The Hours Film Review Essays

The Hours Film Review Essays The Hours Film Review Essay The Hours Film Review Essay Article Topic: Eva Luna Mrs Dalloway Wherever we go, we continually get ourselves angry and disappointed with film adjustments that never appear to serve us equity The book is simply sooooooo much better!. Yet, is it truly reasonable for engrave this impact on all film adjustments of much-adored books? The appropriate response is NO. From the executive of Billy Elliot, Stephen Daldry and his capable group on-and-off camera will demonstrate you wrong.It is madly hard for the vast majority of us, to try and start to envision the horrendous agony got from the individuals who bear tremendous melancholy or the individuals who experience the ill effects of some type of dysfunctional behavior. They are secured up a prison that looks like their psyche and can't break free. The Hours embodies this passionate pressure suffered by ladies across various periods to absolute perfection.Based on the Pulitzer Prize-winning novel composed by Michael Cunningham, The Hours delineates the lives of three ladies in three ages alongside the c urved battles they experience detained in their miserable spirits. Australian entertainer Nicole Kidman (Moulin Rouge, Rabbit Hole), catches the job of Virginia Woolf in 1925, dealing with Mrs. Dalloway (a continuous flow novel) about the lady of society, whose fake nature of flawlessness veils her inward disturbance. Julianne Moore (The End of An Affair) depicts cliché American housewife, Laura Brown living in 1951 American the suburbs a lady who feels constrained to keep up her dedication towards her child and spouse (John C. Reilly). What may appear as though a contentful heart and lively face may potentially be something different underneath the surface. Widely praised entertainer, Meryl Streep (Adaptation, Sophies Choice) as Clarissa Vaughan in 2001, dismisses her accomplice for the part in her life that she is hesitant to close, whom is imparted to AIDS victim, Richard Brown played by Ed Harris.Kidman stands taller than the rest, conveying an unprecedented Oscar-commendable e xecution of astounding mental fortitude, uncovering the damaging war between her scholarly brain and the disorder spinning around her own reality. Each motion and each outward appearance persuades the crowd that this character was customized particularly for her. Streep mirrors this degree of execution and as usual, handles her job cautiously delivering a convincing exhibition accordingly. Her switch between supreme lunacy to a merry lady is estimated flawlessly. In any case, there is consistently one that allows the group to team. Moores way to deal with the mind boggling character of Laura Brown shows that she is simply one more beautiful woman in an entirely dress. The repetitive void face is a nap fest that obstructs the crowd from entering her perspective. Last however surely not least, it's anything but an unexpected that the most youthful individual from the cast, youthful and charming Ritchie Brown played by Jack Rovello, radiantly illuminates the screen, making us aww over and over, while taking our powerless hearts with his honestly legit words, and honest gaze. Cuuute.Perhaps one of the most important scenes from the film is the initial grouping, which quickly causes to notice Virginia Woolfs irreversible choice, interweaved with a perfectly composed voiceover of a note dedicated her significant other that practices our psyches in anticipation of the approaching influx of feelings. The three distressed ladies and their lives are painstakingly woven together into a liquid bit of aesthetic understanding. However, at long last every life must proceed, regardless of how dull it might be. Strains crescendo. Fears emerge. The once-grave disposition is at long last elevated and lit up when a progression of crisp, sprouting blossoms are shot to finish the succession with an astounding finish.The genuinely determined intensity of the subjects included in The Hours consequently select the focused on age gathering to develop crowds, as the multi-layered plot i s potentially too thick to even think about digesting for more youthful crowds. A specific interest with mortality is investigated by the female trio, who are expressly delicate, having an away from of the rotating scene. Consistent assessments are made by every one of the primary characters, scrutinizing their monotonic ways of life. The basic through-line can be recognized between the victims.David Hares breathtakingly built screenplay for the film remains dedicated to Cunninghams tale and the gave fans that are joined to his work. Rabbit faced sure challenges, to move toward his obligation with development. The content created isn't hesitant to regard its crowd as though they were learned masters. The screenplay effectively imparts the lesson of the story, that there is an endless variety of encounters over the span of ones life, where no two days are actually same.The faultless costuming, cinematographic and melodic parts of The Hours conceal the baffling gaps in the movies plot . Outfit architect Ann Roth, made a striking showing in deciphering the characters of the characters through design [which is fundamental in numerous ways], just as painting of periods in which every scene is set in. Kidman sports a straightforward yet successful prosthetic nose, which permits the crowd to see an unrecognizable entertainer, making her job substantially more reasonable. Seamus McGarveys masterfully lovely cinematography, comprising of waiting shots on the profoundly, beset appearances of the three driving ladies, is most likely perceived as the movies noticeable instrument.An perfect film is introduced because of his dexterous work. Philip Glass wonderfully made score is one mystery and ground-breaking weapon, which effectively goes with the story, setting a scope of mind-sets and communicating environments such that exchange is infrequently incapable to do as such. The melodic harmonies delivered by a captivating blend of piano and strings are an imperative part of the film, building up and building up the characters by spilling their feelings out. This is to some degree uncommon in a common Hollywood film. It is really the immaculately adjusted completing touch to the brilliant creation.Every single inch of detail and part of the film from the heart-wrenchingly persuading acting performed by most of the cast, to the astonishing screenplay and the eerie score is assaulted with insight, earnestness and definitively exact estimates which at last delivered a unique and amazing perfect work of art that is The Hours. It abandons any uncertainty whatsoever, that the film completely merits its showering recognition and grants. The Hours is an unmistakable must-see film of the year.

Kiki Smiths Biography and Works

Kiki Smith was destined to Tony Smith an American Sculptor in 1954 in Nuremberg, Germany. She is an American conceived in Germany. Quite a bit of her youth years, Kiki spend helping her dad in his work. She got formal instruction. She didn't adore workmanship at her young age since all her youth was spent working for her father.Advertising We will compose a custom research paper test on Kiki Smith’s Biography and Works explicitly for you for just $16.05 $11/page Learn More She didn't make the most of her adolescence as other youngsters did. At the point when other youngsters went for no particular reason exercises like outdoors they never had the chance, their work was isolating twigs for her dad and helping him in his work. She didn't care for what he father did and his appearance as a result of how youngsters ridiculed his facial hair and possessing a yards until having a whiskers got in vogue. Her work includes utilizing stone carvers, compositions and drawings in narrating . The majority of her work of art particularly in her initial a very long time in her vocation spun around the subject of death. Until having a facial hair got trendy. Kiki was destined to a catholic family. She accepts that her childhood assisted with molding her future vocation as a craftsman. She contrasts Catholics and workmanship, in that, the Catholic confidence makes an association between the profound world and the physical world that resembles craftsmanship, the Catholic confidence brings out what inside is. She likewise draws out the association among craftsmanship and the catholic that both are types of narrating. Kiki’s work of art utilizes the utilization of artists, artworks and drawings to pass out her message. She utilizes the iconography of fantasies and story in her work, she acquires from the western iconography as of now replenish nor laden with significance. The visual imagery of minimal Red Riding Hood, the Evil Witch, the shouting banshee, trigger a whi rlwind of affiliations. Smith breaks this exchange, notwithstanding, by adding unforeseen storylines into the customary stories (Close 170). She has an energy for works of art and figures she clarifies this is so in light of the fact that with artistic creations and models, you can overhaul them until you bring out what you need. To her, this is an enthusiasm and she gives the best (Richard 251). Kiki Smith is progressively inspired by her own reality. Her work includes a greater amount of mentioning objective facts then in gratefulness she gives a story. It is a greater amount of perception than individual connection. It is about her own reality and how it identifies with others. Kiki says, â€Å"The most significant thing for me is taking a gander at objects† (Richard 251). She gets motivation by watching things. She affirms that to her, it is difficult to peruse that she utilizes perception; even in her school days, she thought that it was hard to peruse so what she realiz es best is focusing on things or in her words, â€Å"I tune in to things, or I tune in to what individuals say† (Seaman 718).Advertising Looking for examine paper on workmanship? We should check whether we can support you! Get your first paper with 15% OFF Learn More Her works in the start of her vocation for the most part were identified with death. She would ask why individuals kick the bucket and on the off chance that it was fit for men to bite the dust. This emerged after her father’s demise. Her work depended on how she could endure and shield herself from death. She ponders one attempting to secure him/herself. In her room, she had a skull and had an image of Charlie Manson. She would address the skull and state that Charlie will never get her. This is the amount she dreaded demise. She was consistently terrified of death and continued reasoning that somebody would bite the dust in their structure. She affirms that something abnormal used to occur in that buildi ng and the second she entered, nobody passed on yet they could get admonitions from the local group of fire-fighters and that they expected to clean the house or, in all likelihood an awful thing would occur there (Yablonsky 134). When she had the telephone ring, dread would envelop her and she dislike returning home since she thought somebody had passed on. In her adolescence, she generally figured demise would strike constantly. This impacts the beginning of her vocation in fine art where, as indicated by her, fine art at first centered around death. Never did she comprehend why individuals passed on until she at long last acknowledged that it was alright for individuals to bite the dust. She saw demise as peculiar as a kid. She scarcely has confidence in things she has not seen in light of the fact that her inspiration is in observing and very little in hearing. She accepts that it is a great idea to be attentive for you to become more acquainted with a ton. To her, when you see something, you can decipher it in different structures (Drake 287). She is a major aficionado of Virgin Mary. This is on the grounds that she was raised as a catholic. She has made numerous fine arts as to the virgin. Her dad used to advise her that â€Å"it was Irish catholic to be morbid† (Drake 287). The vast majority of Kiki’s work acquires from Julia Kristeva particularly her convictions of the â€Å"abject† and â€Å"horror† in her stories about AIDS. The two specialists are women's activists and have an incredible enthusiasm for sexual issues and ladies portrayal. Crafted by the two specialists in their fine art makes the image of woman's rights that is ladylike feelings and brain research. Works Cited Close, Chuck. Kiki Smith. Time 167.19 (2006): 170. Print.Advertising We will compose a custom research paper test on Kiki Smith’s Biography and Works explicitly for you for just $16.05 $11/page Learn More Drake, Cathryn. Kiki Smith. Artforum u niversal 44.4(2005): 287. Print. Richard, Frances. Kiki Smith. Artforum global 48.9(2010): 251. Print. Sailor, Donna. Kiki Smith. The Booklist 95.8 (1998): 718. Print. Yablonsky, Linda. Kiki Smith. Artforum worldwide 44.1(2005): 134. Print. This exploration paper on Kiki Smith’s Biography and Works was composed and put together by client Gunnar Q. to help you with your own examinations. You are allowed to utilize it for research and reference purposes so as to compose your own paper; be that as it may, you should refer to it as needs be. You can give your paper here.

Bill Cosby legal allegations and laws that apply to and affect this Term Paper

Bill Cosby legitimate charges and laws that apply to and influence this circumstance - Term Paper Example A few ladies have blamed Bill Cosby for explicitly ambushing them by utilization of medications. The rundown has developed to13 offended parties with the most recent being the two offended parties met in Philadelphia and People magazines. The ladies that have professed to be explicitly attacked by Cosby have become more than 20 in number. The privilege to protection holds that no individual should encounter not legitimate obstruction in his life. This privilege ensures one’s protection, correspondence, home, notoriety, and respect. The law, along these lines, ought to guarantee the insurance against such assaults or impedances. Bill Cosby has put forth attempts to see that his entitlement to security is ensured (Noorani 802). Bill Cosby has utilized his privilege of articulation to secure his protection in the instances of rape. He has utilized this option to respond to the accusers’ claims by demonstrating that they are liars. Bill Cosby’s act has meant to pick up and control the compassion of people in general and legal procedure. He has painted the informers as people who have concealed plans of stigmatizing him. This is by ruining his notoriety and respect that he has worked for long to pick up. His demonstration of doing this in the media is a method that he uses to intensify his voice (Scocca). Bill Cosby has likewise utilized his privilege of self-preservation to secure his protection in the rape allegation cases. For instance, his lawyers’ call for excusal of the slander cases documented by the three ladies is a demonstration of security insurance. The legal advisors contend the Cosby marking the ladies liars doesn't meet the slander edge. Bill’s proclamations were of self-protection, which is a benefit that ought to be given to all the denounced. In opposite, it is in Cosby’s rights to make self-protection expressions. As indicated by his attorneys, the slander guarantee on the demonstration of self-protection will be a lot of twofold gauges. Hobson’s Choice backings the privilege of openly denying the

Arbitrage Pricing Theory And Uk Stock Exchange Finance Essay - Free Essay Example

To estimate empirically the Arbitrage Pricing Theory (APT) model we focus our attention to the UKs stock exchange market. Our study employs monthly time series data spanning the period 2000:9 to 2010:9 (121 observations). The sample of our analysis is dictated solely by the demands of the coursework. The variables involved are: the closing share prices for 25 UK companies listed on the London Stock Exchange, the FTSE 100 stock index, the UK Libor as proxy for the short-run risk-free rate, the 20-year government bond yield as proxy for the long-run risk-free rate, the exchange rate series between the British Pound and the US Dollar and finally the Brent crude oil prices.  [1]  The abbreviated notation of the above variables is as follows: Sharei = Si with i= 1 to 25 FTSE 100 stock index = indext UK Libor= free_s_ratet 20-year government bond yield = free_l_ratet Exchange rate series = fxt Brent crude oil prices = brentt Given the availability of the Si series it is trivial to calculate the return series for each of the 25 selected shares (r_ Si) by taking the first logarithmic differences of the share prices (growth rate). To do so in E-views the relevant command is the one described below: For !i=1 to 25 series r_S!i = dlog(S!i) Next To constr uct the equally weighed portfolio return series (portfoliot) we merely estimate the average return of the 25 share returns for each time period of the sample. The commands applied are described as follows: series sum_stock_returns = r_S1+ r_S2+ r_S3+ r_s4+ r_S5+ r_S6+ r_S7+ r_S8+ r_S9+r_S10+r_S11 +r_S12+ r_S13+ r_S14+ r_S15+ r_S16+ r_S17+ r_S18+ r_S19+ r_S20+ r_S21+ r_s22+ r_S23+ r_S24+ r_S25 series portofolio = sum_stock_returns / 25 Figure 1 below presents the five main variables used in this study as well as the equally weighed portfolio return series constructed by the returns of the 25 involved shares. Figure 1. The variables of the study Figure 1. The variables of the study (continued) II. Empirical Results Question 1 i) The term spread is defined as the difference of the short-run and the long-run free interest rates. The relevant command is: series term_spread = free_l_rate free_s_rate, and the finally constructed series is illustrated in Figure 2. The mid-period of the sample (2003-2007) is characterized by healthy economic activity and therefore the term-spread decreased, while during the crisis (2008-2010) the short term rate is almost zero and as a result the term spread increased. Figure 2. The term-spread series ii) Figure 3 presents the percentage changes for the three basic factors of the model. The percentage change transformation for the term-spread series, the exchange rate series and the Brent oil prices is accomplished through the following three E-views commands: series g_term_spread = ( term_spread term_spread(-1) ) / term_spread(-1) series g_fx = ( fx fx(-1) ) / fx(-1) series g_brent = ( brent brent(-1) ) / brent(-1) Figure 3. Percentage changes for the th ree basic factors of the APT model In general, the three variables show similar characteristics with respect to their evolution through the observed sample period. In particular, the following distinctive characteristics are realized a) All the variables appear to fluctuate around a constant mean value, which in every case is approximately equal to zero, b) All the variables seem to have variance that remains fairly constant within the sample, but this is not the case for the exchange rate which becomes volatile after 2008, and the term-spread which has a very low volatility after 2009 (the short-term risk free rate is zero) c) All the variables receive extreme values approximately at the same period, which is located during the last quarter of 2008, d) Only the percentage change of the term-spread appears to present two additional extreme values one in the beginning of the sample and one just before the middle point of the sample. What can be inferred from the above is that all the variables show clearly a stationary behaviour. This stationarity can be verified by implementing relevant stationarity tests. By applying the Augmented Dickey Fuller test (ADF) we have realized that the three examined variables are undoubtedly stationary.  [2] iii) Figure 4 presents the portfolio excess returns over the short-run risk free proxy (exs_r_portofolio) along with a set of descriptive statistics.  [3]  The E-views command to construct the portfolio excess returns is presented beneath: series exs_r_portofolio = portofolio (free_s_rate/100) Figure 4. Portfolio excess returns and the associated descriptive statistics Similarly, figure 5 presents the market excess returns over the short-run risk free proxy (exs_r_index) along with a set of descriptive statistics (see footnote 3). The E-views command to construct initially the market returns and afterwards the market excess returns are presented below: series r_index = dlog(index) series exs_r_inde x = r_index (free_s_rate/100) Figure 5. Market excess returns and the associated descriptive statistics Before we comment on the distributional properties of these two variables, it is worth to mention that both variables appear to be stationary with constant mean and constant variance.  [4]  Again the applied ADF tests revealed that indeed both variables are clearly stationary.  [5]  What we know for the case of the symmetric distributions is that the mean and the median statistics are equal between them. Differences between these two measures occur with skewed distributions. In our case, the portfolio excess returns series appear to have almost identical values for the mean and the median statistics, that is -0.036483 and -0.036315 respectively, which is an indication for a symmetric behaviour. The maximum value is 0.14, the minimum value is -0.24 and finally the standard deviation receive the value of 0.057. Skewness measures the distributions asymmetry around t he mean. A symmetric distribution like the normal has skewness equal to 0, while positive skewness means that the distribution has a long right tail and negative skewness implies that the distribution has a long left tail. The value of -0.300 for the skewness implies that the distribution of the portfolio excess returns presents a slightly long left tail, which is a result of the negative returns during the crisis. Kurtosis measures the fatness of the distribution of the series. The kurtosis of the normal distribution is 3, while in cases where the kurtosis exceeds the said value, the distribution is leptokurtic relative to the normal; and if the kurtosis is less than 3, the distribution is platykurtic relative to the normal. The value of 4.67 for the Kurtosis implies that the distribution of the portfolio excess returns series is pretty leptokurtic. This is common for stock returns. Finally, we tested for normality by making use of the Jarque-Bera statistic. The null hypothesis in the test is that the distribution is normal. The estimated Jarque-Bera statistic along with the associated p-value, for the portfolio excess returns series, are 15.76 and 0.000, respectively. Consequently, judging by the reported p-value we clearly reject the null hypothesis of normality. Therefore, the portfolio excess returns series is not distributed normally. Provided that the Anderson-Darling normality test presents better small sample properties than the Jarque-Bera test, we implemented it also. The Anderson-Darling normality test has the same null hypothesis as the Jarque-Bera test. The Anderson-Darling test statistic receives the value of 24.13 with p-value 0.000, and as a result we reject the null hypothesis of normality. Overall, both tests affirm that the portfolio excess returns series is not distributed as a normal variable. The non-normality is a characteristic of small samples and in our case we only had 121 observations. If the sample size increases the distribution will be closer to the normal distribution. Furthermore, it is a well known fact that asset returns are not normally distributed. Turning now to the market excess returns series, we may say that the mean and the median of the series are quite similar, that is -0.042 and -0.039 respectively, indicating symmetric behaviour. The maximum value is 0.07, the minimum value of the series is -0.20 and finally the standard deviation receive the value of 0.05. The skewness is -0.31 and kurtosis is 3.66, indicating quite normal behaviour given that these two values are quite close to the benchmark values of the normal distribution (0 and 3, respectively). The p-value of the estimated Jarque-Bera statistic is 0.12, indicating that we fail to reject the null hypothesis of normality at the conventional 0.05 level of significance. Finally, the p-value of the estimated Anderson-Darling statistic is 0.06, indicating again that we fail to reject the null hypothesis of normality at the conventional 0 .05 level of significance. In general the market excess returns appear to distribute like a normal variable. What has been revealed from the above analysis is that a) both series are stationary, b) the market excess return series is less volatile than the portfolio excess returns series and c) the market excess return series is distributed normally, while this not true for the portfolio market excess return series. Question 2 In this section we estimate the APT model having as a dependent variable the excess portfolio returns and as independent variables 1) the excess market returns 2) the percentage change of the term spread 3) the percentage change of the exchange rate series and finally 4) the percentage change of the Brent crude oil prices. The specification of the above described APT model is provided by equation (1): (1) where, is the excess portfolio returns series at time t , c is the constant term, is the excess market returns series at time t, is the percentage change of the term spread at time t, is the percentage change of the exchange rate series at time t, is the percentage change of the Brent crude oil prices at time t, are parameters to be estimated and finally, is the error term assuming the usual properties. Parameter estimates for equation (1), by means of the OLS estimation technique, along with their associated standard errors, t-statistics and p-values, are analytically il lustrated in Table 1. The E-views command for the estimation of the above mentioned model is as follows: equation model1.ls exs_r_portofolio c exs_r_index g_term_spread g_fx g_brent Table 1. Estimation output for equation 1 Variable Coefficient Std. error t-Statistic p-value constant 0.008164 0.002893 2.822046 0.0056 [ Rm-Rf ]t 1.047768 0.043587 24.03840 0.0000 GTSt 0.001993 0.003167 0.629342 0.5304 GFXt 0.039145 0.086038 0.454976 0.6500 GBPt 0.005340 0.024816 0.215195 0.8300 Regression Diagnostic Statistics R-squared 0.844807 Mean dependent var -0.036483 Adjusted R-squared 0.839409 S.D. dependent var 0.057761 S.E. of regression 0.023147 Akaike info Criterion -4.653130 Log likelihood 284.1878 Schwarz criterion -4.536984 F-statistic 156.5033 Hannan-Quinn criter. -4.605962 Prob(F-statistic) 0.000000 Durbin-Watson stat. 1.927105 White hetero. Test 0.926993 LM test ser. cor. (2 lags) 0.203657 Whites test p-value 0.532800 LM test ser. cor. p-value 0.816000 Anderson-Darling nor. test 0.858200 LM test ser. cor. (8 lags) 0.521658 Anderson-Darling p-value 0.440800 LM test ser. cor. p-value 0.837900 In general, the estimated sign for every single parameter is theoretically meaningful, only two of the parameters appear to be statistically significant at the conventional level of 0.05 and finally, the model seems to fit the data pretty well. In more detail and in relation to the expected signs we stress the following: the excess return of a well diversified portfolio is expected to experience similar co-movements with the excess returns of the market. Therefore, the expected sign is positive as it happens in our case. As it is well known, the term spread variable is widely used by economists and the practitioners in order to predict the real economic activity. Given that the stock market generally follows real economic activity, then it comes that the expected sign for the term-spread variable would be positive. The estimated sign in our model for the term spread variable is also positive. For the exchange rate variable we know that a company may be affected by the changes in the exchange rates directly if its orientation has to do with the foreign trade or indirectly if its inputs or outputs are affected by the exchange rate. In the literature there is no consensus with respect to the expected sign. Some studies have shown that devaluation of the currency has a strong positive effect in the long-run for the stock prices and a negative effect in the short-run. In general, we have no reasons to expect a particular sign for the exchange rate variable. Our results suggest the effect of the exchange rate changes is positive. Finally, we know how crucial the price of oil is for the operation of all firms but again we do not expect an a priori sign for the returns of a portfolio. The sign might be positive if most of the firms in the portfolio experience profits by such an increase and negative if the opposite is true. Furthermore, oil prices may be seen as the expectation for the future inflation. The estimated sign in our model is again positive, which of course does not contradict the theoretical underpinnings of the APT model. Overall, all the estimated signs of the coefficients, which are presented in the second column of Table 1, are theoretically meaningful and this fact indicates that our model is well specified. Among the independent variables used only the constant and the excess market returns appear to be statistically significant even at the 0.01 significance level, while all the remaining variables are statistically insignificant. The significance for a coefficient can be affirmed by the corresponding t-statistic or alternatively by the associated p-value. The t-statistic is calculated by the ra tio of the estimated coefficient (column two) to the associated standard error (column three). If the absolute value of the t-statistic is greater than 2, then we may say that the coefficient is significant at the 0.05 significance level (but this is a rule of thumb). More accurate information with respect to the significance can be derived from the p-value. Hence, if the p-value is lower than the selected level of significance (e.g. 0.01), then the coefficient is considered significant at that particular level of significance. Provided that we only have the constant and one variable that are statistically significant, we continue by interpreting only the two respective coefficients. The constant can be interpreted as follows: if all the independent variables are simultaneously equal to zero then portfolios excess return is equal to 0.008. For the second coefficient we can say that if the excess market returns increase by 1 unit, then the portfolio excess return will be increased by 1.047 units, provided that all the other variables remain constant. Additionally, as it can be inferred by the value of the adjusted R-square (corrected with the degrees of freedom), which is 0.839, included into the model independent variables explain more that the 4/5 of the portfolios excess returns variability. At last, the value of the F-statistic for testing the joint significance of all the independent variables included in the model is pretty high (156.50) with the associated p-value to be in practice equal to zero. Therefore, we reject the null hypothesis () that all the coefficients are jointly insignificant at 0.05 significance level and we can support that there is at least one coefficient which is significantly different from zero. The F-statistic provides further evidence for the validity of the estimated APT model. Question 3 In this section we conduct diagnostic testing in order to assess our models statistical strength. For this reason we investigate by testing analogously if there is presence of multicollinearity, heteroskedasticity, serial correlation and finally non-normality in the residuals. Before the diagnostic testing, it is important to stress that all the regressors used in equation 1 are stationary and therefore we exclude the possibility of estimating a spurious regression. It is well known that the estimated results in cases where the regression is characterized as spurious, are meaningless and the statistical inference is worthless. Clearly, this is not the case for our estimated model presented in Table 1. Turning now to the diagnostic testing procedure, our first concern is to ensure that there is no presence of multicollinearity. The problem with multicollinearity is that it inflates the standard errors and therefore it is hard to assess the significance of the regressors used i n the model. Furthermore, we know that multicollinearity does not affect the efficiency of the estimated parameters. Provided that there is no availability of an official testing procedure for the detection of multicollinearity we make use of a practical solution. According to this approach evidence for multicollinearity would be a high correlation among the regressors. High value for the correlation coefficient is considered a value of above 0.8. For this reason we estimate the correlation coefficients for all the regressors involved in the estimation of equation 1. The correlation coefficients are illustrated in Table 2. Undoubtedly, the results in Table 2 reveal that all the correlation coefficients are well below the threshold value of 0.8 and as a consequence we may say that there is no evidence of multicollinearity for that particular set of regressors. Table 2. Correlation matrix for the regressors of the APT model Regressor [ Rm-Rf ]t GTSt GFXt GBPt [ Rm -Rf ]t 1.000 GTSt 0.124 1.000 GFXt 0.066 -0.048 1.000 GBPt 0.216** -0.029 0.379*** 1.000 Note: **, *** denote significance at the 0.05 and 0.01 significance level, respectively. We continue with testing for serial correlation. We know that the presence of serial correlation in a regression model leads to the underestimation of the standard errors and the coefficients and as a consequence hypothesis testing will direct us to incorrect conclusions. A widely used Statistic for testing first order serial correlation is the Durbin-Watson. If its value is close to 2 then this is evidence of no serial correlation. In Table 1, we observe that the Durbin-Watson statistic equals to 1.92 and as result we can support the absence of a first order serial correlation. In order to ensure that higher order serial correlation is also excluded from our model we implemented the Breusch-Godfrey Serial Correlation LM Test for two and eight lags. The Breusch-Godfrey LM statistics for two and eight lags along with the associated p-values ar e presented in Table 1. Based on the relevant p-values we fail to reject the null hypothesis of no serial correlation in each case, and as a result we may support that serial correlation, even in higher orders, is not a problem in our model. Another important issue related to the diagnostics of a model has to do with the presence of heteroskedasticity. Heteroskedasticity leads to non-efficient estimators as well as to biased standard errors, resulting to unreliable t-statistics and confidence intervals. However, the estimators still remain unbiased under heteroskedasticity. To test formally for heteroskedasticity we implemented Whites test and the results are illustrated again in Table 1. Based on the calculated p-value (0.53) that corresponds to Whites test, we fail to reject the null hypothesis of homoskedasticity. As a result our model seems to satisfy the assumption of homoskedasticity, implying that the performed statistical inference is correct. Our final concern is to e nsure that the residuals are normally distributed, which is one of the basic assumptions of the classical linear regression model. The assumption of the errors normality is considered essential for conducting correctly statistical inference. Finally, we tested for normality by making use of the Anderson-Darling statistic with the null hypothesis to be the presence of normality. The estimated Anderson-Darling statistic along with the associated p-value, for the residuals, is 0.85 and 0.44, respectively. It is clear that we fail to reject the null hypothesis of normality and therefore we have one more clue that our model is well specified. Question 4 As is clearly shown in question 3, the diagnostic testing performed for the statistical validity of the estimated model revealed the following a) the regressors are stationary, b) multicollinearity is not considered a threat, c) there is no serial correlation in the residuals, d) the residuals are homoskedastic and finally, e) the residuals are distributed normally. Therefore, we came to the conclusion that all the basic assumptions of the classical linear regression model hold and no further actions are required. Question 5 In this part of the coursework we augment equation (1) with the squares of the factor changes. The new specification is given by equation (2): (2) Parameter estimates for equation (2) along with their associated standard errors, t-statistics and p-values, are analytically illustrated in Table 3. The E-views command for the estimation of the above mentioned model is as follows: equation model2.ls exs_r_portofolio c exs_r_index g_term_spread g_fx g_brent (g_term_spread)^2 (g_fx)^2 (g_brent)^2 Examining the results in Table 3, we can say that from the three additionally included variables only one proves to be statistically significant (the GBPt2) at the 0.1 significance level (not 0.05 or 0.01). The significance and the magnitude for the non-squared regressors do not alter in any important way with respect to the corresponding results presented in Table 1. Additionally, the adjusted R-squared improved marginally from 0.839 to 0.848, implying that the additional regressors have contributed less than 1% in explaining the variability of the dependent variable. The diagnostic testing for equation (2), which is presented at the lower part of Table 3, reveals that the new model is well specified. In more detail, we realize that all the main assumptions of the classical linear regression model are adequately satisfied. There is no serial correlation, the residuals are homoskedastic and finally the residuals are distributed normally. Table 3. Estimation output for the augmented specification (equation 2) Variable Coefficient Std. error t-Statistic p-value constant 0.011998 0.003107 3.861951 0.0002 [ Rm-Rf ]t 1.037345 0.042858 24.20433 0.0000 GTSt 0.002770 0.003517 0.787418 0.4327 GFXt 0.039821 0.083831 0.475017 0.6357 GBPt -0.004681 0.024362 -0.192148 0.8480 (GTSt)2 -0.001131 0.000921 -1.229082 0.2216 (GFXt)2 -0.831541 1.931252 -0.430571 0.6676 (GBPt)2 -0.340632 0.184292 -1.848331 0.0672 Regression Diagnostic Statistics R-squared 0.857205 Mean dependent var -0.036483 Adjusted R-squared 0.848280 S.D. dependent var 0.057761 S.E. of regression 0.022499 Akaike info Criterion -4.686387 Log likelihood 289.1832 Schwarz criterion -4.500554 F-statistic 96.04850 Hannan-Quinn criter. -4.610919 Prob(F-statistic) 0.000000 Durbin-Watson stat. 1.843856 White hetero. Test 0.840402 LM test ser. cor. (2 lags) 0.546468 Whites test p-value 0.704900 LM test ser. cor. p-value 0.580600 Anderson-Darling nor. test 0.737227 LM test ser. cor. (8 lags) 0.615434 Anderson-Darling p-value 0.528500 LM test ser. cor. p-value 0.763100 In order to test whether the additionally included variables provide a better specification, we perform the Wald test for coefficient restrictions. The Wald test is applied to a ll the possible combinations that may arise among the three variables. The results of the Wald testing procedure along with their associated p-values are illustrated in Table 4. Table 4. Wald testing results Null hypothesis F-Statistic (p-value) 3.24 (0.02) 0.81 (0.44) 4.65 (0.00) 4.03 (0.02) When we tested the null of it was realised that we reject the null at the 0.05 level, suggesting that the three additional variables contribute significantly in explaining the dependent variable. In the case where the following is tested: we fail to reject the null at the 0.05 level, signifying therefore that the square of the oil inflation ( coefficient) is quite crucial. Moreover, in testing the restriction the null is rejected at the 0.01 level. Finally, when the restriction is tested we reject the null at the 0.05 level. Overall, the Wald testing procedure suggests that the preferred specification would be the one that excludes the square of the exchange rate percent age change. Therefore, the new adopted specification after the Wald testing procedure receives the form presented in equation (3): (3) Equation (3) is estimated with OLS and the results are illustrated in Table 5. The E-views command for the estimation of the model is the following: equation model3.ls exs_r_portofolio c exs_r_index g_term_spread g_fx g_brent (g_term_spread)^2 (g_brent)^2 Table 5. Estimation output for the specification of equation 3 Variable Coefficient Std. error t-Statistic p-value constant 0.011796 0.003060 3.854984 0.0002 [ Rm-Rf ]t 1.035900 0.042572 24.33292 0.0000 GTSt 0.002638 0.003491 0.755653 0.4514 GFXt 0.042275 0.083335 0.507297 0.6129 GBPt -0.004001 0.024223 -0.165184 0.8691 (GTSt)2 -0.001100 0.000914 -1.202750 0.2316 (GBPt)2 -0.392334 0.139300 -2.816473 0.0057 Regression Diagnostic Statistics R-squared 0.856968 Mean dependent var -0.036483 Adjusted R-squared 0.849374 S.D. dependent var 0.057761 S.E. of regression 0.022417 Akaike info Criterion -4.701399 Log likelihood 289.0840 Schwarz criterion -4.538796 F-statistic 112.8391 Hannan-Quinn criter. -4.635365 Prob(F-statistic) 0.000000 Durbin-Watson stat. 1.831355 White hetero. Test 1.066227 LM test ser. cor. (2 lags) 0.552305 Whites test p-value 0.396100 LM test ser. cor. p-value 0.577200 Anderson-Darling nor. test 0.690392 LM test ser. cor. (8 lags) 0.557522 Anderson-Darling p-value 0.566900 LM test ser. cor. p-value 0.810300 The econometric inference for equation (3), which is presented at the lower part in Table 5, reveals that again the selected model is well specified. There is no serial correlation, the residuals are homoskedastic and finally the residuals are distributed normally. The rationale for the inclusion of the i nitial variables squared lies in our intension to assess the presence of a non-linear impact that the independent variables may have on the dependent variable. The intuition in other words is that we actually generate a quadratic term. Consequently, if we have for example a positive coefficient for a variable and a negative coefficient for the square of the same variable, then it is implied that as the variable receives higher values the effect increases with a decreasing rate. Therefore, the interpretation of the coefficient for the (GTSt)2 variable is as follows: as the GTSt increases then the effect on the dependent variable decreases with the rate of 0.0011 (Table 5). The interpretation for the rest squared coefficients is quite similar. Question 6 The Chow breakpoint test is implemented for equation (3). The Chow breakpoint test is used to assess the stability of the estimated coefficients over a pre-specified breakpoint. The test depends heavily on the correct selection of the breakpoint. After the selection of the breakpoint the test is carried out by separating the initial sample into two sub-samples, with the first sample to be from the beginning of the sample up to the breakpoint and the second sample from the breakpoint up to the end. The main intuition of the test is based on the similarity of the sum of squared residuals resulting from the whole sample with the respective sum of squared residuals resulting from the equations that are fitted to each sub-sample. If there is a significant difference then this is indicative of a structural change in the coefficients derived from the whole sample regression. At this point we need to be very careful of the selection of the breakpoint. Based on the results presented abov e, and especially in question 1, we have realized that all the variables illustrated graphically show systematically a spike (extreme value) which takes place during the last quarter of 2008. The period indicated by the data coincides with the beginning of the global economic crisis. The beginning of the crisis is chronologically oriented by the collapse of the investment bank Lehman ÃÆ'Ã… ½Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢rothers on September of 2008 (2008m09). Consequently, the choice of the 2008m09 as a break date for our application seems to be theoretically and empirically fully justified. The results of the Chow breakpoint test are presented in Table 6. The test is implemented for a break to all the estimated coefficients of the regression. As can be realized from the p-values of the three illustrated statistics we clearly reject in all cases the null hypothesis of no breaks at the 0.01 significance level. Table 6. Chow Breakpoint Test (equation 3) Null Hypothesis: No breaks at spe cified breakpoints Breakpoint: 2008:m9 Varying regressors: All equation variables Equation Sample: 2000:m10 2010:m09 F-statistic 3.226107 Prob. F(7,106) 0.0039 Log likelihood ratio 23.17603 Prob. Chi-Square(7) 0.0016 Wald Statistic 22.58275 Prob. Chi-Square(7) 0.0020 Clearly the confirmation of the structural change in the coefficients of the estimated regression reveals that our specification needs to be revised analogously in order to take into account the break. Such a re-specification may be the inclusion of a dummy variable for the period after the break date or otherwise cross products between the dummy and the independent variables in order to determine the magnitude of change for the initially estimated slopes. Question 7 In this section we will compare the three alternative specifications which have been presented (equations 1, 2 and 3) and estimated (Tables 1, 3 and 5) in the previous sections. For this reason we will make use of four different Statistics which are considered appropriate for the task at hand. These Statistics are the Adjusted R-square, the Akaike information criterion, The Schwartz criterion and finally the Hannan-Quinn criterion. For the adjusted R-square, this receives values between 0 and 1, the higher the value the better for the corresponding model. High values imply that high percentage of the dependents variable variability is explained by the regressors. For the three remaining Statistics, the lower the values they receive the better the model is. Table 7 below presents all these Statistics in order to select the final model. Table 7. Model selection criteria Statistic Model 1 Model 2 Model 3 Adjusted R-square 0.839409 0.848280 0.849374 Akaike -4.653130 -4.686387 -4.701399 Schwartz -4.536984 -4.500554 -4.538796 Hannan-Quinn criterion -4.605962 -4.610919 -4.635365 Based on the reported results in Table 7 it is immediately realized that model 2 is preferred in comparison to model 1 (higher adjusted R-square and lower values for the rest of the statistics) and model 3 is preferred in comparison to model 2 (also there is higher adjusted R-square and lower values for the rest of the statistics). Models 3 fit to the data is considered more than satisfactory as almost 85% of the variability that the dependent variable has is explained by the selected regressors. Question 8 Based on the model presented in Table 5 we will assess the results from a financial perspective. This task is mainly focused on the interpretation and the significance of the estimated coefficients. We have already proved that model 3 is well specified and as a result we may proceed to the analysis of the results. Regarding the expected theoretical sign of the regressors it can be stressed that the estimated signs do not deviate from those expected. The justification for the sign of each variable has been analytically presented in question 2 and the same rationale applies also to the finally selected specification. The most notable fact is that the market index, FTSE 100, excess returns was found to be significant at 99% confidence level. This implies that this factor is the single-most important factor in explaining our portfolios excess returns. Alternatively, the estimated coefficient of 1.035900 can be seen as a measure of risk for the portfolio constructed since it is infer red that if the markets excess returns increase by one unit then the portfolios excess returns will increase also by the value of the coefficient. Immediately we realise that our constructed portfolio is riskier than the market. This is because our portfolio is only a subset of the market portfolio and the market portfolio is more diversified and contains less individual risk. The constant can be interpreted as follows: if all the independent variables are simultaneously equal to zero then portfolios excess return is equal to 0.011796. The fact that the constant term is statistically different from zero suggests that our choice to use the APT model is correct provided that the CAPM model is a special case of the APT model. A non-significant constant term would favour the use of the CAPM model. Finally, the three included factors in the specification remain statistically insignificant implying that these factors do not contribute considerably in the explanation of our portfolios e xcess returns. There are probably other factors that may play a significant role in explaining our portfolios excess returns. Such factors, among others, may be the industrial production, money supply, inflation and markets capitalization. Their effect remains under further investigation.

`` Weapons Of Math Destruction `` By Cathy O Neil Essay

Becoming Numbers No one thinks that they have an impact on the world. But everyone does; everyone is a number in some algorithm. Each one of us is turned into numbers and those stats become data and are used by scientists to either do good or in some cases, bad. The book â€Å"Weapons of Math Destruction†, Cathy O’Neil talks about the dangers of turning people into numbers and how people don t even know that it is happening. A lot can go wrong when people are no longer people and they are turned into the just number. People could be placed in the wrong group because they went through a rough time for a short period, and that could ruin their lives, but computers only see numbers, not the person the number represents. Job interviews that should have happened, didn t because the computer passed over them because of a certain number, not the actual person. A person could also be called in for a job because they may have seemed perfect, but they were the opposite of what they needed. And be ing in a certain area could then mean that a person is now associated with that group even though they never were. The scientist turns people into numbers so that they are easier to cataracts and target, even if those categories are unknown to the public and is causing harm. The idea of Big Data is not new. It is only new to most people who never thought about it until an article shows up when they scroll down their Facebook newsfeed. The history of Big Data goes all the way back to 18,000 BCEShow MoreRelatedProject Mgmt296381 Words   |  1186 PagesT. Hercher, Jr. Developmental editor: Gail Korosa Associate marketing manager: Jaime Halterman Project manager: Harvey Yep Production supervisor: Carol Bielski Designer: Mary Kazak Vander Photo researcher: Jeremy Cheshareck Media project manager: Cathy Tepper Cover image:  © Veer Images Typeface: 10.5/12 Times Roman Compositor: Aptara ®, Inc. Printer: Worldcolor Library of Congress Cataloging-in-Publication Data Larson, Erik W., 1952Project management: the managerial process / Erik W. Larson, Clifford

James Hoban - 1104 Words

James Hoban and The White House Is James Hoban the best Irish born architect ever? I will let you decide after you read his story. James Hoban was born in Callan, County Kilkenny, Ireland, in 1758 in a small house. His catholic parents worked as servants in Desart Court which was a grand mansion. Early on in his life he was disadvantaged because of the anti-Catholic Penal law.[1] The law stipulated Hoban was not allowed to go to school but he still managed to go to the Royal Dublin Society where he took architecture classes. Unfortunately, he was not able to land a job in Ireland. When the American revolutionary war ended, he decided to move to the United-States. At first he lived in Charleston, South Carolina where he built the†¦show more content†¦He gave Hoban a short deadline to complete the house. Hoban was confident that he could finish building the house before the deadline. That was before Monroe decided to move in the house even before it was completed. Making it even more difficult for Hoban to finish building it but he was finally able to complete it just a bit after the deadline. Within less than a year after the architect finished building the White House, Hoban passed away. He was buried at the St-Patrick Catholic church, which he had helped build. After what you have learned about the history of James Hoban, do you think he is the most important Irish architect ever? First, the White House is the oldest public building in Washington (Thornton). It has been renovated many times but it still has the same base upon which Hoban built it. It still has 2 rooms that have not even been touched since they were built. The White House is one of the most important buildings in the world, since it is the house of the President of the most important country in the world. Not only was James Hoban the White House architect, he encountered a lot of problems during construction. The White house is not the only building he designed. 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Cokking Competition Concert In New Zealand- MyAssignmenthelp.com

Question: Discuss about theCokking Competition Concert in New Zealand. Answer: Project The project of conducting a huge cooking concert that will be specializing in preparation of various types of foods is a very good idea. The town of New Zealand is growing and developing town in term of business industries and economic status. In addition to that, the towns population is also increasing at a high rate in terms of number and diversity. Originally, the town was inhabited by people from Pakeha and Maori cultures. However, many other communities have been there also, e.g. pacific peoples, Europeans, Asian, Latin Americans and Africans among others. All of these ethnic groups have carried on their different cultural practices which include cooking methods, types of foods, beliefs and customs to name a few. Therefore, to cater for the different food types that the communities prefer, one should carrying out a cooking concert that specializes on the specific traditional foods of the ethnic groups. The communities will be well notified prior to the concert happening through their elders, local authorities, political leaders as well as religious leaders (Zulch, 2014). In addition to that, notices will be placed in strategic places where the different communities will be able to view them. Goals and Objectives The purpose of this project is to ensure that every communitys traditions and customs are kept and respected especially the cooking methods, recipes and traditional cooking materials. However, it is one of the best ways to appreciate and recognize each and every ethnic group because some of them will certainly be employed in the restaurant to serve and prepare the foods. The ethnic groups will be able to get their traditional foods in the concert without having to struggle to prepare them on their own and publicize them or make them noticeable to other cultures. For instance, the concert should be able to accommodate traditional African foods, European foods and Asian foods and many other traditional foods preferred by specific ethnic communities living in New Zealand. According to Morris, 2014, it will be a way to improve the living standards of the people in all the cultures in the town because by showing their expertise in food preparation, they will be earning a living from possi ble employment opportunities that may arise e.g. in restaurants and hotels. Benefits and Success Criteria The benefits that will arise from offering the restaurant service is that: The communities will feel wanted and appreciated by the original community that was living there It will encourage peace and togetherness among all the communities. Different ethnic groups will be able to continue with their traditional practices and customs to whatever end they want. The people will be able to compete with other cultures and find out the best and tasty food that can be found in New Zealand. The success criteria for the benefits named above will be: I will ensure that every community in New Zealand is represented. I will ensure that every communitys traditional food is prepared as to the exact requirements. This means it should taste and appear exactly the way the community describes it. The different kinds of foods must always be available and enough to cater for the demand. The project will have a reward for the best prepared and tasty food. Also, all the communities will be very well informed about the progress of the concert. Scope Scope of the Project According to Morris, 2014, some of the parameters that will be involved in the execution of any project are: Project Scope is basically the actual project dealings. For instance, the cooking competition will be offering a chance for the communities to prepare traditional food and also an opportunity to serve it. This will be aimed at identifying the different cultural differences in New Zealand. Project time which refers to the life span of the business and the duration of the results. Project Integration refers to the collaboration and participation of the ethnic communities towards the demand and execution of the restaurant services. Project costs is the amount of money expected to be incurred for the completion of the restaurant. Project risks are the negative aspects that may arise and hinder or affect the restaurant progress. In Scope The following elements are included in the project: Project location which will be in New Zealand Town. With time, the project will be expanded to Australia and Sydney towns as well where the concerts will be held later next year. Project costs. This will relate to the costs of hiring a building or constructing one, hiring of chefs and cooks from the communities, costs in terms of time used to request for recipes and procedure from the ethnic groups especially the experts, costs of purchasing other equipment and technical support needed for the success of the project. Project scope itself which illustrates the exact concert and the location of its location. This should be in the main center of the town and on a day that most communities will be available. Risks which have Clearly been Outlined and Understood. Project life span whereby preparations till its end are estimated to be around in 6 months but the actual project should take part 3 months before the end of year 2017. Out Scope Elements The exact number of communities that should participate in the concert. This is simply because not all communities are very well known to be belonging to specific community. Apparently some community do not belong to any specific ethnic group and therefore just group themselves to be just among any community they feel like. Deliverables Key Deliverable According to Weaver, 2012, some of the key outputs from such kind of project include the fact that the communities practicing different cultures will be able to continue with their practices especially in the cooking sector. They will also be able to specialize even more from continuous practice. Additionally, the different cultures will be able to interact with other cultures and learn their ways of cooking and respecting their methods. Through this project, the communities will be able to harmonize themselves and live in peace with each other. Estimated Deliverable Date The key deliverable date should be at the end of year 2017. The results are expected to be seen by the end of the year which gives the project around 6 months to be conducted. However, the results are also expected to be seen from there onwards because the people still live together day in day out. This is a way of encouraging learning of different communities from other cultures and respecting the beliefs, customs and practices of other communities. References Zulch, B. G. (2014). Communication: The foundation of project managementt.Procedia Technology,16, 1000-1009. Talukhaba, A., Mutunga, T., Miruka, C. O. (2011). Indicators of effective communication models in remote projects.International Journal of Project Organization and Management,3(2), 127-138. Weaver, P. (2012, October). The management of project management. InThe Australian Institute of Project Management National Conference. Izmailov, A., Korneva, D., Kozhemiakin, A. (2016). Project Management Using the Buffers of Time and Resources.Procedia-Social and Behavioral Sciences,235, 189-197. Morris, P., Pinto, J. K. (2010).The Wiley guide to project control(Vol. 9). John Wiley Sons. Olegovna, K. D., Elyasovich, I. A., Artem, K. (2016). Project management using the buffers of time and resources. Dmitrievich, K. A., Olegovna, K. D., Elyasovich, I. A. (2016). Effective Project Management with Theory of Constraints. Morris, P. W. (2010). Research and the future of project management.International Journal of Managing Projects in Business,3(1), 139-146.

The Life Of Emily Dickens Essays (1166 words) - Lecturers

The Life of Emily Dickens Emily Dickinson was raised in a traditional New England home in the mid 1800's. Her father along with the rest of the family had become Christians and she alone decided to rebel against that and reject the Church. She like many of her contemporaries had rejected the traditional views in life and adopted the new transcendental outlook. Massachusetts, the state where Emily was born and raised in, before the transcendental period was the epicenter of religious practice. Founded by the puritans, the feeling of the avenging had never left the people. After all of the "Great Awakenings" and religious revivals the people of New England began to question the old ways. What used to be the focal point of all lives was now under speculation and often doubted. People began to search for new meanings in life. People like Emerson and Thoreau believed that answers lie in the individual. Emerson set the tone for the era when he said, "Whoso would be a [hu]man, must be a non-conformist." Emily Dickinson believed and practiced this philosophy. When she was young she was brought up by a stern and austere father. In her childhood she was shy and already different from the others. Like all the Dickinson children, male or female, Emily was sent for formal education in Amherst Academy. After attending Amherst Academy with conscientious thinkers such as Helen Hunt Jackson, and after reading many of Emerson's essays, she began to develop into a free willed person. Many of her friends had converted to Christianity, her family was also putting enormous amount of pressure for her to convert. No longer the submissive youngster she would not bend her will on such issues as religion, literature and personal associations. She maintained a correspondence with Rev. Charles Wadsworth over a substantial period of time. Even though she rejected the Church as a entity she never did reject or accept God. Wadsworth appealed to her because he had an incredibly powerful mind and deep emotions. When he left the East in 1861 Emily was scarred and expressed her deep sorrow in three successive poems in the following years. They were never romantically involved but their relationship was apparently so profound that Emily's feelings for him she sealed herself from the outside world. Her life became filled with gloom and despair until she met Judge Otis P. Lord late in her life. Realizing that they were well into their lives they never were married. When Lord passed away Emily's health condition which has been hindered since childhood worsened. In Emily's life the most important things to her were love, religion, individuality and nature. When discussing these themes she followed her lifestyle and broke away from traditional forms of writing and wrote with an intense energy and complexity never seen before and rarely seen today. She was a rarity not only because of her poetry but because she was one of the first female pioneers into the field of poetry. Emily often speaks of love in her poems, but she did it in such a way that would make people not want to fall in love. She writes of parting, separation and loss. This is supported by the experiences she felt with Wadsworth and Otis P. Lord. Not with a club the heart is broken, nor with a stone; A whip so small you could not see it, I've known This seems to be an actual account of the emotions she experienced during her relationship with Otis Lord. Individuality played a pervasive role in her life as a result of her bout with separation. Emily did not conform to society. She did not believe it was society's place to dictate to her how she should lead her life. Her poems reflect this sense of rebellion and revolution against tradition. From all the jails the boys and girls Ecstatically leap,- Beloved, only afternoon That prison doesn't keep. In this poem Emily shows her feelings towards formalized schooling. Being a product of reputable college one would think that she would be in favor of this. But as her beliefs in transcendentalism grew so did her belief in individuality. Emily also went against the Church which was

Capitec Case Study Essays

Capitec Case Study Essays Capitec Case Study Essay Capitec Case Study Essay Wits Business School WBS-2006-21 Capitec Bank: Low-Cost Banking for Joe Average By December 2006, Capitec Bank, South Africa’s newest listed retail bank, had come a long way from its origins as a microlending organisation in 2001. Over time it had started introducing other banking services to its entry-level clients, so that by 2006 it offered all the basic banking services, namely lending, transacting and savings. Capitec’s chief executive for marketing and corporate affairs, Carl Fischer, considered the organisation’s strategic plan for 2007: to position itself as a proper bank in a much broader target market. Despite the perception that Capitec was more of a microlending organisation than a bank, it had in fact been performing exceptionally well as a bank for well over four years, with limited marketing effort (see Exhibit 1). Fischer realised that the key to survival for a low-cost bank in South Africa lay in high volumes, but still wrestled with the question as to how Capitec could overcome the current perception that it was a niche bank in order to attract the volumes it needed to compete successfully. Background to Entry-Level Banking in South Africa1 The South African government had endeavoured to facilitate and regulate the financial sector since 1992. Prior to the promulgation in 1992 of an Act exempting small loans from interest rate restrictions imposed according to the Usury Act of 1968, the vast majority of the South African population did not have legal access to formal credit. Banks did not offer microcredit, so borrowers had to resort to pawnbrokers, informal operators, mashonisas (township moneylenders) and other systems such as the stokvelsa, burial societiesb and rotating savings and credit associations (ROSCAs). After 1992, however, a whole new industry arose. Because it was legal for interest rates to exceed the cap placed on loans by the Usury Act, two separate types of operation began to expand: independent, cash-loan providers, who made one-month loans; and term lenders, who ensured repayment using payroll deductions. a A stokvel is an informal savings club in South Africa. Members of a stokvel pay a mutually agreed sum into the club every month. The cumulative savings of the group are then rotated to each member of the group on a regular basis. After everyone has had their turn in receiving the contributions, the group may disband or start another cycle. Burial societies, a hybrid of the stokvel, are informal self-insurance schemes, which absorb the costs of social activities and cultural requirements of funerals. Stokvel members contribute a fixed amount of money to a common pool weekly, fortnightly or monthly. Money is then drawn when the particular need arises. This case was prepared by Research Associate, Stephanie Townsend, with lecturer Thabo Mosala. The case is not intended to demonstrate effective or ineffective handling of an administrative situation; it is intended for classroom discussion only. Copyright  ©2006 Graduate School of Business Administration, University of the Witwatersrand. No part of this publication may be reproduced in any format electronic, photocopied, or otherwise without consent from Wits Business School. To request permission, apply to: The Case Centre, Wits Business School, PO Box 98, Wits 2050, South Africa, or e-mail chetty. [emailprotected] wits. ac. za. Capitec: Low-Cost Banking for Joe Average By 1999 the government realised that the 1992 exemption had created an environment conducive to high interest rates and abusive practices. The Micro Finance Regulatory Council (MFRC) was therefore established under the 1999 Usury Act Exemption Notice to protect consumers by regulating those institutions lending under the unrestricted interest rate window. The Exemption Notice made it compulsory for microlenders (all those who extended credit up to a new maximum of R10,000. 00, at rates above the statutory cap) to register with the MFRC. In 2002 it became compulsory for all suppliers of microfinance to register with the National Loans Register (NLR), thus creating a database that recorded all loans disbursed by lenders registered with the MFRC. According to researchers Patrick Meagher and Betty Wilkinson, from the IRIS centre at the University of Marylandc, the Exemption Notice had a great impact on the microlending industry and since then, several trends had emerged, including: an increasing formalisation of the industry (registration of previously independent operations); the introduction of new players (such as furn iture and retail merchants); an increased interest from the commercial banking sector; increased formal investment in microlending (funds raised on the stock market or through private placement); and increasing levels of client indebtedness. They went on to point out that, small borrowers required finance for a wide variety of reasons. These included compensating for seasonal fluctuation in cash flow; funding a small business; consolidating or paying off other loans; housing improvements; funding emergency expenses; paying for education; purchasing consumer products; and funding bad habits, such as alcohol abuse. 4 Cash microlenders had to take into consideration that there was a cyclical nature to their lending, ensuring that they had large amounts of cash on hand for part of each month. There were several different segments in the industry: formal registered firms – the so-called microfinance providers – which included commercial banks, financial institutions, section 21 (not for profit) enterprise lenders, developmental lenders, and larger short-term moneylenders; semi-formal moneylenders, such as small, unregistered moneylenders whose main livelihood was microlending and pawnbrokers, who were not yet formally included in the moneylending statistics; and purely informal moneylenders such as the mashonisas, stokvels, burial societies and ROSCAs. In 2000, the year before Capitec was founded, the demand for banking services from lowerincome individuals was growing rapidly, as a combination of increasing income levels in this segment of the population, urbanisation, rising consumer aspirations and the rapid growth of the informal business sector started to make an impact. Yet at this stage, the poor made little use of formal banking services and the fo rmal banking sector seemed to be inappropriately structured to satisfy this rapid growth in demand. In reaction there was considerable growth in the microfinance sector, with the biggest source of growth coming from the microlending sector. 6 IRIS is a research and advisory centre located in the Department of Economics at the University of Maryland which works to understand and facilitate economic growth and democratic development in poor and transition countries. c 2 Capitec: Low-Cost Banking for Joe Average Founding of Capitec The origins of Capitec dated to 2000, when the chairman of the PSG Financial Group, Jannie Mouton, persuaded Michiel le Roux, the former head of NBS Boland Bank to join PSG to help establish Keynes Rational, a PSG microlending division. In the process of canvassing his former colleagues, Le Roux met with Riaan Stassen (chief executive officer of Capitec in 2006), two other colleagues and Fischer, all of Boland PKS. They convinced Mouton and Le Roux that microlending alone was not sustainable in the long run, because of the unacceptably high interest rates and the challenges of recouping the loans. 7 (At the time, noted Fischer, the market was characterised by some shady characters who used unconventional methods to ensure that they would receive the repayments. ) Thus, the idea of a bank with microlending capabilities, that served the lower end of the market, was born. The fundamental principles around which the bank was structured were that it would recoup loans through a proper bank account, ensure that it understood its clients’ financial activities, and that it had insight into the creditworthiness of its clients. 8 The profitable microlending side of the business was to act as an income generator to finance the migration process to a formal bank. In the end the entire management team of Boland PKS joined Keynes Rational, soon to become Capitec Bank. Fischer noted that the process of establishing a bank was neither simple nor inexpensive. 9 It could literally take years to obtain approval for a banking licence from the South African Reserve Bank, build the technological infrastructure of the bank, and set up the inter-bank relationships with, for example, credit clearing bureaus and the Payment Association (which was part of Saswitchd). Capitec was the first new bank to enter the South African banking arena in 20 years. In March 2001 PSG obtained a retail banking licence and one year later Capitec listed on the Johannesburg Securities Exchange (JSE). During its first year Capitec traded as two separate entities, namely the bank (Capitec), and the microlending business (called FinAid). Both had separate branches, with separate branding. This situation was short-lived, however, as the management team soon realised that it made far more sense strategically to be one entity and one brand. 0 In the process of merging the two entities, the microlending side of the business had to be dramatically upgraded, Fischer said, as the branches were located in somewhat sleazy locations and run by less desirable personnel. 11 Thus, 75% of the branches were closed down or relocated to better surroundings and transformed to a more formalised structure. They were redesigned, with an open, modern feel for easy access. During this period Capitec focused predominantly on microlending which accounted for the perception in 2006 that it was still only providing microloans. By 2006, Capitec had grown significantly and the business, which was originally capitalised with R350 million, was worth R2. 2 billion. The half-year results released in September 2006, showed that the bank had grown by almost 50% in the past year and had increased its profitability by 71%, with a 23% return on equity. 12 It had close to one million clients, of whom 468 000 had savings accounts. Furthermore, savings customers were growing at a rate of 25 000 new clients per month. 13 (See Exhibit 1. ) By the end of 2006, Capitec had a staff count of over 2 000. Saswitch stands for South African Switch. Saswitch is the brand name for the electronic switch operated by Bankserv, an inter-bank system operator owned and controlled by member banks to facilitate exchange transactions among the various banks. d 3 Capitec: Low-Cost Banking for Joe Average Business Model From the inception of the bank, the Capitec management team decided to focus on providing lowcost basic banking services to the lower- to middle-income market, and not to create a bank that offered everything to everybody. As Capitec’s business strategy unfolded, it reversed what the bank believed to be the flaws in traditional banking, and offered its target market something completely different. As a result, the bank turned several conventional banking practices on their heads. Heather Formby, a journalist at the Financial Mail, referred to this as â€Å"a quiet banking revolution in some ways†. 14 The conviction to do this, Fischer said, flowed from deep insight into the needs of the bank’s target market, and a willingness to improve consumer financial literacy. 5 Target Market In 2001 the bank set out to service the typical microborrower, who originated from the lowerincome end of the market. While there were different levels of financial sophistication in this group, the typical clients were relatively unsophisticated. Only a few, for example, would know what an interest rate was. Fischer explained that the traditional microlending business was built on people having shortterm cash-flow crises, brought about by the behaviour of certain of the worst-case scenario clients. They would, on receipt of their salaries, withdraw every cent they had. This meant that they operated strictly with cash-in-hand – at a high security risk. By the middle of the month cash-flow problems usually presented themselves to such individuals, forcing them to turn to short-term loans. 16 However, Capitec’s market stretched much further than the typical salaried microborrower. The bank actually concentrated on the LSM 3-7e market (or those people with an income of between R1 179 and R6 659 a month). This gave it a total target market of 19 million people (see Exhibit 2). By 2006, the bank had the LSM 8 market within its sights as well. 7 Moreover, the management team had noticed a tremendous change in the average South African consumer over the past 10 years. As a result of better housing and electricity, the demand for white goods, such as fridges and washing machines, had accelerated beyond expectations, opening up yet another market for Capitec. However, Fischer observed that although Capitec’s loan repayments’ offer was better, white goods’ retailers were in a better position to offer immediate finance, such as hire purchase contracts, thereby satisfying their clients’ need for instant gratification (see section on Competitors below). Thus, he said, it remained an ongoing challenge to try and change the consumer mindset from desiring instant gratification to thinking â€Å"coldly and ruthlessly† about finance, and about where to find the best loan option. 18 Having pinpointed the trends that characterised the target market, Capitec set out to offer practical solutions to the everyday challenges of its clients (see Exhibit 3). The company identified key needs such as price, real-time delivery, simplicity through paperless card driven processing and personal contact, and from this a business model emerged. The model rested on the four pillars of affordability, accessibility, simplicity and personal service, and Fischer maintained that â€Å"everything the bank did was measured against those four pillars†. 19 By applying this strategy, Capitec believed that it had managed to change consumer perceptions that banks e The South African Advertising Foundation (SAARF) Living Standards Measure (LSM) had become the most widely used marketing research tool in Southern Africa. It divides the population into ten LSM groups, 10 (highest) to 1 (lowest). The SAARF LSM segments the South African market according to its living standards, using criteria such as degree of urbanisation and ownership of cars and major appliances. 4 Capitec: Low-Cost Banking for Joe Average were expensive and slow, that they offered complicated products and services requiring loads of paperwork, and were not the right place to grow one’s money. Affordability Fischer maintained that the main objective of Capitec was to â€Å"slash by half the banking fees of its competitors†. 0 From day one the bank had managed to do this by using technology to help keep costs down and enable the bank to operate without back offices in all the branches. By cutting out paperwork and the administrative activity associated with it, the bank saved significantly on expenses. The branches themselves operated on a cashless basis to save on security devices such as bullet-proof glass and were kept simple, and there was only one ATM at each branch to facilitate withdraw als. By using the existing debit card infrastructure at retailers, the bank not only saved costs, but also encouraged a change in client behaviour by limiting the handling of cash. As cash transactions were very expensive, both the client and the retailer benefited from this approach. Capitec’s alliance with Shoprite Checkers and Pick ‘n Pay also allowed cash withdrawals from these retailers’ terminals. The fee structure was simple and affordable. Bank transactions such as ATM withdrawals and debit orders cost R2, cash withdrawals at point-of-sale terminals cost R0. 5 and, to encourage the use of debit cards, purchase transactions were free of any fees. Capitec realised that the first thing its clients did at an ATM was to enquire about their balances, and therefore ensured that the client’s balance appeared on the screen automatically at no cost when they inserted their cards. 21 By encouraging debit card use, the bank minimised the security risk associated wit h carrying large amounts of cash. To change a client’s borrowing mindset to one of saving, was yet another challenge. However, in an attempt to encourage the client to save, Capitec offered 10% interest on deposits up to R10 000 while other banks paid minimal interest on savings accounts. Fischer believed that this strategy had worked, judging by the rate at which Capitec was acquiring new savings account customers Breaking with convention, the bank reduced the interest rate on deposits exceeding R10 000. Underlying this move was the desire to manage the bank’s liquidity – to reduce risk by attracting large numbers of smaller accounts rather than being dependant on a few really big accounts, Fischer explained. 2 Accessibility Capitec’s almost 290 branches were located in places where people commuted, worked and shopped – at train stations, taxi ranks or shopping malls, for example. The bank’s minimum operating hours were from 08h00 to 17h00 and often from 07h00 to 19h00 on weekdays (to accommodate those clients on their way to or from work), and 08h00 to 13h00 on S aturdays. Simplicity Capitec ensured a simplified and focused product range, which allowed for an almost completely paperless environment. For example, the bank took photographs of its clients, while bank employees used fingerprint identification to identify themselves and verify transactions on clients’ accounts. The simple banking procedure entailed capturing the client’s details, taking the photograph and running a credit check. Within 10 minutes the client would have a Global One Banking Facility which gave access to savings accounts, transaction and loan accounts, as well as a debit card called the Global One Gold Card. All that was required to complete the process, was one signature and even this was soon to be replaced by client fingerprint identification. 3 5 Capitec: Low-Cost Banking for Joe Average Personal Service It soon became clear to the management team that the less informed a client was about banking, the more he or she needed support from people within the bank, so it set out to provide exactly that. In an effort to connect well with the target market, and in the belief that it was much s impler and more effective to do so in the client’s home language, Capitec recruited staff from the areas surrounding its branches and trained them in the required skills. 4 Capitec had also launched mobile banking in 2006 (see Exhibit 4), in terms of which a sales force would open accounts for customers at their workplace, at a time which suited the employer. Within minutes, using 3G-technology, a client would have access to an account and a debit card. Employers welcomed this move, as it meant that employees spent less time away from work. 25 Challenges Capitec’s two major challenges came from the demands imposed by the Financial Sector Charter and the National Credit Act. Financial Sector Charter 26 In terms of the Financial Sector Charter, which was signed in 2003, the major players in the financial sector – banks, insurance companies, brokers and exchanges – agreed to a set of service provision and empowerment targets. These included improving banking services to low-income earners, increasing the number of black employees at all levels of the organisation as well as ensuring that blacks shared in the ownership of the bank. It also required that they support black entrepreneurs. All financial services companies were expected to pursue these targets, to report periodically on their progress to a monitoring body and to be graded on their performance in the form of a public scorecard. The Charter aimed to ensure access to transaction and savings products for 80% of people in LSMs 1-5f by 2008. With 16. 4 million people (or 53. 5% of all adults) still lacking access to banking in 2006, another 8 million people would have to move from the unbanked category to the banked category over the next 18 months if this target were to be achieved. The government found that the interest rate caps contained in the Usury and Credit Agreement Acts had not been effective in protecting consumers. It found that credit allocation had been distorted to the detriment of low-income clients and that misleading disclosure, anti-competitive practices and the very high costs of credit had undermined the potential benefit of access to credit. The problems in the microlending industry were also found, to a large extent, to be a symptom of the failure of the banking sector to meet the needs of low-income earners. 7 In this context, the government passed the National Credit Act in June 2006. It was set to come into effect by early 2007 and would replace the Usury Act (1968), its Exemption Notices and the Credit Agreements Act (1980). The Act aimed to regulate the granting of consumer credit by all credit providers, including microlenders, banks and retailers. It would create formal bodies referred to as the National Credit Regulator and the Nati onal Consumer Tribunal, to ensure enforcement of the Act and promotion of access to redress, and to adjudicate contraventions of the Act. It addressed, among other things, over-indebtedness and the reckless granting of credit and unlawful provisions in agreements; it promoted disclosure in terms of the form and effect of credit agreements and disapproved any debt settlements other than debt enforcementg. The f g National Credit Act The poorest 60% of the population. The recoupment of payments through legal means, for example debit orders. 6 Capitec: Low-Cost Banking for Joe Average potential impact of the Act would be to limit the granting of pre-approved credith; to change the debt counselling process,i and; to result in a prolonged collection process. 8 The Act, in its attempts to make the credit facility process as transparent and comparable (to other credit facility offers) as possible, thus presented some challenges to banks and other financial institutions. For example, it complicated the quoting process and affected Capitec’s use of technology, as the new requirements demanded a complete rewrite of the ba nk’s systems. In turn, these changes prevented the organisation from advancing its own technology to stay ahead of the pack. Fischer explained that only by continued technological advancement could they stay at least three steps ahead. 29 Other Challenges Adding to the controversy surrounding banking charges in general, a report commissioned by the Competition Commission in 2006 had questioned the make-up of bank charges levied on transactions. As a result, the government again turned its attention to banking: this time to the transparency and costs of certain banking transactions. The first public hearing at which financial institutions could respond to the report was scheduled for the end of 2006. In addition, for Capitec, being one of the smallest players in the South African banking industry by far, presented a number of additional challenges, the most pressing of which was how to keep control of the bank. The management team was acutely aware of the danger of a hostile take-over attempt by a bank such as African Bank, for example (see Competitors below). 30 Future Plans Internet and cell phone banking were high on the agenda and the bank already had plans to launch these services in 2007. Capitec intended to use technology to its fullest extent to support its aim of growing its savings accounts in the mass market to three million by the end of February 2009. 31 In addition, Capitec had introduced six- and 12-month loans in 2005, in addition to the one- and three-month loans it already offered. Now, in 2006, it planned to introduce 18- to 24month facilities in the near future. Granting small, unsecured loans was expensive and inevitably resulted in high fees, yet, in Capitec’s latest annual report, Mouton pledged to continue making microcredit more accessible. He said that the bank wanted to reduce the cost of lending, at the same time offering more products to meet the exact needs of the market. 32 On the other hand, home loans would not form part of Capitec’s product offerings. Fischer explained that as far as Capitec was concerned, this was best left to the specialists who had perfected securitised lending. Another approach was necessary for unsecured home loans which they were evaluating. 33 According to Stassen, about 64% of salaried people in South Africa still did not have banking accounts, therefore huge growth opportunities still existed. 4 The reckless granting of credit is prohibited under the Act. Reckless credit is when a credit provider gives you a loan or other credit without assessing whether you can repay the loan and even if you do not understand or appreciate the risks, costs or obligations under the credit agreement or if the granting of the credit leads to you becoming overindebted. [Source: www. persfin. co. za (accessed 28 February 2007). ] i The process whereby a client is informed about the implications of the loan. h 7 Capitec: Low-Cost Banking for Joe Average Competitors Capitec faced competition from a number of sectors, both traditional and emerging. African Bank Investment Limited (ABIL) The focus of the bank was to underwrite largely unsecured credit risk through the provision of personal loans to the â€Å"formally-employed, emerging market†j. Prior to 1998, ABIL (then called African Bank) had operated for 24 years as a small commercial bank. It was bought by the JSElisted Theta Group in 1998, and subsequently merged with three loan finance companies owned by the Theta Group. In August 2002, it acquired the R2. 8 billion Saambouk personal loan book. By the end of 2006, ABIL had 1. million clients from various sectors of the South African economy. 35 The bank focused solely on term loans, requiring repayment over between 12 and 35 months, for example, in contrast to the typical microlending sector offering of loans to be repayed over one, three or six months. However, according to Fischer, the organisation was migrating to the lower end of the market, while Capitec was migrating up to the middle section of the market. 36 ABIL introduced credit cards as part of its offerings in late 2006. Capitec perceived African Bank as a major competitor because of its well-established reputation in the market. Mzansi A government initiative, the Mzansi account was launched as a low-cost product in October 2004 by the four major retail banks Absa Bank, First National Bank (FNB), Nedbank and Standard Bank as well as Postbank. The aim was to attract the 16. 4 million unbanked South Africans into the economic mainstream. This initiative was a direct outcome of the Financial Sector Charter, in terms of which the banks undertook to provide access points for first-order, retail financial services within 20 kilometers of 80% of South Africans in LSMs 1 to 5. 7 By mid-2006 more than two million people were users of the product. Facilities on Mzansi accounts were limited to deposits, withdrawals, debit card transactions and balance enquiries. In early 2006 all the banks agreed to include debit orders on the account in the course of the year. Interest was paid on credit balances (which could not exceed R15 000) and there was no monthly service fee. 38 Mzansi users were allowed to make four withdraw als and deposits free of charge. Thereafter, normal banking charges applied. In an article comparing Mzansi’s fees with those of a normal Capitec banking account, journalist Richard StovinBradford found that Mzansi’s were higher than those of Capitec. 39 According to Colin Donian, the initiatives director of the Mzansi account, the profile of the Mzansi account holder was mostly female and the average account balance was R300. Most account holders (62%) were between 25 and 54 years, and the largest uptake had come from black communities, where most of the unbanked population resided. 0 The Four Major Retail Banks Apart from the Mzansi account, all four major banks had other accounts serving the lower end of the market, such as Nedbank Transactor (designed to meet the needs of clients who did not Emerging markets in this context, refers to the upcoming black middle class market. On 9 February 2002, Saambou Bank, one of South Africa’s larger banks at the time, collapsed and was placed under curatorship. k j 8 Capitec: Low-Cost Banking for J oe Average require a cheque book), Absa Flexisure and FNB Smart Account. Standard Bank’s E Plan offered basic banking products to people earning less than R5 000 per month. Standard Bank launched its E bank in 1994 as a separate subsidiary which offered an electronic banking and savings product. It was a high-volume, low-margin product that proved to be extremely popular with the lowincome market, particularly because it offered a R1 000 death benefit to the account holder’s next-of-kin. By 1996 E Bank was doing so well that it had become a threat to its parent brand, with the result that Standard Bank incorporated the subsidiary into its main stable. 1 E Bank only entered the microlending market in 1999, and then did so via a joint venture with African Investment Bank Ltd. 42 Following on the success of E bank, Nedbank entered the low income market with its People’s Bank division in 1995, which later became its empowerment subsidiary with a separate banking licence. By 2003 People’s Bank had about 2 million clients. Unlike the other banks’ offerings, the Nedbank Transactor account was available to all customers – and not just to the entry-level segment of the market. Absa established its NuBank division in 1996, and immediately started granting credit to clients. In 2000, it acquired 51% of UniFer, which was then the market leader in microlending, and incorporated NuBank into this organisation. The rapid growth in the volume of loans granted, however, meant that UniFer’s administrative systems could not cope, and by March 2002 its provisions for bad debts were hopelessly inadequate. UniFer was accordingly delisted and made a whollys of local partnerships between banks and retailers were those between Standard Bank and cell phone group, MTN (with ts MobileMoney account), Nedbank and supermarket retailer Pick ‘n Pay (with Go 9 Capitec: Low-Cost Banking for Joe Average Banking), and the fashion retail group Edcon and FNB for the provision of personal loans. Fischer noted that some of these alliances were powerful and presented a potentially serious threat to Capitec. 48 The Standard Bank/MTN and Edcon/FNB alliances were relatively new i n the market and difficult to assess, but Pick ‘n Pay Go Banking had been in operation since 2000, which meant it had had time to prove itself. Operating as a division of Nedbank, Go Banking used the retailer’s stores (6 000 till points countrywide) for transactions, as well as Nedbank and Old Mutual Bank ATMs and branches. A customer could draw cash for only R2, get a balance enquiry free of charge, make deposits, and pay accounts. Both debit and credit cards were available. Although specific numbers of clients were hard to come by, Stovin-Bradford mentioned that Go Banking had never generated the sort of response expected by Pick ‘n Pay. 49 Accordingly, Fischer did not perceive Go Banking as a major competitor, as he believed the one thing that it lacked, was personal service. Banking is about people and service, and everything boils down to that. A retail cashier or a brochure can hardly offer personal banking advice,† he said. 50 Credit and Loans Provided by Retail Organisations The furniture retail industry in South Africa was worth R15 billion per year, of which about R10 billion was sold on credit. Historically, credit furniture sales had been conducted according to the Credit Agreements Act, which restricted interest rates to the ceiling of the Usury Act, while allowing the seller to retain ownership of the goods sold as collateral. However with the advent of the MFRC and a clearer more transparent regulatory environment for microlending, many of the furniture retailers, as well as other retail chains such as Woolworths, had started actively promoting microloans to their regular, well known clients. These organisations had a solid credit history on their clients, relied on a credit scoring methodology to assess risk, and did not require debit orders or other deductions. Most of their clients were salaried employees. 51 This was still a very new segment of the icrolending market and had yet to develop. Analysts speculated that it would replace much of the traditional furniture credit market, and also provide additional small loans to the retailers’ customers. 52 The MFRC had placed many objections to furniture organisations entering the microlending market, as it saw this as a means of bypassing the Credit Agreement Act. The argument was that since the retailers also controlled the price of the items they were selling, they could adjust the price of the goods to cover the cost of the lending. However, the retail organisations said that the ceiling on the Credit Agreement Act did not allow them to recover their costs. 53 Capitec perceived the retail market as a serious emerging competitor. 54 Conclusion To achieve its aim of growing its share of savings accounts in the mass market to three million by the end of February 2009, Capitec had little choice but to focus heavily on marketing. From this perspective, the company’s major challenge lay in changing the perception that Capitec was only a microlender. To do this, it had to build trust and stature in the eyes of the public. The question facing the Capitec management team was how it should set about doing this over the next year. Considering the fierce competition that existed in the market (the four major banks’ marketing spend, for example, was in the order of R200 million each per year) and the pressure from the South African government on financial institutions to support the lower end of the market, Capitec had some serious choices to make, and it would be these choices that would determine its destination. 10 Capitec: Low-Cost Banking for Joe Average Exhibit 1 Capitec Bank: The Present Profile Capitec Bank The Present Profile 3 Operations Clients ‘000 Savings Clients ‘000 Turnover R’m Number of Loans ‘000 Capitec Bank Branches % Impairment Profitability Headline Earnings R’m Headline Earnings per Share (c) ROE % Equity NAV per Share (c) Share Price (c) Market Capitalisation R’m 611 260 164 623 580 399 676 1 490 1 072 784 3 105 2 233 824 3 050 2 194 30 46 8 49 70 12 70 101 16 116 165 23 74 104 26 300 0 1 477 2 454 266 2. 58 380 18 1 904 2 617 265 1. 43 440 143 2 259 2 486 251 1. 45 706 375 2 863 2 650 253 2. 85 852 468 1 586 1 486 267 4. 07 04 05 06 Aug 06 Source: Courtesy of Capitec, August 2006. 11 Capitec: Low-Cost Banking for Joe Average Exhibit 1 The Present Profile (cont) Source: Courtesy of Capitec, 2006. 12 Capitec: Unconventional Banking in a Risky Market Exhibit 2 The Market: Average Income Spread The Market LSM 1 2 3 4 5 6 7 8 9 10 Average Income Spread Number ‘mil 30. 6 Income R 0–R 947 % 2. 1 3. 8 3. 8 4. 5 4. 1 4. 3 2. 3 1. 7 1. 9 1. 7 7 12 13 15 13 14 8 6 6 6 R 949 – R 1 179 R 1 179 – R 1 443 R 1 443 – R 1 977 R 1 977 – R 2 549 R 2 549 – R 4 366 R 4 366 – R 6 659 R 6 659 – R 9 388 R 9 388 – R12 077 R12 077 – R19 298 Target Market 19m * Household Income after statutory deductions Exhibit 3 The Average Client In Summary The Average Client Time constrained : 8 – 5 working hours Limited mobility – public transport Cash dependant – Security Risk Pay date driven Does not save Needs more information on managing finances Needs funding in times of crisis Source: Courtesy of Capitec, 2006. 13 Capitec: Unconventiona l Banking in a Risky Market Exhibit 4 Mobile Banking Mobile Consulting Source: Courtesy of Capitec, 2006. Unless otherwise indicated, all the information in this section comes from M Kirsten, ‘Policy Initiatives to Expand Financial Outreach in South Africa’. Paper delivered at World Bank/Brookings Institute Conference, 30-31 May 2006, available www. dbsa. rg, documents link (accessed 16 November 2006). 2 Ibid. 3. Wilkinson Meagher. â€Å"Filling the gap in South Africa’s small and micro credit market: an analysis of major policy, legal and regulatory issues. † Institute for Informal Sector Research. University of Maryland. 2001. 4 5 1 Ibid. Ibid. 6 Ibid. 7 Interview with Carl Fischer, 3 November 2006. 8 Ibid. 9 Ibid. 10 Ibid 11 Ibid. 12 S Planting, ‘Assume You Can’, Financial Mail, 7 April 2006, available www. financialmail. co. za (accessed 27 October 2006). 13 Interview with Carl Fischer, 3 November 2006. 14 H Formby, ‘Snug in the Low -Cost Niche’, Financial Mail , 27 October 2006, p 45. 5 Interview with Carl Fischer, 3 November 2006. 16 Ibid. 17 Ibid. 18 Ibid. 19 Ibid. 20 Ibid. 21 Capitec Annual Report 2006, p. 11. 14 Capitec: Unconventional Banking in a Risky Market Interview with Carl Fischer, 3 November 2006. Ibid. 24 Ibid. 25 H. Duvenhage, ‘Capitec Bank vat Bank na die Werkplek’, Sake Rapport, 10 September 2006, p 9. 26 Unless otherwise indicated, all the information in this section comes from M Kirsten, ‘Policy Initiatives to Expand Financial Outreach in South Africa’. Paper delivered at World Bank/Brookings Institute Conference, 30-31 May 2006, available www. bsa. org, documents link, (accessed 16 November 2006). 27 Ibid. 28 Nedbank Group, ‘The Turning Point’, National Credit Bill, available www. nedbankgroup. co. za/pdfs (accessed 10 December 2006). 29 Interview with Carl Fischer, 3 November 2006. 30 Ibid. 31 S Gunnion, ‘Capitec Lifts Client Base, Profit Fast’, Business Day, 28 September 2006, p 22. 32 Capitec Annual Report, 2006, p 12. 33 Interview with Carl Fischer, 3 November 2006. 34 Riaan Stassen quoted in an article by L Peyper, ‘G’n of Min Bankkoste: Bankgroep Wys Hoe’, Die Burger, 20 May 2006, p 23. 35 www. africanbank. co. a, about African Bank link (accessed 14 November 2006). 36 Interview with Carl Fischer, 3 November 2006. 37 R Stovin-Bradford, ‘Getting a Measure of Mass Banking’, Sunday Times Business Times Money, 7 May 2006, p 21. 38 Ibid. 39 Ibid. 40 www. southafrica. info/public_services/citizens/consumer_services/mzansi. htm (accessed 5 December 2006). 41 C. Mitchel and Heil, D, ‘Taking Banking to the Unbanked: Wizzit (A), Wits Business School case WBS 2006-14. 42 Ibid. 43 Ibid. 44 www. southafrica. info/public_services/citizens/consumer_services/mzansi. htm (accessed 5 December 2006). 5 Electronic correspondence with Carl Fischer, 5 February 2007. 46 www. postbank. co. za (accessed 14 November 2006). 47 R Stovin-Bradford, ‘Getting a Measure of Mass Banking’, Sunday Times Business Times Money, 7 May 2006, p 21. 48 Interview with Carl Fischer, 3 November 2006. 49 R Stovin-Bradford, ‘Getting a Measure of Mass Banking’, op cit. 50 Interview with Carl Fischer, 3 November 2006. 51 P Meagre and B Wilkinson, ‘Filling the Gap in South Africa’s Small and Micro Credit Market: An Analysis of Major Policy, Legal and Regulatory Issues’, op cit. 52 Ibid. 53 Ibid. 54 Interview with Carl Fischer, 3 November 2006. 23 22 15