online trading

 Theory for Online Financial Trading

Yang-Yu Liu, Jose C. Nacher, Tomoshiro Ochiai, Mauro Martino, Yaniv Altshuler

(Submitted on 26 Feb 2014 (v1), last revised 7 Mar 2014 (this version, v3))

Prospect theory is widely viewed as the best available descriptive model of how people evaluate risk in experimental settings. According to prospect theory, people are risk-averse with respect to gains and risk-seeking with respect to losses, a phenomenon called "loss aversion". Despite of the fact that prospect theory has been well developed in behavioral economics at the theoretical level, there exist very few large-scale empirical studies and most of them have been undertaken with micro-panel data. Here we analyze over 28.5 million trades made by 81.3 thousand traders of an online financial trading community over 28 months, aiming to explore the large-scale empirical aspect of prospect theory. By analyzing and comparing the behavior of winning and losing trades and traders, we find clear evidence of the loss aversion phenomenon, an essence in prospect theory. This work hence demonstrates an unprecedented large-scale empirical evidence of prospect theory, which has immediate implication in financial trading, e.g., developing new trading strategies by minimizing the effect of loss aversion. Moreover, we introduce three risk-adjusted metrics inspired by prospect theory to differentiate winning and losing traders based on their historical trading behavior. This offers us potential opportunities to augment online social trading, where traders are allowed to watch and follow the trading activities of others, by predicting potential winners statistically based on their historical trading behavior rather than their trading performance at any given point in time.

ULTIMATE FINANCIAL RULES FOLLOWED by MNC'S COMPANIES

 QuickMBA / Accounting / Standards

Financial Accounting Standards

Accounting standards are needed so that financial statements will fairly and consistently describe financial performance. Without standards, users of financial statements would need to learn the accounting rules of each company, and comparisons between companies would be difficult.
Accounting standards used today are referred to as Generally Accepted Accounting Principles (GAAP). These principles are "generally accepted" because an authoritative body has set them or the accounting profession widely accepts them as appropriate.

Securities and Exchange Commission (SEC)The Securities and Exchange Commission is a U.S. regulatory agency that has the authority to establish accounting standards for publicly traded companies. The Securities Act of 1933 and the Securities Exchange Act of 1934 require certain reports to be filed with the SEC. For example, Forms 10-Q and 10-K must be filed quarterly and annually, respectively. The head of the SEC is appointed by the President of the United States.
When the SEC was formed there was no standards-issuing body. However, rather than set standards, the SEC encouraged the private sector to set them. The SEC has stated that FASB standards are considered to have authoritative support.


Committee on Accounting Procedure (CAP)
In 1939, encouraged by the SEC, the American Institute of Certified Public Accountants (AICPA) formed the Committee on Accounting Procedure (CAP). From 1939 to 1959, CAP issued 51 Accounting Research Bulletins that dealt with issues as they arose. CAP had only limited success because it did not develop an overall accounting framework, but rather, acted upon specific problems as they arose.


Accounting Principles Board (APB)
In 1959, the AICPA replaced CAP with the Accounting Principles Board (APB), which issued 31 opinions and 4 statements until it was dissolved in 1973. GAAP essentially arose from the opinions of the APB.
The APB was criticized for its structure and for several of its positions on controversial topics. In 1971 the Wheat Committee (chaired by Francis Wheat) was formed to evaluate the APB and propose changes.

Financial Accounting Standards Board (FASB)
The Wheat Committee recommended the replacement of the Accounting Principles Board with a new standards-setting structure. This new structure was implemented in 1973 and was made up of three organizations:

• Financial Accounting Foundation (FAF)
• Financial Accounting Standards Board (FASB)
• Financial Accounting Standards Advisory Council (FASAC).

Of these organizations, FASB (pronounced "FAS-B") is the primary operating organization.
Unlike the APB, FASB was designed to be an independent board comprised of members who have severed their ties with their employers and private firms. FASB issues statements of financial accounting standards, which define GAAP. The AICPA issues audit guides. When a conflict occurs, FASB rules.


International Accounting Standards Committee (IASC)
The International Accounting Standards Committee (IASC) was formed in 1973 to encourage international cooperation in developing consistent worldwide accounting principles. In 2001, the IASC was succeeded by the International Accounting Standards Board (IASB), an independent private sector body that is structured similar to FASB.

Governmental Accounting Standards Board (GASB)
The financial reports of state and local goverment entities are not directly comparable to those of businesses. In 1984, the Governmental Accounting Standards Board (GASB) was formed to set standards for the financial reports of state and local government. GASB was modeled after FASB.

How A Mutual Fund Works

A fund sponsor - generally a financial intermediary like Fidelity Investments or Vanguard - organizes a mutual fund as a corporation; however, it is not an operating company with employees and a physical place of business in the traditional sense. A fund is a "virtual" company, which is typically externally managed. It relies on third parties or service providers, either fund sponsor affiliates or independent contractors, to manage the fund's portfolio and carry out other operational and administrative activities. 

Figure 1, below, has been sourced from the Investment Company Institute's (ICI) 2005 ICI Fact Book to illustrate the organizational structure of a mutual fund. 

The fund sponsor raises money from the investing public, who become fund shareholders. It then invests the proceeds in securities (stocks, bonds and money market instruments) related to the fund's investment objective. The fund provides shareholders with professional investment management, diversification, liquidity and investing convenience. For these services, the fund sponsor charges fees and incurs expenses for operating the fund, all of which are charged proportionately against a shareholder's assets in the fund. 

The most prevalent and well-known type of mutual fund operates on an open-ended basis. This means that it continually issues (sells) shares on demand to new investors and existing shareholders who are buying. It redeems (buys back) shares from shareholders who are selling. 

Mutual fund shares are bought and sold on the basis of a fund's net asset value (NAV). Unlike a stock price, which changes constantly according to the forces of supply and demand, NAV is determined by the daily closing value of the underlying securities in a fund's portfolio (total net assets) on a per share basis. (For more insight, read What is a mutual fund's NAV?)

Government concessions to debt funds a partial relief: Mutual Fund industry 

Mutual Fund industry today termed as 'partial relief' the government's decision to exempt debt mutual funds sold between April 1 and July 10 this year from an increased tax rate. 

Earlier this month, the Union budget had proposed doubling of the long-term capital gain tax on debt-oriented mutual fund to 20 per cent with effect April 1, 2014. 

Following representations from market participants, Sebi, AMFI and member of Parliaments, Finance Minister Arun Jaitley in Lok Sabha .. 

Indian Institute of Banking and Finance

                                                     Indian Institute of Banking and Finance


 The Indian Institute of Banking and Finance (IIBF) is India’s premier institute in banking and finance education, aiming for professional excellence.^[1] Indian Institute of Banking & Finance is a professional body of banks, financial institutions and their employees in India. With its membership of over 700 banks and financial institutions as institutional members and about 300000 of their employees as individual members, IIBF is the largest Institute of its kind in the world.

A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses.

Due to their importance in the financial system and influence on nationaleconomies, banks are highly regulated in most countries. Most nations have institutionalised a system known as fractional reserve banking, under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Banking in its modern sense evolved in the 14th century in the rich cities ofRenaissance Italy but in many ways was a continuation of ideas and concepts ofcredit and lending that had its roots in the ancient world. In the history of banking, a number of banking dynasties—notably the Medicis, the Fuggers, the Welsers, theBerenbergs, and the Rothschilds—have played a central role over many centuries. The oldest existing retail bank is Monte dei Paschi di Siena, while the oldest existingmerchant bank is Berenberg Bank.

History :

The Institute was originally established in the year of 1928 as a Company under Section 25 of the Indian Companies Act, 1913, and named as The Indian Institute of Bankers (IIB). Afterwards in the year of 2008, it was renamed as Indian Institute of Banking & Finance. The Original Office was located at Nariman Point of Mumbai. In 2011, it was shifted to current address of Kurla ( West ) of Mumbai.

                                      Stock exchange

A stock exchange is a form of exchange which provides services forstock brokers and traders to buy or sell stocks, bonds, and othersecurities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products andbonds. Stock exchanges often function as "continuous auction" markets, with buyers and sellers consummating transactions at a central location, such as the floor of the exchange.^[2]

To be able to trade a security on a certain stock exchange, it must belisted there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only.

The initial public offering of stocks and bonds to investors is by definition done in theprimary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors that, as in all free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange orover-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

In recent years, various other trading venues, such as electronic communications networks, alternative trading systems and "dark pools" have taken much of the trading activity away from traditional stock exchanges.^[3]

                                Major stock exchanges

Rank	Exchange	Economy	Head­quarters	Market cap (USD bn)	Trade volume (USD bn)	Time zone	Δ	DST	Open (local)	Close (local)	Lunch (local)	Open (UTC)	Close (UTC)
1	New York Stock Exchange	United States	New York	19,179	12,693	EST/EDT	−5	Mar–Nov	09:30	16:00	No	14:30	21:00
2	NASDAQ	United States	New York	6,671	8,914	EST/EDT	−5	Mar–Nov	09:30	16:00	No	14:30	21:00
3	Japan Exchange Group	Japan	Tokyo	4,624	2,866	JST	+9		09:00	15:00	11:30–12:30	00:00	06:00
4	Euronext	France  Netherlands  Belgium  Portugal	Amsterdam	3,818	1,900	CET/CEST	+1	Mar–Oct	09:00	17:30	No	08:00	16:30
5	London Stock Exchange Group	United Kingdom  Italy	London	3,396	1,890	GMT/BST	+0	Mar–Oct	08:00	16:30	No	08:00	16:30
6	Hong Kong Stock Exchange	Hong Kong	Hong Kong	3,089	913	HKT	+8		09:15	16:00	12:00–13:00	01:15	08:00
7	Shanghai Stock Exchange	China	Shanghai	2,408	2,176	CST	+8		09:30	15:00	11:30–13:00	01:30	07:00
8	Toronto Stock Exchange	Canada	Toronto	2,333	1,121	EST/EDT	−5	Mar–Nov	09:30	16:00	No	14:30	21:00
9	Deutsche Bourse	Germany	Frankfurt	1,936	1,101	CET/CEST	+1	Mar–Oct	08:00 (Eurex) 8:00 (floor) 9:00 (Xetra)	22:00 (Eurex) 20:00 (floor) 17:30 (Xetra)	No	07:00	21:00
10	SIX Swiss Exchange	Switzerland	Zurich	1,606	502	CET/CEST	+1	Mar–Oct	09:00	17:30	No	08:00	16:30
11	Shenzhen Stock Exchange	China	Shenzhen	1,526	2,007	CST	+8		09:30	15:00	11:30–13:00	01:30	07:00
12	National Stock Exchange of India	India	Mumbai	1,472	442	IST	+5.5		09:15	15:30	No	03:45	10:00
13	Bombay Stock Exchange	India	Mumbai	1,499	93	IST	+5.5		09:15	15:30	No	03:45	10:00
14	Australian Securities Exchange	Australia	Sydney	1,464	800	AEST/AEDT	+10	Oct–Apr	09:50	16:12	No	23:50	06:12
15	Korea Exchange	South Korea	Seoul	1,309	1,297	KST	+9		09:00	15:00	No	00:00	06:00
16	BME Spanish Exchanges	Spain	Madrid	1,224	731	CET/CEST	+1	Mar–Oct	09:00	17:30	No	08:00	16:30
17	BM&F Bovespa	Brazil	São Paulo	1,100	751	BRT/BRST	−3	Oct–Feb	10:00	17:30	No	13:00	20:00
18	JSE Limited	South Africa	Johannesburg	1,028	287	CAT	+2		09:00	17:00	No	07:00	15:00
19	Taiwan Stock Exchange	Taiwan	Taipei	899	572	CST	+8		09:00	13:30	No	01:00	05:30
20	Singapore Exchange	Singapore	Singapore	811	215	SST	+8		09:00	17:00	No	01:00	09:00
21	Moscow Exchange	Russia	Moscow	735	300	MSK	+4		10:00	18:45	No	06:00	14:45

WHY INVEST IN THE NORTH EASTERN                             PART OF INDIA

The North Eastern Region of India lags in development far behind the national average. The availability of basic minimum services is very poor. The continuing gaps in infrastructural sectors have resulted in industrial backwardness of the Region. Recognising this, position, the Prime Minister announced on 27 October, 1996 "New initiatives for the North Eastern Region" along with a Rs. 6100 crores special economic package including Rs. 703 crores for Manipur.

Pursuant to the "New Initiatives", the Central Government appointed a High Level Commission to critically examine the backlog in respect of the basic minimum services and the gaps in important sectors of infrastructure development in the region and suggest policies, programme and the requirement of funds to bridge such gaps and backlogs. The Commission has in its report entitled "Transforming the Northeast" (March, 1997), made an exhaustive 173 recommendations touching upon 27 areas for development. These, among others, include power, roads, civil aviation, railways, waterways, telecommunications, banking and financing, trade and transit, industry, etc. The report recommends a total of about Rs. 9,396 crores for the whole region's requirement in respect of basic minimum services, of which Rs, 1,423 crores is for Manipur. It also makes room for an indicative requirement of Rs. 93,619 crores as total estimated investments in infrastructural sectors for the region as a whole, of which Manipur's share is Rs. 5,815 crores.

The following sector wise allocations are included in the report in respect of Manipur:
(1) Irrigation Sector - Rs. 566 crores
(2) Flood Control - Rs. 45 crores
(3) Railways - Rs. 935 crores
(4) Power Sector - Rs.3,740 crores
(5) Transmission Sector - Rs. 84 crores
(6) Others - Rs. 445 crores

Further, the High Level Commission has advocated to improve the NH-39, the Imphal-Moreh sector in particular, to serve both as a commercial highway and as line of communication for construction of the Rs. 92 crores Tamu-Kalewa Highway sanctioned by Border Road Development Board, as Moreh could become a major nodal point for trade with the South East Asia along the proposed Trans-Asian Highway. In the banking and finance sector, the Commission has, inter alia, spelt out the need to consider industrial finance as part of priority sector lending. The recommendation on the industry sector recognises the need to establish export processing or special economic zones in the region to attract export oriented industries. The Govt. of Manipur is also vigorously pursuing to set up such an Export Processing Zone at Moreh.

Manipur, though located in a far flung north-eastern corner of the country and largely hilly terrain in its landscape, it has got many areas of strength and opportunities that justifies investment in the State. The existing Indo-Myanmar Border Trade currently underway in the border towns of Moreh & Tamu has already paved the way for a full scale trade between India and Myanmar which would further extend to other adjacent countries, like Thailand, Laos, South West China along the old Burma road and the proposed Trans-Asia Highway and railway. In this context, Manipur is the gate way to the International trade route connecting between Indian sub-continent including Nepal, Bhutan and Bangladesh. Resultantly, not only the production and trading units can flourish taking advantage of the expanding international trade but there is also good scope for investment in creating infrastructure facilities in the areas of road construction, power generation, developed industrial areas, water facilities, IT services, etc.

Another important competitive advantage thereby increasing the strength and opportunities of the state is the suitable agro-climatic condition prevailing in the state. The climatic condition of the state is very much suitable for growing almost all kinds of agricultural and horticultural crops and taking up afforestation activities and as such, there is great potential and prospects for large scale plantation of fruits and vegetables and setting up agro-horti based industries particularly food processing industries. For instance, the agro-climatic condition is so suitable that potato can be harvested two times in a year.

There are more than four lakhs unemployed youths in the live register of the Employment Exchange. Of these, more than 2.5 lakhs are educated youths who are matriculates and above. There is therefore, adequate educated manpower for absorption to any economic/business venture in the State.

Manipur is unique in its craftsmanship. The artisans are adorned with innate qualities of craftsmanship. There are more than 1.5 lakh artisans in the trade of cane and bamboo.

In addition to the above mentioned strengths and opportunities, the State Govt. has fully taken note of the Central Govt.'s new economic policy initiatives in the post-1991 era to:

• Create a liberal investment environment for economic activity especially industrial activity.
• Minimise Govt. regulation and control.
• Move towards a supportive role, i.e. facilitation.
• Create internationally competitive basic infrastructure facilities.
• Extend preferential treatment to priority sectors of industrial activity through an incentive mechanism.
• Provide full freedom of industrial and commercial activity within clearly established and transparent parameter.

Keeping in view these new policy initiatives of the Govt. of India, the State Government has adopted the "Industrial Policy of Manipur, 1996". This policy among others seek to:

• create an integrated investor-friendly environment;
• bring about industry and trade supportive infrastructural establishments and other facility centres;
• maximise utilisation of various resources including raw materials and skills in the manufacturing sectors and accord priority to industrial investment;
• modernise technology and upgrade skill of the manufacturing units to improve the quality and thus competitiveness of the products;
• revive the sick industrial units;
• take positive steps to optimise the advantages offered by the recently opened Indo-Myanmar border trade through Moreh in Manipur; and,
• provide a comprehensive and attractive package of incentives to the industries.

The package of incentives offered by the State Government over and above those provided by the Government of India are as follows:-

1. Preferential allotment of land and subsidy on cost of land development.
2. Provision for allotment of sheds to SSI Units and subsidise the monthly rent.
3. Subsidies on Manpower Development.
4. State Capital Investment Subsidy.
5. State Transport Subsidy upto Siliguri and upto Patna on case to case basis by surface route.
6. Interest Subsidy upto 7% on working capital & term loan taken from banks/financial institutions.
7. Power subsidy on the tariff, drawal of power lines and purchase of diesel generating set.
8. Subsidy for feasibility study and project report preparation.
9. Subsidy for the cost of technical know-how obtained by SSI units.
10. Price preference of 20% in favour of SSI units.
11. Reimbursement of Stamp duty and Registration fee for securing loans and other incentives from financial institutions.
12. For purchase of testing equipment upto 25-30% of cost for improvement of the quality.
13. State capital investments Subsidy for modernisation/ expansion/ diversification through purchase of plant and machinery

With this brief commentary on some aspects of the State developmental endeavours which underlines the strong commitment of the Government for promoting industries. Manipur is well set to welcome investors as a major player in industrial development. The Government of Manipur is prepared to update the existing Industrial Policy to meet the requirements of private investors in the State.