After much research on the developing economy and capital markets of the country of Otunia, your firm, GAC, has decided to include an investment in the Otunia stock market in its Emerging Markets Commingled Fund. However, GAC has not yet decided whether to invest actively or by indexing. Your opinion on the active versus indexing decision has been solicited. The following is a summary of the research findings:
Otunia’s economy is fairly well diversified across agricultural and natural resources, manufacturing (both consumer and durable goods), and a growing finance sector. Transaction costs in securities markets are relatively large in Otunia because of high commissions and government “stamp taxes” on securities trades. Accounting standards and disclosure regulations are quite detailed, resulting in wide public availability of reliable information about companies’ financial performance.
Capital flows into and out of Otunia, and foreign ownership of Otunia securities is strictly regulated by an agency of the national government. The settlement procedures under these ownership rules often cause long delays in settling trades made by nonresidents. Senior finance officials in the government are working to deregulate capital flows and foreign ownership, but GAC’s political consultant believes that isolationist sentiment may prevent much real progress in the short run.
a. Briefly discuss aspects of the Otunia environment that favor investing actively, and aspects that favor indexing.
b. Recommend whether GAC should invest in Otunia actively or by indexing. Justify your recommendation based on the factors identified in part (a).
Management By Objectives (MBO) is a system for achieving organizational objectives, enhancement of employee commitment and participation. Which of the following is not an...Apr 04 2018
Select a familiar company or analyze the approach your college uses to pay teaching assistants or faculty. Infer its compensation strategy using the five dimensions (obje...May 04 2020
If you were to be engaged as a consultant to advise an organization dealing in the production and marketing of durable goods, what steps would you adopt to prepare a trai...May 12 2020
What are the Miller indices of the slip planes in FCC unit cells that include the  slip direction?Apr 21 2020
36 items are randomly selected from a population of 300. The sample mean is 35 and the population standard deviation is 5. The distribution is normal. Using the 98% degre...Apr 17 2020
How can we explain how a companies revenue can be related to the general state of the economy with economic indicators such as Retail Index, Consumer Price Index and Pers...Feb 06 2020
You have been called in as a consultant to a medium – sized toy manufacturer whose range of construction toys (building bricks, etc.) has been losing market share to othe...May 21 2018
Filer Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. The company also has two bond ...Aug 29 2020
What is covered interest parity? You observe the following current rates: Spot exchange rate: $0.01/yen. Annual interest rate on 90-day U.S. dollar–denominated bonds: 4%....Apr 04 2020
Which of the following is true? a) for choosing the profit-maximizing quantity, the short-run decision-making process of a firm in perfect competition is the same as that...Jun 02 2020