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Project Advice
发布时间：2021-12-05
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Project Advice
1. There are three methods to approach trading.
a. Each person should buy shares in one company traded on a foreign stock exchange. This means the foreign currency must be purchased as a prelude to buying the stock.
b. If you buy a Canadian company either purchase it on a foreign stock exchange, in which case you are using approach (a) or, if you buy it on a Canadian stock exchange like the TSE couple this with a currency trade. Specifically choose a Canadian company that is an exporter then discuss how its profits are affected by exchange rate changes. Take part of your capital and buy the currency that affects its earnings so you also analyze currency changes. In effect you buy a company on the TSE then do an associated currency trade.
c. If you want to trade currencies without a stock then buy two currencies.
Excluding the bibliography the report cannot be more than three single spaced pages in length
2. Companies whose profit stands to increase during the next year merit a ”buy” recommendation; if profit seems like it will fall over the next year issue a ”sell” recommendation. You can backdate trades to the start of the term. Remember to get at least one more quote by the end of the term to determine if your prediction was correct.
3. Grades are determined by the quality of the analysis rather than being correct about the price movements. Reporting reasons why trading recommendations were wrong is a key part of the analysis. Using current mi- croeconomic events such as product, cost or earnings developments is critical to completing a strong project. Such information is key to forming stock rec- ommendations and provides reasons for unexpected price movements. You may also use macro analysis on the general state of the business cycle since profits rise during expansions and fall in recessions.
Past earnings or dividends may be extrapolated by the market and may serve as a springboard for your analysis but must be modified to account for covid restrictions that create a slow economy. Current conditions for the company’s markets are extremely important and should be described. These may embrace the launch of new products or changes in cost conditions, macroeconomic conditions as well as covid restrictions.
Look at the sample analysis posted on Quercus for an example of the kind of work required. This is meant to be a guide or illustration rather than something to be imitated without variation. Remember, this is an opportunity to apply your knowledge of economics to investment decisions and be creative.
4. Use the exchange rate models in eco365 to motivate buying a currency. Most of you will use the foreign exchange market model, Fleming-Mundell model or the parity conditions found in ch. 3. These models should also be used to explain exchange rate changes. Discussing the impact of fiscal and monetary policy on exchange rates is crucial; these discussions can be supplemented by how trade affects exchange rates.
5. You must explain key stock price and exchange rate movements over the term. At the minimum get an initial quote and final quote and explain the changes but any events that affect the value of your portfolio during the term can be explained.
6. Have balanced analysis for the stock and currency. Do not spend all your time on the company because eco365 is about cur- rencies.
7. The project was originally to focus on North American markets. How- ever, provided you can obtain information and price quotes for companies traded on European and Asian stock exchanges you are welcome to include those in the project. A list of internet sites for stock and currency quotes is on the reading list under the Trading Project heading. All quotes here are free of charge. Report profits and losses for the trades in Canadian dollars.
8. Cite all sources for corporate earnings. inflation rates, GDP statistics etc. in the body of the text Sources for lesser known facts about corporate strategies or products should be cited as well. The sample trade shows you one method of citation though any method is fine. Also you can use the style in the sample trade for the bibliography. Failure to cite sources for stats and lesser known facts in the body of the text if a form of plagiarism. It is not enough to list sources in the bibliography.
9. Be creative in your choice of companies. You might consider trading some exotic currencies rather than standard ones like the USD, GBP, EURO, YEN and YUAN, though trading these is fine.
10. Do not just spend your time motivating trades. Instead spend time discussing why the trades succeeded or failed. When analyzing these reasons pay attention to macroeconomic as well as microeconomic factors. Often people spend too much time on company analysis. Remember this is a course in macroeconomics and exchange rates so include substantial analysis about factors that may cause exchange rates to change.
11. You should rely on sources other than the internet for current events and analysis of these events. Try The Wall Street Journal, The Economist, The Financial Times or The Report on Business in The Globe and Mail. The reason is that there’s more analysis in these periodicals than internet sites. But the internet is good for stats on corporate earnings etc.
Possible Companies
1. Major companies are posting their corporate reports on their web- sites. You can use these as a source for earnings data, especially from export oriented operations.
2. All major Canadian banks have US operations so could be used in the project. You might also look at foreign banks or brokerage houses with large international operations. Examples are JP Morgan, Chase, Merrill Lynch, CitiBank, Deuchbank, Royal Bank, TD Bank, CIBC.
3. Mining, railway, airline and oil companies are involved in trade in one way or another. You might consider Barrick Gold, Vale, Exxon, BP, Royal Dutch Shell, CP Rail, Amtrack, Air Canada, American Airways.
4. Luxury goods, fashion companies and cosmetic companies have great interests in trade. You might look at Moet-Hennessy, Chanel or major dis- tillers.
5. Agricultural or consumer products firms like Coca-Cola, PepsiCo, Monsanto, Procter and Gamble, Merck, Pfizer, MacDonald’s have strong interests in international trade or operate in many markets. MacDonald’s produces locally in many countries; in effect this US firm has exported its product by producing it locally worldwide.
6. You might look at car companies such as GM, Ford, Tesla, Toyota, Honda and Chrysler.
7. Hotel chains such as Hyatt and Hilton might be analyzed.
