalies are regarded as strong evidence of the existence of a certain amount of predictability in market price m ovement. The role of bad models in explaining the deviations of market patters from the Efficient Market Hypothesis has been recognised by most experts, including Fama, who state that the arguments against unpredictable markets should be considered and assessed critically. The tests of market efficiency, as a rule, depend upon the use of standard asset pricing models that include the Present Value Model, the Capital Asset Pricing Model and the Arbitrage Theory. However, the applicability and suitability of these asset pricing models, to the situation at hand is, most often, a subject of debate. For example, if one were to postulate upon the basis of empirical evidence that prices are consistent with fundamentals, (an example of a clear deviation from the EMH) it would be necessary to use a model that uses a valid link from economic fundamentals to asset prices. While there are a number of models in all asset markets that can be used to establish this relationship, doubts persist over their suitability for this purpose in an empirically satisfactory manner; as they may not account for factors like â€Å"supply of shares, heterogeneity of beliefs, costs of private information production, and seasonality† [5] It is important to take account of this possible inadequacy while investigating evidence of deviations from the EMH because empirical assessment of market efficiency, especially those that relate to the examination of asset price returns over extensive periods are tests, not just of market efficiency but also obviously of the adopted asset pricing model. It is thus entirely probable that in cases where the postulates of the EMH appear to be rejected by empirical data, the failure may very possibly be due to inadequacies in the pricing model and not in the Efficient Market Hypothesis. This, as per Fama, constitutes the â€Å"bad model† problem, a reason that could prevent researchers from drawing legitimate inferences about the tenets of t he EMH. Economists supporting the EMH often argue that deviations in behaviour of efficient markets from the postulates of the hypothesis are actually due to the bad model problem and not due to inadequacies in the hypothesis. The bad model interpretation would thus suggest that predictability regarding excess returns could represent recompense for risk, which was poorly measured in the first instance, by the chosen asset pricing model. This reasoning however loses validity if deviations of actual behaviour from EMH postulates remain for long periods of time. In such situations it thus becomes imperative to specify alternative models that incorporate empirically assessable efficiencies. â€Å"Consequently, most long-term return anomalies tend to disappear when subjected to different models and statistical testing methods, (Fama, 1997)† [6] 3. The â€Å"Bad Model Problem† and the puzzle of Equity Risk Premium Accepted finance theories postulate that while inves tments in stocks and shares available in the equity market are far more volatile in their price movements than investments made in governmental or treasury bonds, they also provide greater return on the money invested. Analysis of historical data in most countries with mature stock markets also confirms that investments in shares, while being more volatile than official bonds, do provide higher returns. As such while rational investors should find the prospects of higher yields available from investments in stocks attractive, they would also tend to be wary of the associated risk and chances of economic loss. It would thus be natural for investors to expect higher returns, or rather premiums, from share market investments than in governmental bonds. The Equity Risk Premium (ERP) arises from these sentiments and represents the incremental rate of return expected by an investor in return for investing in shares or stocks that are associated with a higher risk than in risk free investm ents like, for example, government bonds. â€Å"Welch (1999) notes that this equity risk premium ‘is perhaps the single most important number in financial economics’, with implications for asset allocation decisions and providing a key input into calculations of the appropriate discount rate for evaluating investments.†[7] The ERP can apply to a broad based selection of stocks as well as to single stocks. If, for purposes of clarification, we take the rate of return on governmental bonds to be 6 %, the risk free rate would be the same and any investor would obviously not like to invest in any security offering a rate of less than the risk free rate. Any investment in a risky security would thus necessarily have to provide a return higher than the risk free rate. Risks are normally associated with all stocks and an expectation of 9 % from a diversified selection of stocks would indicate an ERP of 3 % on part of the investor. The final measure of risk associated with stocks is the risk associated with a particular stock, generally called the â€Å"beta†. The â€Å"beta† of a company depends upon a combination of its operational risk and financial risk and increases with increases in their perception, a larger beta being associated with an increased ERP. The extra recompense investors expect to get from investment in higher risk investments has become a bit of a puzzle. Common sense, backed by logical financial theory would suggest that this extra premium should be just enough or slightly more than the cost of the extra risk, calculated in most cases with the use of the Capital Assets Pricing Model The actual position, however, is vastly different. A number of studies have found and reconfirmed that the actual equity risk premium has been significantly larger than that required to cover the cost of the extra risk. â€Å"The Ibbotson data from 1926 through 2001, (states that) common stocks have produced rates of return of a pproximately 10 ½ percent while high grade bonds have returned only about 5 ½ percent†[8] The existence of a large historical risk premium, which is at odds and quite incompatible with the actual risk involved, implies the existence of irrationality in stock market behaviour and a sign of the fact that the Efficient Markets Hypothesis does not apply to stock markets. Various reasons put forward to account for this puzzle includes a school of thought that feels that the measurement of past premiums was erratic or due to improper selection of shares. In the short run, stocks are riskier than bonds, and it used to be assumed that the equity premium was simply the market price of risk. In 1985, however, economists Rajnish Mehra and Edward Prescott showed that no plausible model of investor preferences could reconcile the observed investor premium with the efficient markets hypothesis that is the belief that financial markets smoothly diversify all relevant risk. They conclu ded that an efficient market would produce an equity premium of at most half a percentage point.[9] Such results indicate the possibility that markets are essentially not efficient if the use of the Capital Assets Pricing Model (CAPM) is presumably correct. The CAPM was conceptualised originally by William Sharpe fifty years back and has since evolved into one of the chief models for managers to control risks for taking investment decisions. It is an equilibrium model that describes the pricing of assets as well as derivatives. It is the single most used model for valuing securities and uses the Discounted Cash Flow system with risk adjusted discount rates. The CAPM stipulates that market entry throws open investors to two types of risks, systematic risks that arise from being present in the market, and unsystematic risks, which arise from investing in particular companies. As unsystematic risks can be controlled through a process of diversification, the main risk in portfolio decisions comes from systematic risks. The validity of the CAPM and its appropriateness for all cases of valuation is however an issue of debate and repeated doubts have been raised over some of its assumptions, namely that investors are rational single period planners who seek mean-variance optimal portfolios and that security markets are ideal and large, that there are no transaction costs, that all risky stocks are traded and money is available at risk free rates. While the existence of abnormally high equity risk premiums does lead to questions about the efficiency of markets, supporters of the EMH argue that the existence of high ERPs do not automatically mean that markets are inefficient. It could simply be due to a bad model problem and the inadequacy of the CAPM to account for all the aspects of risk. Fama and French (1993) suggest that the price-to-book value ratio may reflect another risk factor that is priced into the market and not captured by CAPM. Companies in s ome degree of financial distress, for example, are likely to sell at low prices relative to book values. Fama and French (1993) argue that a three-factor asset-pricing model (including price-to-book-value and size as measures of risk) is the appropriate benchmark against which anomalies should be measured. [10] The relationship between equity Risk Premiums and the Efficient Market Hypothesis is a matter of debate and a number of economists and market experts think of this phenomenon as a strong indicator of the inefficiency of markets and the fact that the EMH is open to questioning. Supporters of the hypothesis on the other hand refute this opinion strongly and state that this, as in the case of most other EMH anomalies, could be no more than another example where the use of CAPM is inappropriate and indicative of a bad model problem. The use of alternate and more sophisticated models could well incorporate the cost of unaccounted risk factors and, by reducing the Equity Risk Pr emium significantly, bring it in line with the postulates of the hypothesis. In the meantime, while the debate continues to rage, it is becoming evident that the EMH is no longer the definitive word in predicting stock behaviour that it once was. Alternate theories that point to anomalies in EMH and hypothesise that markets can be predictable, to some extent, are gaining ground. Bibliography Active Fund Management and Investment Strategies, 2006, Investment Management, Retrieved December 7, 2007 from www.londonexternal.ac.uk//lse/lse_pdf/further_units/invest_man/23_invest_man_chap3.pdf Bodie, Z, Kane, A and Marcus, 2005, Investments, McGraw Hill, USA Burton, J, 1998, Revisiting the Capital Asset Pricing Model, Dow Jones Asset Manager, Retrieved December 7, 2006 from www.stanford.edu/~wfsharpe/art/djam/djam.htm Investment funds from Barclays Global Investors, 2006, Retrieved January 7, 2006 from https://www.bgifunds.com Lofthouse, S, 1994, Equity Investment Manageme nt: How to Select Stocks and Markets, John Wiley and Sons, Inc. Levy, H, 1996, Introduction to Investments, South-Western College Publishing, USA Malkiel, B.G, The Efficient Market Hypothesis and Its Critics, 2003, Retrieved January 7, 2006 from www.princeton.edu/~ceps/workingpapers/91malkiel.pdf Malkiel, B.G, A Random Walk Down Wall Street, 4th ed. New York: W.W. Norton, 1985, p. 16. Maxym, D, The Efficient Market Hypothesis and the Ukrainian Stock Market, 2000, Retrieved January 7, 2007 from www.eerc.kiev.ua/research/matheses/2000/Dedov_Maxym/body.pdf Quiggin, J, Puzzling analysis from free market camp, Australian Financial Review, 1999, Retrieved January 7, 2007 from www.uq.edu.au/economics/johnquiggin/news/Dow9905.html Wicas, N, 2005, Add active ingredients to spice up passive portfolios, Professional Wealth Management, Retrieved November 12, 2006 from www.pwmnet.com/news/categoryfront.php/id/75/ASSET_ALLOCATION.html Bottom of Form 1 Footnotes [1] Burton G. Malkiel, A Random Walk Down Wall Street, 4th ed. New York: W.W. Norton, 1985, p. 16. [2] Burton G. Malkiel, The Efficient Market Hypothesis and Its Critics, 2003, Retrieved January 7, 2006 from www.princeton.edu/~ceps/workingpapers/91malkiel.pdf [3] Burton G. Malkiel, The Efficient Market Hypothesis and Its Critics, 2003 [4] Dedov Maxym, The Efficient Market Hypothesis and the Ukrainian Stock Market, 2000, Retrieved January 7, 2007 from www.eerc.kiev.ua/research/matheses/2000/Dedov_Maxym/body.pdf [5] Dedov Maxym, The Efficient Market Hypothesis and the Ukrainian Stock Market, 2000 [6] Dedov Maxym, The Efficient Market Hypothesis and the Ukrainian Stock Market, 2000 [7] Quiggin, J, Puzzling analysis from free market camp, Australian Financial Review, 1999, Retrieved January 7, 2007 from www.uq.edu.au/economics/johnquiggin/news/Dow9905.html [8] Burton G. Malkiel, The Efficient Market Hypothesis and Its Critics, 2003 [9] Quiggin, J, Puzzling anal ysis from free market camp, Australian Financial Review, 1999 [10] Burton G. Malkiel, The Efficient Market Hypothesis and Its Critics, 2003

Intro to philosophy Free Essay Example, 1000 words

Theories of Parmenides have different errors, which cannot apply in the world (vidyate, 2014). Demonstration of the derivatives of corollaries The demonstration of the derivatives of corollaries is very clear to expressing the basics of being. For example, eyes identify the color of the objects, hands find the shapes of objects, etc. , but main thing is the being of subjects that enables the natural things to work. Eyes are nothing without the existence of other things, hands are noting without main subjects. Shapes and colors are nothing without other being existences (Thomism, 2013). According to the metaphor of sharing, there is a sense of strangeness for considering the situations. For considering the current situations, there is a natural interconnected system in human beings, which present the entities in the form of derivations. In the result, the signals for connections differentiated the originalities via interconnection system (Wood, 2012). There is a network of signs and ideas, which results in limited, derivatives, or arbitrary outcomes. Parmenides signifies these outcomes by indicating some reasons, e.g. , unity and plurality, form and formlessness, ignorance and knowledge, mastery and slavery, etc. We will write a custom essay sample on Intro to philosophy or any topic specifically for you Only $17.96 $11.86/pageorder now The terms of signify describe the differences and relations to every relevant object in the context of originally interconnected metaphorically (Wood, 2012). In simple words, there are many chances to reduce the chances of manifold of being in the presence of disclosure derivative modes. Derivatives are useful for indefinite potential repetitions to reduce the chances of disclosures through intellectual ways. There is a legitimate circulatory system to deal with the kind of issues, and this is called being accordingly theorem. Metaphysical implications of Parmenides According to the philosophy of Parmenides, bringing actual changes in the world is very impossible. He believes in both thoughts of existence and non-existences with the help of his theories and poems. In start, the metaphysics implications of Parmenides got popularity all over the world (in the field of philosophy), but these concepts were failed because of time consuming and confusing conditions (fiu, 2010). The evolutionary and enigmatic Greek philosopher, the Parmenides of Elea, was an earliest defender of the Eleatic metaphysics. He argued for the importance of homogeneity and challenged the importance of being by refusing numerous apparent of the world over time and space (Theory, 2012).

Study On The Different Types Of Forward Contracts Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1551 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Compare and contrast essay Did you like this example? FORWARD CONTRACTS: A forward contract agreement is effective under the consistent critical terms method if all the following criteria are met: 1. The forward contract is for the purchase or sale of the same quantity or notional amount and at the same time as the hedge able item. 2. Upon association with the hedge able item, the forward contract has a zero fair value. 3. The references rate of the forward contract is consistent with the reference rate of the hedge able item. Example: While entering into agreement of forward contracts which involve buying an equity forward, that is purchasing the equity at a specific date in the future, for the price which has been agreed at the time of forward contract is made or entered in it. (Tomas Bjork) INTEREST-RATE FORWARD CONTRACTS: It involves interest rates on agreement; the seller has the opportunity of hedging against a futures fall in interest rates. As wall as the buyer has the security from a future ri se in interest rates. Interest rate forward contract, more normally called a forward rate agreement or FRA. The FRA has instruments on which they are based; there is a worldwide market for time deposition in various currencies issued by large responsible banks. (Financial News, journal ) LONG POSITION: The purchase or buying of securities such as commodity, stock or currency, with the intention that the assets value will rise in coming future. The long position is far used by banks and bay window to manage foreign exchange risk. In context of options, the buying of an options contract. Its like opposite to Short position. Example: The shareholder in KFCs corp. is said to be long KFCs or has the long position in KFCs. Buying a put option contract from a writer entitle you the right, not the obligation to buy (or sell) a specific asset for a specified amount at a specified time or date. (Fischer Black) SHORT POSITION, HEDGE: The sale of borrowed shares or securities, commodit y with an expectation that the price of the asset might fall in value. In the context of option, it is the sale of an options contract. Opposite of long position. Example: The classic economic rationale for future markets is, of course, that they facilitate hedging-that they allow those who deal in a commodity to transfer the risk of price change in that commodity to speculators more willing to bear such risk. An investor who borrows shares of from a broker and sells them in open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. And if the price of stock falls in the market, the investor buys it for less than the price from he or she sold it, thus making a profit. Selling a put options contract to buyer entitles the buyer the right, not the obligation to buy from or sell to you a specific asset or commodity for a specified amount at a specified time or date. (Louis H. Ederington) FINANCIAL FUTURE CONTRACT: A similar, moveable, exchange-traded contract that delivery of trade good, securities, currency, or stock market index, at a specified price, on a specified time to come. Unlike options, futures convey an indebtedness to buy. The risk to the holder is unlimited, and because the yield pattern is proportionate, the risk to the seller is unlimited as well. Dollars lost and increase gain by each party on a futures contract is equivalent and opposite. In other words, future trading is a zero-sum game. The exchange of assets occurs on the date specified in the declaration. An exchange traded contract, for settlement at a date beyond the normal spot settlement data, for the purchase and sale of a standardized quantity of a financial instrument. The futures contract locks in the future rate of return on a notional investment by the buyer, the seller lock in the cost of borrowing. (Investor word, journal) ARBITRAGE: Attempting to profit by overwork price differ ences of indistinguishable or similar financial instruments, on different markets or in different forms. The ideal version capture slight difference in price is riskless arbitrage. A risk-free transaction of securities industry, the purchasing of under value share and the simultaneously resale of these shares for a higher price, generating a profit on the difference. (Tomas Bjork) MICRO HEDGE: Hedge is designed to reduce or eliminate risk resulting from a particular asset or liability, as opposed to the risk arising from an entire list of the financial assets held by an individual or a bank. If the asset or liability is part of a large portfolio with a number of correlate risks, then micro-hedge is less likely to be an effective technique. Opposite of macro-hedge. (Stephen G. Cecchetti) MACRO HEDGE: Hedge designed to reduce or eliminate risk for an entity. Opposite of micro-hedge. An investment technique used to reduce the risk of portfolio of commodity. In most cases, this wo uld mean taking a position that offsets the whole portfolio. But it is difficult proficiency in exercise because there is seldom one commodity that offset the risk of a broader portfolio, so applying for a macro-hedge is most likely requires taking an outset position in each single commodity. An index fund manager believes that there will be a loss in the index in the upcoming future. To reduce the risk of a downward turn in the index, the manager can take a short position in the index funds future market that might lock in a price for the index. (Carl Ackermann) CROSS HEDGE: Hedging one instruments risk with a different by taking a particular portion is a related financial instrument. This is frequently done when there is no financial instrument being hedged, or a suitable financial instrument exists but the marketplace is extremely illiquid. The cross hedging counts completely on how strongly correlate the instrumental being hedged is with the semantic role or tool which underl ies the financial instrument or derivative contract. Furthermore; the recognition quality of the derivation and the instrument being hedged need to be of similar liquid, so that price changes are resemblance. Lastly, the due date of the financial instrument must be at least as long as the due date of the craved hedged; otherwise investor will be left with an un-hedged exposure for a point of time. (Ronald W. Anderson, Columbia University) HEDGE RATIO: The change in price of a call option for every one-point move in the price of the rudimentary security. The hedge ratio is also called delta. The ratio of volatility of the portfolio to be hedged and of the volatility of the hedging instrument. Example: the price of a commodity future with a hedge ratio of 40 will rise 40% (of the security-price move) if the price of the rudimentary stock increases. Typically, options with lofty level hedge ratio are usually more fruitful to buy rather than pen since the degree the portion moveme nt-relative to the rudimentary price and the comparable little time-value wearing-the greater the leverage. The opposite is true for alternative with a low hedge ratio. (Financial Institution Market Madura International Edition 9th Edition 2010) BASIC RISK: An applied to interest rate swap, risk that the index used for an interest rate swap doesnt move perfectly in tandem with floating-rate instrument specified in a swap agreement. As applied to financial futures, risk that the future prices do not move perfectly to in tandem with the assets that are hedged. (Financial Institution Market Madura International Edition 9th Edition 2010) STOCK MARKET RISK: The variability in returns on stock that is due to basic swapping changes in investor expectations is referred to as market risk. It is part of systematic risk. They are caused by tangible events like political, social, or economical and intangible events like market psychology. Other factors playing a major role in market ris k are interest rate and inflation. (Financial Institution Market Madura International Edition 9th Edition 2010) PORTFOLIO INSURANCE: A strategy of hedging a stock portfolio against market risk by selling stock index futures short or buying stock index put options. Program trading combined with the trading of index futures to hedge against market movements. The hedging technique is frequently used by institutional investors when the market direction is uncertain or volatile. Short selling index futures can offset any downturns, but it also hinders any gains. (Financial Institution Market Madura International Edition 9th Edition 2010) REQUIREMENTS: If you expect interest rates to increase, what type of hedge should you set up, long or short? And why? Sol: Long hedge requires taking a long position in future contract, it is appropriate when a certain asset or commodity would be purchased in the future and one is interested in locking in the price now. For example, the tex tile company would use a long hedge. And short hedge involves a short position in the future contract, it can be applicable when a hedger already owns asset and expect to sell it in the future. For example, the aluminium producer would use a short hedge. If 1% increases in the interest rate results in a decline in the value for treasury bonds of par. So, I would like to set up short hedge or short position because the interest rate is going to increase in the future period. Don’t waste time! Our writers will create an original "Study On The Different Types Of Forward Contracts Finance Essay" essay for you Create order

Empiricism and Experience - 1575 Words

Empiricism Empiricism by nature is the belief that there is no knowledge without experience. How can one know what something tastes like if they have never tasted it? For example, would someone know that an apple is red if they have never actually have seen one. Someone can tell you an apple is red, but, if you never have seen one, can you really be sure? Empiricists use three anchor points in which they derive their opinions from. The first of these points is; the only source of genuine knowledge is sense experience. An easier way to understand this is to compare the mind to a clean sponge. As the sponge touches things, it takes with it, a piece of everything it touches. Without this, the sponge would remain clean and be void of†¦show more content†¦The second epistemological question is; does reason provide us with knowledge of the world independently of experience? John Locke says the answer to this question is no. He uses arguments discussed in the third anchor point of empiricism to support this idea. Locke does not believe that reason alone can provide knowledge because we do not possess innate knowledge that we are not aware of. To best describe this Locke proposes this model: Suppose the mind to be, as we say, white paper, void of all characters, without any ideas; how comes it to be furnished? When man has painte d on it with endless variety, how does it have all the materials of reason and knowledge to this question I answer, in one word, from experience. In that all our knowledge is founded, and from that, it ultimately drives itself (p94). Therefore, without these experiences Locke believes that we would not possess the concept of reason and because of that reason alone cannot provide us knowledge of the world. Berkeleys answer to the second question is no as well. He believed that it was only through experience and not reason that we have any knowledge of reality. Since our experiences differ from each individual, reality too will differ for each individual. These ideas as he calls them are the concrete contents of our minds. These ideas are provided through experience and not reason. Therefore, we can not posses knowledge through our reasoning because that reasoning would be basedShow MoreRelatedEmpiricism Is The Theory That Experience1202 Words   |  5 PagesEmpiricism is the theory that experience, rather than reason, is the source of knowledge, and in this sense it is opposed to rationalism. This general thesis can receive different emphases and refinements; therefore, philosophers who have been labeled empiricists are united generally and may differ in various ways. The Empiricist Revolution helped facilitate discussion on real world, political problems. 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These two, very different, schools of thought attempt to answer the philosophical question of how knowledge is acquired. While rationalists believe that this process occurs solely in our minds, empiricists argue that it is, instead, through sensory experience. After reading and understanding each argument it is clear that empiricism is the most relative explanatory position in epistemology. To begin with the question of rationalism versus empiricism, it is importantRead MoreEmpiricism, Positivism, And Positivism Essay1421 Words   |  6 Pageskinds of investigation in the world. We also refer it as â€Å"empiricism†, the scientific way we gain our knowledge from experience. Empiricism is also a view that all kinds of knowledge come from, not just scientific knowledge. Scientific thinking and investigation have the same basic pattern as everyday thinking and investigation. (Godfrey-Smith, 9) Again, we call it â€Å"empiricism† in terms of philosophical way, but in earliest form, the â€Å"empiricism† was referred as â€Å"logical positivism†. Logical Positivism

A Report on Politics of the 1990s Persian Gulf War

News Event Persian Gulf War On August 2, 1990, Iraq leader Saddam Hussein ordered the invason of the neighboring country kuwait. The reason for this invasion was to steal the rich oil that was in the land. During this invasion President George H. W. Bush declared that the war in Kuwait will not stand. A day after the declaration, King Fahd of Saudi Arabia met with U.S. Defense Secretary Richard Cheney to request military assistance. Saudi Arabia, japan, and other wealthy allies would be funded $60 billion for there losses and damages. August 8, 1990 U.S. air force fighters were in Saudi Arabia. By 1991 the United States alone had 50,000 troops. On February 26, 1991 Saddam ordered the withdrawal from Kuwait. About 10,00 retreating troops were killed when Caoliton aircraft bombed their stolen military vehicles. Finally, George H. W. Bush announced to ceased fire and that Kuwait had been free from Iraq occupation. Famous People Bill Clinton Bill Clinton was born on August 19, 1946 in Hope, Arkansas. He graduated from Geargetown and got a degree in law. After getting his degree in law, Bill went back to Arkansas to teach law at the Unviversity of Arkansas. In 1974 he campaigned for congress but was not elected. 2 years later he was elected Arkansas Attorney General. In 1975 Bill married Hillary Rodham who he met during law school and 5 years later they had their only child Chelsea. Bill lost the reelection in 1980 but regained the governship two years later andShow MoreRelatedThe Connection between 9/11 and the Need for Foreign Oil Essay examples1227 Words   |  5 Pagesremembered. It was a day in history where time it seemed stood still, and one that became a moment of pronounced transformation. 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Consumer Acceptance of Functional Foods

Question: Discuss about the Consumer Acceptance of Functional Foods. Answer: Introduction: The debate of the GMO has been substantial and heated on either side. One of the leading contemplation when arguing against the use of the GMO is the possibility you will encounter for the environment and people. One of the effect it will have is the toxicity, which will be a huge issue to the environment due the chemicals pesticides as well as herbicides that are commonly used with the GMOs (Frewer, Scholderer Lambert, 2003). Evidence has also suggested that small genetic alterations in the plants might produce primary environmental changes , meaning there could possibly be likelihood of the GMO to turn out to be continual along with weedy in the agricultural conditions being that they are altered to be resistant against the advanced procedures of agriculture. Moreover, the biodiversity may be put in risk by the GMO (Frewer, Scholderer Lambert, 2003). This means that the natural ecosystem could be comprised especially in the long term. The GMO food have been known to cause allergy, which could affect people. Allergic reaction in the humans usually occurs whenever almost certainly a protein goes into the system, which induces an immune response (Klmper Qaim, 2014). When the source leads to allergies in the human or perhaps the source, which has been, consumed as human food. The vitro evidence has suggested some of the GMO products could cause the allergic reaction, which has been caused by biotechnology organization (Klmper Qaim, 2014). Other future impact of the GMO to the people could be the unintended effects such as the outcrossing as well as the effects from the genes in terms of the stability. References Frewer, L., Scholderer, J., Lambert, N. (2003). Consumer acceptance of functional foods: issues for the future. British Food Journal, 105(10), 714-731. Klmper, W., Qaim, M. (2014). A meta-analysis of the impacts of genetically modified crops. PloS one, 9(11), e111629.

Artist and Humanist, Albrecht Durer Essay Example For Students

Artist and Humanist, Albrecht Durer Essay Artist and Humanist, Albrecht Durer is one of the most significant figures in the history f European art outside Italy during the Renaissance Gowing 195. Portraying the questioning spirit of the Renaissance, Durers conviction that he must examine and explore his own situation through capturing the very essence of his role as artist and creator, is reflected in the Self-portrait in a Fur Collared Robe Strieder 10. With the portrait, Durers highly self-conscious approach to his status as an artist coveys his exalted mission of art more clearly than in any other painting. He seems to be less concerned with himself as a person than with himself as an artist, and less with the artist than with the origin and exalted mission of art itself. Strieder 13. In this self-portrait Durer portrays himself in the guise of the Savior. Durers natural resemblance to Christ has been reverently amplified Hutchinson 67. His bearded face is grave, and fringed by lustrous shoulder-lenth hair painted in a dark, Christ-like brown Russell 89. Scholars have called attention to the fact that, the portrait was intended to portray Durer as the thinking artist through emphasis on the enlarged eyes and the right hand. Dueres use of the full-face view and almost hypnotic gaze emphasizes his belief that the sense of sight is the most noble of the five senses. He wrote in the Introduction to his Painters Manual, For the noblest of mans senses is sightà ¢Ã¢â€š ¬Ã‚ ¦ Therefore a thing seen is more believable and long-lasting to us than something we hear Hutchison 68. The position of the right hand held in front of his chest is almost as if in blessing 89 Russell. Joachim Camerarius, a professor who published a Latin translation of two of Durers books, wrote of Durers intelligent head, his flashing eyes, his nobly formed nose, his broad chest, and then noted: But his fingers- you would vow you had never seen anything more elegant Russell 8. Along with his qualities of mind and eye, the gracefully extended fingers in his self-portrait portrays his extraordinary faculty of hand. Camerarius continued: What shall I say of the steadiness and exactitude of his hand? You might swear that rule, square, or compasses had been employed to draw lines which he, in face, drew with the brush, or very often with pencil or penà ¢Ã¢â€š ¬Ã‚ ¦ this consummate artists mind, endowed with all knowledge and understanding of the truthà ¢Ã¢â€š ¬Ã‚ ¦ governed and guided his hand and bade it trust to itself without any other aidsà ¢Ã¢â€š ¬Ã‚ ¦ And this was a subject of greatest wonder to most distinguished painters who, from their own great experience, could understand the difficulty of the thing Russell 8. Symmetrically arranging his serious, handsome face and mass of shoulder length hair deliberately invite comparison with the image of Christ. The idealized arrangement and strict symmetry of the face is based on a construction made up of circle and a triangle, a formula used down to the Byzantine period for images of the Redeemer. The frontal pose and symmetrical composition have recurred in many images of Christ, particularly in the form of the vera icon, or true image Strieder14. No architectural setting appears within the plain, black background of the painting Hutchison 67. The darkened tone and limited but unified color scheme create a mood of sanctity Hutchinson 68. The contours of the face are molded by means of soft light and transparent shadows, almost in an attempt to fathom the inner depths of Durers creative spirit Strieder 147. Set against the dark background, the strong face and chin emanate an impression of energy from the portrait. .u4fc89389a1ad42bab277251b4a6abcc5 , .u4fc89389a1ad42bab277251b4a6abcc5 .postImageUrl , .u4fc89389a1ad42bab277251b4a6abcc5 .centered-text-area { min-height: 80px; position: relative; } .u4fc89389a1ad42bab277251b4a6abcc5 , .u4fc89389a1ad42bab277251b4a6abcc5:hover , .u4fc89389a1ad42bab277251b4a6abcc5:visited , .u4fc89389a1ad42bab277251b4a6abcc5:active { border:0!important; } .u4fc89389a1ad42bab277251b4a6abcc5 .clearfix:after { content: ""; display: table; clear: both; } .u4fc89389a1ad42bab277251b4a6abcc5 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u4fc89389a1ad42bab277251b4a6abcc5:active , .u4fc89389a1ad42bab277251b4a6abcc5:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u4fc89389a1ad42bab277251b4a6abcc5 .centered-text-area { width: 100%; position: relative ; } .u4fc89389a1ad42bab277251b4a6abcc5 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u4fc89389a1ad42bab277251b4a6abcc5 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u4fc89389a1ad42bab277251b4a6abcc5 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u4fc89389a1ad42bab277251b4a6abcc5:hover .ctaButton { background-color: #34495E!important; } .u4fc89389a1ad42bab277251b4a6abcc5 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u4fc89389a1ad42bab277251b4a6abcc5 .u4fc89389a1ad42bab277251b4a6abcc5-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u4fc89389a1ad42bab277251b4a6abcc5:after { content: ""; display: block; clear: both; } READ: Mason-Caree, Renaissance Architecture Essay SummaryWithin the background on the right-hand side, the inscription reads I Albrecht Durer of Nuremberg painted myself thus, with undying colors, at the age of twenty-eight years Hutchinson 67. This was a personal verification of the quality of his materials and his craftsmanship. And he had painted his own image in everlasting colors, desiring the hand down an undying image to posterity Strieder 14. Ironically, the self-portrait did more than preserve his image; it helped foster the popular characterization of Durer as a Christ-like master, aloof and awe-inspiring. Albrecht Durer believed that his artistic mission reflected that of Christ. He felt the artists creative spirit was God-given, Russell 89 and saw the ability to create as being innate, a gift and labor linking man to God Gowing 56. Art comes from God, he says. God created all forms of art and the attainment of true, artistic, and lovely execution in painting is hard to come untoà ¢Ã¢â€š ¬Ã‚ ¦ Whoseoever, therefore, falleth short cannot attain a right understanding for it cometh alone by inspiration from above Strieder 14. Durer was deeply religious, troubled by rebellions and abuses he witnessed within the church. Traditional values were beginning to show signs of breaking down with great religious and social upheavals Gowing 56. The artist shared and understood Martin Luthers plea for religious toleration, and for official recognition of the need for reform. There is no doubt that Durers thought and art were affected by the powerful reforming spirit of the age Hutchison 164. Albrecht Durer desired to establish a system of principles that would foster the development of a True Art. He wanted to find out all that he could, to obtain a higher knowledge about everything connected with his art- how to collect knowledge and pass it on to others Streider 12. To further fulfill his spiritual role, Durer pledged to write one last instructional book entitled Food for Young Painters in which he would hand down all his knowledge and experience as his legacy to those able young men who love art more than silver and gold Russell 161. His advice for the young painter was that he be kept from womenà ¢Ã¢â€š ¬Ã‚ ¦ and that he guard himself from all impurity, for nothing weakens the understanding more than impurity. He should be taught how to read and write well, he should be taught to pray to God for The grace of quick perception Hutchinson 111. But the book was never completed before he died suddenly on the sixth of April, 1528 Hutchison 110.