The stock exchange is a highly organised market where securities are bought and sold. Blue chips are the shares of the best-performing companies regarded as safe investments. Bonds represent a loan for a fixed period with a fixed interest rate.
The stock exchange is a highly organised market where securities are bought and sold. Blue chips are the shares of the best-performing companies regarded as safe investments. Bonds represent a loan for a fixed period with a fixed interest rate.
The stock exchange is a highly organised market where securities are bought and sold. Blue chips are the shares of the best-performing companies regarded as safe investments. Bonds represent a loan for a fixed period with a fixed interest rate.
Financial markets (the stock exchange, investment)
I. Introduction to the topic
The way the stock exchanges operate The stock exchange is a highly organised market where securities are bought and sold. The issuer offers the security for sale on the primary market. The investor can sell the security any time on the secondary market. The over-the-counter (OTC) market has been created for unlisted securities which are not traded on an organised exchange. The fall and rise of prices respond to changes in supply and demand. Blue chips are the shares of the best-performing companies regarded as safe investments. The Hungarian index, the BUX contains the liquid shares of companies with the biggest capital value. Fluctuations in the volume and the price of securities traded on the stock exchange are important indicators of the state of the economy.
Securities A company can issue shares to institutional investors or the general public. Buying a share through a specialist company or a broker gives its holder a stake in the company. Shares generally entitle their owners to vote at the companys Annual General Meeting and to receive a dividend in proportion to their investment. Ordinary shareholders with equities only get a dividend if there is enough profit. Preference shareholders are entitled to get their fixed dividends before ordinary shareholders. Bonds represent a loan for a fixed period with a fixed interest rate. They can be either held till maturity or sold before maturity. Treasury bills are issued by the state and represent a safe investment with a state guarantee. If a company wants to raise money, it issues corporate bonds.
Portfolio This is a set of investments made by an investor. A portfolio consisting mainly of bonds is regarded as a low risk-level investment. The addition of shares to a portfolio of government and corporate bonds increases the risk-level of the investment, but at the same time returns can be higher.
Bulls and bears Bulls are speculators who anticipating a price rise (on a bullish market) buy shares in large quantities in order to sell them at a higher price later. Speculators who sell their securities in the belief that prices are about to fall (on a bearish market) are called bears.
Vocabulary exercises based on the introductory text
A. Match each item in the left-hand column with one similar in meaning from the list opposite 1. operate a. purchases made in order to gain profit 2. securities b. upward movement 3. fall c. financial investments, such as shares 4. rise d. give the right to (sy) 5. fluctuations e. relating to a company 6. stake f. part of the ownership of a company 7. entitle (sy) g. function 8. dividend h. wave-like motions, rising and falling 9. investment i. part of the profit of the company 10. corporate j. downward movement
B. For each item listed below, find in the text a word or phrase given in bold that is similar in meaning
1. react 2. worth 3. agent who acts as a middleman, buying and selling securities on behalf of others . 4. corresponding to (three words) 5. amount paid for the use of borrowed money 6. time when a financial investment is due for payment 7. get, acquire 8. profits yielded 9. expecting 10. amounts
II. Hungarian text Exercise 1 Cover the English words and expressions given on the right and try to guess the English equivalents of the underlined parts of the Hungarian text..
Exercise 2
After checking your guesses against the list of equivalents on the right, give an oral summary of the text in English.
DANUBIUS trtkelik i ? Vilggazdasg 2007. prilis
Hossz vek ta visszatr tma ii a magyar rszvnypiacon iii a Danubius Hotels, s az rfolyamban nem tkrzd iv rtkes ingatlanllomny v . A brkercgek vi korbbi elemzsei vii nem grtek viii nagyobb emelkedsi potencilt, ugyanakkor az j informcik azt vetthetik elre ix , hogy a fellvizsglt x modellekben mr nagyobb slyt kap xi majd az eszkzalap rtkels xii . Mindez jelentsebb xiii , akr 30 szzalkos rfolyam-emelkedssel kecsegtet xiv . Az trtkeldst elsdlegesen xv a lengyel szektortrs xvi , az Orbis szrnyalsa xvii vetti elre. A vezet xviii lengyel szllodatrsasg rszvnyeinek flelmetes emelkedst xix
(janur eleje ta 50 szzalkos ugrs) az indtotta el xx , hogy rtkestettk az egyik nem megfelel kihasznltsg xxi szllodt, amely a knyv szerinti ingatlan rtknek xxii kzel hromszorosn kelt el. A Danubius - az Orbishoz hasonlan xxiii , eltren xxiv viszont a nyugat-eurpai szektortrsaktl- nem csupn szlloda-zemeltet xxv , de egysgeinek tbb mint 90 szzalka sajt tulajdon ingatlanban mkdik. Az ingatlanok piaci rtke xxvi a nemrgiben napvilgot ltott xxvii , hangslyozottan konzervatv becsls xxviii szerint rszvnyenknt xxix tbb mint 12 ezer forint lehet, ahhoz azonban, hogy e piaci rtk rvnyesljn xxx , nhny tnyleges s sikeres xxxi rtkestsre lenne szksg. Az j informcit egy stratgiai dnts xxxii adja, amely szerint a Danubius - konkrt hatrid xxxiii n1kl- rtkesti ngy alacsonyabb kategrij xxxiv szllodjt. Ezek becslt rtke elrheti xxxv a msfl millird forintot xxxvi . A lengyel pldbl kiin- dulva xxxvii pedig egy ilyen tranzakci elegend lehet arra, hogy a befektetk xxxviii
figyelmt az eddig rejtve marad xxxix ingatlanrtk fel terelje, s meginduljon egy rszleges berazdsi folyamat xl . A hatalmas ingatlanvagyon berazdsa ellen hat xli , hogy a trsasg ftulajdonosa s menedzsmentje nem igazn elktelezett xlii a pro- fesszionlis ingatlanhasznosts mellett. Ettl fggetlenl xliii a befektetknek rdemes xliv
a kzeljvben fokozott figyelemmel xlv kvetnik a Danubius-rszvnyekre vonatkoz elemzi kommentrokat xlvi . 1752 n
III. English text
A looming challenge for the fund-management industry
The Economist print edition, Jan. 3 rd , 2008
1. A lot of people would like to earn hedge-fund returns. But they are nervous about paying the fees that hedge-fund managers like to charge, and about the risks those managers take. 2. That creates a great opportunity for those fund managers who can bridge the gap by creating vehicles that might be described as hedge funds lite. Doing so has raised a host of interesting issues, among them how to measure the skill, or alpha, of fund managers, and what an index is really for. 3. The lite version of the hedge-fund industry includes products known as 130-30 funds, which allow managers the limited use of hedge-fund techniques, such as going short (betting on falling prices) and leverage (using borrowed money to enhance returns). The name stems from the structure of the product; if the fund has $100m of assets, it will buy $130m of shares, funding the difference by selling $30m of short positions. 4. Provided the manager has the ability to choose the right stocks to buy and sell, the product should yield superior risk-adjusted returns. And theory suggests that giving the manager the chance to short stocks allows him greater scope to put his skills into effect. 5. In a recent paper by Andrew Lo of MIT, he constructs a 130-30 index. Such a benchmark would allow investors not only to see whether the 130-30 manager they hired is performing well, but also to create low-cost, quasi-hedge funds of their own. 6. Mr Lo uses many factors to assess stocks, ranging from those based on valuation (the ratio of the share price to sales) to business prospects (rising profits) and price patterns such as momentum (shares that have performed well over the previous six months tend to keep doing well). The index consists of long positions in the stocks with the best scores and short positions in the stocks with the worst. 7. Nevertheless, investors have no guarantee that traditional fund managers (who also use past performance as a sales tool) will perform as well in the future. 8. Skill, or alpha, is fast becoming a residual: the explanation that remains when all other factors have been discounted. Its still so hard for clients to distinguish skill from luck. But for any thoughtful fund-management executive, it ought to be a long-term worry.
Important terms
hedge fund - an aggressively managed portfolio of investments with the goal of generating high returns (via leverage, long, short and derivative positions)
index - a statistical benchmark that measures market performance. In the case of financial markets, an index is an imaginary portfolio of securities representing a particular market or a portion of it.
short position - selling a borrowed security, commodity or currency with the expectation that the asset will fall in value (opposite of long position)
long position - buying a security such as a stock, commodity or currency, with the expectation that the asset will rise in value.
leverage using borrowed money to buy an investment in the hope of getting better returns
risk-adjusted returns - measure of how much an investment returned in relation to the amount of risk it took on
assessing stocks - the process of determining the current worth of stock on the basis of various factors (valuation, rising profits, price patterns)
Extended vocabulary
looming: threatening bridge the gap: overcome fears of investors concerning fund managers a host: a large number alpha: skill, cleverness enhance: improve stems from: originates from benchmark: standard against which the performance of a security, mutual fund or investment manager can be measured residual: (here) the explanation that is left after all others have been ruled out; residual assets are what is left of an estate after all debts, charges, etc. have been paid
Comprehension questions
1. What makes most people nervous about investing in hedge funds?
2. What is one of the vehicles or products hedge funds use and how does it work?
3. What does it mean to go short?
4. Whether or not the product yields good returns depends on what?
5. In what way does the 130-30 index serve as a benchmark for investors?
6. What are some of the factors used to assess what are the right stocks to buy and sell?
7. What is one way in which fund managers try to sell themselves to investors?
8. What conclusion does the article come to regarding the skill factor in relation to the performance of a fund manager?
IV. Discussion questions
A. Discussion questions related to the text
1. What are some of the advantages and disadvantages of investing in hedge funds?
2. To what degree does a funds strong performance depend on alpha, that is, the skill of the fund manager, or on just plain good luck?
3. Do you think that hedge funds are only designed to make very rich people even richer, or are they also beneficial to society?
B. Additional discussion questions
1. What role does the stock exchange play in the economy? In what way is it important?
2. How would you compare the merits of bonds and shares for investing in?
3. Apart from securities, what forms of investment do you think would give reasonable returns?
V. Role-playing exercises
17. Homeworking
Student: You are the HR manager in a company that is planning to introduce homeworking. You have been asked by a senior manager to outline the potential advantages and disadvantages of homeworking for both the firm and its employees.
Examiner: You are a senior manager in a company that would like to introduce homeworking. You meet with the HR manager to discuss the advantages and disadvantages for both the firm and its employees.
18. Offer of early retirement
Student: You are a financial advisor. An employee has been offered a job-buyout package (early retirement) by his/her employer, but is undecided whether to accept the offer, and if he/she does, whether to accept regular payments or a lump sum. This employee comes to you for advice.
Examiner: You are an employee that has been offered an early retirement severance package from your employer, but youre undecided if you should accept this offer, and if you do, should you accept regular payments or a lump sum. You ask your financial advisor for some insight.
i revalue ii recurring topic iii stock market iv not reflected v valuable real estate portfolio vi brokerage firms vii earlier analyses viii promised ix anticipate x revised xi is attributed greater importance xii asset-based valuation xiii significant xiv holds out hopes of xv primarily xvi peer in the sector xvii soaring xviii leading xix dramatic rise xx triggered xxi under-utilised xxii book value of property xxiii similarly xxiv differently from xxv hotel operator xxvi market value xxvii recently published xxviii estimate xxix per share xxx prove effectual xxxi actual and successful xxxii strategic decision xxxiii deadline xxxiv lower-category xxxv amount to xxxvi one-and-a-half million forints xxxvii on the basis of xxxviii investors xxxix so far hidden xl partial pricing process xli works against xlii committed to xliii apart from this xliv worth xlv with increased attention xlvi commentaries on