Legal and Regulatory Considerations in IT Security Research Paper

Legal and Regulatory Considerations in IT Security - Research Paper Example In the US, data laws used in one state are not necessarily similar to those used in an independent state. Correspondingly, data laws used in the US states are not exactly similar to those used in other nations like Britain or Canada. Technically, laws governing access and use of computerized information differ from one autonomous region to another. Succeeding sections of this paper contains a comparative analysis of data laws in Washington State, the EU, and Canada. Data privacy and encryption regulations in Washington State are covered under chapter 19, section 255 of the state’s laws. In Washington, private parties are protected by law against access and misappropriation of personal information by unauthorized parties. Washington laws define data and information as any software or hardware files, including but not limited to personal contact information, credit and debit card information, plus any encrypted business or personal documents (Lindsey & Smith, 2012). In Washington, breach of security and unauthorized access to confidential data and information constitutes acts of crime. In addition, unauthorized disclosure of personal or business information is prohibited by laws. Data owners must be informed by data controllers of any intention to disclose information prior to the disclosure (Lindsey & Smith, 2012). Persons guilty of data crimes include anyone involved in the assisting, facilitating or abetting of unauthorized access and m isappropriation of someone else information. Persons and companies found to violate these data laws are subject to remedial provisions and liabilities. One data law in Washington involves controlled misuse of unauthorized information. Unauthorized access to information, followed by subsequent viewing, circulation or sale of the information attracts economically reasonable compensations as damages. In Washington State, another law which seeks to minimize data misappropriation asserts that any unauthorized access

Self-Reflection and Self SWOT Analysis

Self-Reflection and Self SWOT Analysis Self analysis is nothing but calculation of ones opinions and activities. That is costing of ones emotions, personality and behavior. From this people can easily recognize their individual strength and weakness. Moreover self analysis is a process or it is a test to judge the abilities, talents and expertise. Self awareness is one of the way to yourself in which to discover our separable personalities, rate structures, politics, usual feelings and tendencies. Because for some stuffs, manufacture facts and learns we are all dissimilar to react. And this is very useful to sometimes pass time in self reflection to increase a superior vision into ourselves. SELF AWARENESS: Self awareness is a main thing for us, because when we know the healthier thoughtful of ourselves then we are the authorized to create a ups and downs and also to figure our parts of strengths. Moreover in our level of recognize areas we would like to make developments over and over again. That is so self awareness is the stage of aim setting. Self awareness is a skill for education. Education here is nothing but knowing ourselves. If a person know about ourselves, then only the person modify the stuffs they want to adjustment himself. Each person have a aim to their life like to became leadership man, playful life, relaxation life and so on. And the person will try and makes works relevant to his aim. But this everything is possible only by the investigating his emotions, reactions, trusts and qualities. Thus it is the self awareness performance. That is, a person will know about their own personalities like skills, thoughts, beliefs, inspiration and sensations. This kind person will only able to say the word i am self aware . That is, if i want to say i am self aware then i had a strong observation about myself and i had studied myself. Determining the exact path that ranges the aim can be probable simply by self-analysis. Self-awareness is one thing chooses whether you are the correct one to become a head or not. I must recognize the powers and weaknesses to become familiar for every circumstance. In the progression of these gatherings i am not forceful a person what to accept as true, how they should consider or what they should to do. I am mainly focused with persons tests in levitation their self awareness. When you grow into more self aware you automatically bring in to being to see phases of your behavior and the character that you did not warning earlier. Some authors give quotes about self-awareness they are, Raising an Emotionally Intelligent Child In the last decade or so, science has discovered a tremendous amount about the role emotions play in our lives. Researchers have found that even more than IQ, your emotional awareness and abilities to handle feelings will determine your success and happiness in all walks of life, including family relationships. John Gottman. Being powerful is like being a lady. If you have to tell people you are, you arent. Thanks to Maria Marquis Thoreau There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. -Margaret Thatcher. We wait all these years to find someone who understands us, I thought, someone who accepts us as we are someone with a wizards power to melt stone to sunlight, which can bring us happiness in spite of trials, which can face our dragons in the night, who can transform us into the soul we choose to be. Just yesterday I found that magical someone is the face we see in the mirror: Its us and our homemade masks. -Richard Bach. Self-Analysis: Self-analysis involves understanding ones own  preconscious and insensible materials like ideas, Para praxes, memories, fleeting thoughts, and powerful emotions. By self analysis a person can simply find the weakness and by rectifying their weakness that person can capable to see the places and positions they have to adjust. Best of all, all persons has incorrect opinions and personal faults committed by them, But by the self analysis the person can simply able to avoid the problems and reach the requirements with no chunks. Self-analysis creates several profits that is it produces a extraordinary level of control that is to improve the person such as helpful talents, capacities and powers can leading easily and they can have a capacity to the true tracks. Self analysis process is very helpful and act as great end in idea making process which is suits for business surroundings. Career choice is almost whether they happy by gettings, assignment, place of work, organizational core, situation, challenges, superior for improvement, connection and the support from the age group. The chief dissimilarity between the self analysis and self awareness is that identifying a persons actions by approaches and talents. WELFARE IN SELF ANALYSIS AND SELF AWARENESS: By performing the self analysis a person can absorb their weakness. By this identification a person can know the real requirements to face the carrier. And they can easily increase the skills and talents by their positive skills. Moreover about decision-making and clear vision, self awareness shows positive and negative ways. CONCLUSION: Thus the method of learning own personality said to be a self analysis and ability of perform the process is called self awareness. We have to increase the strength and weakness by improving the skills. Thus the self analysis and self awareness is much important for career development. PRESENTATION OF RESULTS BASED ON ONLINE TEST: INTRODUCTION: For self analysis there are many number of tests are available and here I am going to discuss about some analysis test report. CAREER PATH TEST: The career path test is like a quiz type, which have two things they are, the activities which makes interests and gives joy and the another thing is about what kind of behaviour i have for my goal. This career path test shows result as yellow for interest and green for style and as I to accepted with this result. As in the result I am very much interested in supervision and administration management. Yes that is the reason iam doing administration course now. And also about my relaxations is like home duties and roaming is very much true. I am spending more time on managing and at all times deliberate the whole thing before starting it. So that the result of career planner quiz said as gathering report and evaluating are also suitable. Always I think of complexity in doing any jobs. I continuously use to say hard work is not the big one, only doing and finishing the thing is great. Various people can do the difficult job by hard work, but some people can do the same job by finding the easiest way. I need to be one of them always. My career planner quiz also said that I am creating the sophisticated processes for doing complex work. My results are ever reasonable because nothing I choose carelessly and without any reason. Before making decision I use to study the points for accepting and rejecting. Then only I will choose to decide if the qualities and income are high otherwise not. Next in the social equality point of view, I never took the others chances and I use give the chances for others when I am in group. This concept is very much believed by me. This concept is very much believed by me. So I agree with the points about my style such as reasonable decision maker and independent. Thus in the career test I can understand my interest and styles and I can agree with this results about my behaviour. So I accepted this self analysis test about me is true. JOHARI WINDOW: Consider the adjective list of me and my friends to map the character awareness by means of overlap and difference between them. It is called the johari window. The johari windows results accepted by me about 100%. In this window the test results grouped into four categories. First one is arena which means the characters known to both self and others? It gives me the result bold, energetic and friendly. It is accepted because I am so friendly to the people with me. Second thing is facade which means the traits known to self but not to others. It says I am happy and nervous. I accepted I am happiest person; I can make any time happy and also make nervous situation on mingle with people without mind the country, language. I am confident about what I am doing. Before start anything I use to search merits and demerits. After decide to do, I dont want to confuse myself. I am always friendly thats why I can make happy all. This is the thing I feel my strength. Ever I responsive because eve ry action there is a reaction. Pre-planning is possible only when I am sensible. Third thing in the johari test is blind spot. It is about the characteristic which is known to others but not to self. By this my friend can expose me and I can understand him that how much he understands me. I can realize my blind spots including knowledgeable and mature. About my culture surroundings i am mature. Thus this result says 100% to my mature. I am little bit nervous and little bit relaxed. Most of the time I am relaxed, nervous comes while lack of confidence in doing complex things. But I always show the relaxed face to others. In debate, I felt nervous sometimes and this results to degrade my performance. The johari windows results accepted by me about 100%.. Final category is about new who is new to both self and others. I need to concentrate these characters and analyse those characters about me. The unknown characters such as my braveness, intelligence, calmness, brave, giving, modest, able, accepting and others are under research. I need to analyse myself to become self aware. PSYCHOMETRIC TEST: In order to change my activities and a number of development tips based on my personal results for suggestions, The psychometric test is use full. There are two parts in the psychometric test that is shapes and views. That is the aim of the report is to give u ideas for your professional and personal development. Based on our personal reports of shapes we will find a few suggestions in this report in order to change our behaviour by trying certain activities. As a result of psychometric shapes test says as, I am a happy to snatch the leadership in team and make every effort to clearly regulate the individual roles and responsibilities. I am normally succeed in effective coordinating the work every day jobs and that everyone concentrates on the upcoming tasks and objectives. And my work manner like highly target motivated and for my mind think i keep in the mind the relationship between cost and benefits. I like to question usual approaches and prefer to creatively and flexibly tackle problems and tasks. I am open to new things, and occasionally contribute innovative ideas and suggestions yourself. yes i agree with this result in organizational behaviour. And this test shows that i need to aware of significance of useful contacts and relationships, and need to develop contacts quickly on the informal level and sometimes incorporate these relationship for your own purpose. And i need to recognize the core of a problem and take hold of the f undamental effects of actions. In these report i not accept with the last sentence that is i need to recognize the core of problem and take necessary effects. I know my decision is correct for current situation . Thus i agree with the aware need for me. And the test shows to try something like make list of all teams and groups in which you work together with others it helps how we describes our own role in these groups. yes so that going to try these types and even i am happy with this results i am limited with organizational development and this results reports i want to aware of here, yes it is true. Thus the progress tip given to me is great idea that can easily workout and result giving tip. The second part of the psychometric test is about view. This results summarizes the results of questionnaire views which i have completed. It indicates my personal values, professional intrests and motives. Is described under which circumstances and in which professional context i can use and develop my maximum potential. The result from the views shows that, When selecting a workplace, i should pay attention to environment of helpfulness. i want to offer my help freely and real generously and expect in return that i will also be offered the same level of support when i need it. In comparison to other professional aspects it is absolutely importance to me that i can become enthusiastic about my work and that i have the feeling that my work has a real meaning to it. And one more thing i need to feel particularly good when i often driven to perform at my intellectual peak. In comparison to my other aspects it is noticeable that it is very important for as, that company in which i was work conveys a feeling of safety and security to me. In comparison to others my attitude in this connection is absolutely typical. Thus i accepted this views results about me and try to pay attention for the above. HUMAN METRICS: The next test result is human metrics has given me result as Extravert(33%),  Ã‚  Sensing(12%),  Ã‚  Feeling(112%),  Ã‚  Judging(22%). Already I discuss my adjustment in many situations and I accept the point extraversion because I can mix together with people. This said I am important. I agreed with this. Always I take care of needs and assigning jobs to fellows. I use to give more importance to projects than life. This is 50% true. Because I use to find simple way to solve the big project not the difficult and excessive demand. And also i have moderate preference of extraversion over introversion as 33% and then i have slight preference of sensing over intuition as 12% and also i have slight preference of feeling over thinking as 12% and to i have slight preference of judging over perceiving as 22% Sensing which means physically touch. I actually aware of sensing. I always use to equip Thinking with a new, full of life sense of how the things work.. I think this I really accept I am sensing I always forecast the things in future. So I am innovative, that I always think of future. Many times before I do any activity, which really helps me that I am pre planned. Then judging result shows that I judge based on the people behaviour and attitude, which is helpful in taking right decisions. So that the result of Human metrics help me to provide for my part in doing best development. CONCLUSION: Thus the four types of test is very useful to identify our behavior and performance in organizations. The Johari windows said the behaviour I have and those behaviour are grouped four based on who knows it. The human metrics said the results by percentage and psychometric said by two parts as shapes and views. One having strength and weakness other having the things to be take care of when choosing work place. Career planning question said my interest and way. Thus the self-analysis tests results having in the region of 80% true. Hence I am accepted the test results. SWOT ANALYSIS: INTRODUCTION: The analysis is about identifying self concept that is strength, weakness, opportunities and threats is called SWOT analysis. Identifying the self concept provides development in own life. So that the analysis is to be take out and grouped as follows. (S)TRENGTHS: The positive behaviour I have is said to be strength of mine is that Problem Solving, Teamwork, Decision Making. I am very much superior to have other main strengths even as being with my team is decision-making, free and innovative idea. My friends are for all time prizing me for those things. Before me deciding anything I statistically study the qualities and demerits of doing such thing and decides if it is acceptable. In team, I ever representation only my points and I give chance to others for expose them also. This are the capability of management. I can manage any kind of people and any kind of situation. And also My strength is my adjustment. I am very much adjustable with the people without considering the country and language. I can combine with the different kind of people. The people, who yet know me, identify me as friend finder. My means of administrating fellows and making friends are my great strengths I feel. This is the thing motivate my friends to prize my brains equality. I am always welcome the changes and challenges. Then I give the imaginative and new idea to replace usual things and making the simple way for doing multifaceted thing because I prefer the stylish information. (W)EAKNESSES: Nervous Dependency Inflexible These are my weakness. Nervous even as speaking in some get-together is my very poor weakness. Still I can combine with any kind of people, I have this problem in proper and specialized meetings. one more great weakness I felt is still I cannot analyse this trouble. I am trying to beat this thing now. Dependency make me another one weakness and I feel it be able to make difficulty in my way but till it is not so. Inflexible to others stress so that I am trying to avoid this kind of weakness from me. (O)PPORTUNITIES Taking advantage from current market analyzing the current marketing strategy .For me the greater opportunity for hearing from other people who are in parallel role or same path to me. One more great thing is that attractive my open skill by means of finding the skills I have and shape the open skills in the correct way. And also to take on others in providing feedback about their experience of me. (T)HREATS The work needs excessive demand, a person being hidden by too much stress. That is the reason I wish easily reachable work. That is the large number of daily stress, which conspires against self-reflection CONCLUSION Thus from the SWOT analysis, i know my strengths, weakness, opportunities and treats. Based on my strengths and weakness i am going to improve my active skills and simultaneously beat my problems. And from opportunities and threats i going get feedbacks from experienced persons and at the same time to impose my attractive skill in correct way of manner

Human Nature Exposed in Animal Farm :: Animal Farm

Human Nature Exposed in Animal Farm "Animal Farm" by George Orwell is a novel based on the lives of a society of animals living on the Manor Farm. Although the title of the book suggests the book is merely about animals, the story is a much more in depth analysis of the workings of society in Communist Russia. The animals are used as puppets to illustrate how the communist class system operated, and how Russian citizens responded to this, and how propaganda was used by early Russian leaders such as Stalin, and the effect this type of leadership had on the behaviour of the people of Russia. One thing which relates to the topic is how the pigs are favoured on Animal Farm. The main source for this was because their leader Napolean was a pig, the pigs were subject to favouritism by Napolean, and were given privileges that other animals were not given, such as sleeping in beds, wearing clothes and drinking beer. The pigs were also the only animals involved in making the vital decisions on Animal Farm. The fact emulates in a way how our Government tends to operate. The Government Party members are paid an exuberant amount of money, with this money the members of the Government can purchase costly cars and houses, if they wish to do so. They make all the important decisions about the country where as the tax payers rarely have a say in it. Another thing that "Animal Farm" and modern society have in common is that the powerless people are subject to propaganda . In " Animal Farm" Squealer and Napolean used propaganda by telling the animals that Snowball was a traitor, and convincing them that he was a criminal. They threatened that if Napolean was not in leadership Jones may come back. This happens in our society during the election period , the opposing parties all warn the public of the consequences of voting the other party, and how bad it would be if they were in power. The issue of Boxer the horse represents how people are used for their skills and talents. As soon as they are not needed they are disregarded. Boxer was the hardest worker on the farm, he contributed the most to the development of the windmill. As soon as Boxer was unable to continue working, Napolean got rid of him.

A Case Study: Employee Behavior

The MBA Toolbox defines influencing as, â€Å"changing another person’s attitudes without using force or authority† (p. 1). When force or authority is used the implication is that the influence is unethical. Influence is achieved ethically by engendering trust. For managers and executives influencing behavior should be thought of as an ongoing, two-way, process. Jeanne Lewis of Staples, Inc. was able to ethically influence her organization by adapting her own style and by listening to and learning from her employees at all levels of the organization.It is impossible to institute effective change within an organization without being well-connected to the organization itself. The Harvard case study about the career of Jeanne Lewis shows that it is possible to change a corporation through interpersonal relationships, dialogue and patience. The Company Despite the ill-fated merger with Office Depot in 1997, Staples Inc. was a company that exhibited a track record of consist ent growth by the time Jeanne Lewis was hired into the marketing department. Strong leadership from the top had characterized Staples rise to prominence.Despite Staples’ track record of success, Jeanne Lewis sensed the need for change within the organization. As she moved through various positions in the company she only became more convinced of this. If Staples was going to meet its’ aggressive goals a more integrative organizational approach was needed. But how could she put her ideas forward? Upon Todd Krasnow’s exit, Lewis would be the new leader. Krasnow was universally respected, and any change from his philosophy could meet with resistance. Promoting ChangeEthical and effective change within an organization is a function of trust. Jeanne Lewis understood this. She also saw influencing change as a process. Gaining influence by dishonest means could have been done in an instant, but Lewis knew this would benefit no one in the long run. Lewis influenced peop le first by being open and honest, and second by putting herself in the shoes of her employees. When the time for change came, they were ready to go along with her because they trusted her commitment to them and the company.Jeanne Lewis did not try to propose significant organizational change as soon as she had the idea. She paved the way for change over a number of years. She learned every detail she could about the operation of the company, and became well liked and respected. One co-worker in Suesse’s case study Jeanne Lewis at Staples, Inc. , describes Lewis this way: Jeanne’s charm could be disarming. She worked really hard and her personality motivated you. She tended to manage tightly at first then loosened the reins. She challenged us a lot and invited us tochallenge each other. (p. 4) Jeanne’s personality and open nature engendered trust among those who worked with her. But it was also clear to everyone that she knew the business, and could succeed in a ny position within it. This feeling was not earned overnight. Lewis had strived to learn the details others might not have. Another co-worker describes her this way: I think she was able to influence people and get respect because she had great insight, and she combined it with a great natural personality. (Suesse, p.5) Conclusions The MBA toolbox defines influence in practical terms this way: †¦to influence you have to prove to other people that accepting your proposal helps them to solve their problems or achieve their objectives. (p. 1) This simple definition masks a complex, and very human, process. Influence can be achieved in ethical or unethical, honest or dishonest, ways. The ramifications of unethical influence can extend far beyond what is expected. The recent corporate scandals show the destruction that can take place.The ethical and financial downfall likely started as the result of one person exerting influence, unethically, over another. The case study of Jeanne L ewis shows the value of trust within an organization. Trust comes from ethical behavior. Gregory Perry in An exploration of Factors Influencing Ethical and Unethical Behavior in Negotiations, highlights this factor: Trust between parties is viewed as an integral- if not central feature of the effective and productive work relationships†¦ Highly ethical behavior can build relationships and reducetransaction costs between parties. (p. 2) Influencing an organization by ethical means takes more time than doing it unethically. It is a process of gaining trust similar to that in any relationship. Jeanne Lewis influenced her organization ethically by gaining the knowledge to know how her changes would affect others, remaining open to suggestion and gaining trust. Comparing the experience of Jeanne Lewis at Staples to other companies rife with unethical behavior, however, shows that the effort is well worth it for everyone involved.Sources DuBrin, Andrew. (2003). Leadership- Research F indings, Practice and Skills (4th Ed. ). New York: Houghton Mifflin. MBA Toolbox. (2006). Chapter 2: Influencing Persuading. Retrieved 9/27/2006 from: http://www. mbatoolbox. org/stories/storyReaders$12 Perry, Gregory M. (2005). An Exploration of Factors Influencing Ethical and Unethical Behavior in Negotiations. Journal of Agricultural and Applied Economics; Apr ’05. Suesse, Jennifer. (2000). Jeanne Lewis at Staples, Inc. (A) (Abridged). Boston: Harvard Business School.

Berkshire Hathaway Phenomenon In the Context of Modern Finance Theory Essay

Berkshire Hathaway Phenomenon In the Context of Modern Finance Theory Septtember 2013 Berkshire Hathaway Phenomenon In the Context of Modern Finance Theory Introduction Over the 46 years ending December 2012, Warren Buffett (Berkshire Hathaway) has achieved a compound, after-tax, rate of return in excess of 20% p.a. Such consistent, long term, out performance might be viewed as incompatible with modern finance theory. This essay discusses the Berkshire Hathaway phenomenon in the context of modern finance theory. Part 1 Modern Portfolio Theory Berkshire Hathaway’s investing strategies mainly differ with modern portfolio theory on two aspects. The first one is the attitude towards the undesirable thing in investment. And the second one is the perspective of diversification. As Harry Markowitz pointed out in Portfolio Selection, one of the assumptions is (Markowitz, 1952)â€Å"the investor does (or should) consider expected return as a desirable thing and variance of return an undesirable thing†. However, in Warren Buffet’s point of view, (Roberg G, 2005) the only undesirable thing should be the possibility of harm. He emphasizes on conducting fundamental analysis to work out a company’s future profits, so as to determine the intrinsic value instead of monitoring the stock prices. This is because in the long term, the investment outcome is mainly harmed by misjudging the business value, including misjudging of inflation rate and  interest rate etc. As such, risk is defined differently between Mr Buffett and Modern Portfolio Theory; one is defined by possibility of misjudging the  intrinsic value of business, the other being simplified to variance of expected returns. If we consider risk as a probability statement, then maybe Mr B uffett’s definition is closer to the original meaning. Also, the assumption of maximising one-period expected utility is not what Buffet focuses on in his investment strategies. (Roberg G, 2005)In this case, Justin Industries, which was acquired by Berkshire Hathaway in 2000, can serve as a good example. During the five years prior to the acquisition, stock price of Justin Industries dropped by 37 percent, which should result in a huge variance of expected return. But Mr Buffett saw it as a perfect opportunity to purchase a well-managed traditional business with over 100 years of history. He offered a 23 percent premium over stock price at the time, and the stock price shot up by 22% on the day of announcement. It is also stated by Markowitz that, (Markowitz, 1952)â€Å"a rule of behaviour which does not imply the superiority of diversification must be rejected both as a hypothesis and as a maxim†. On the contrary, Mr Buffett has his famous quote, (Roberg G, 2005)â€Å"diversification serves as a protection against ignorance. If you want to make sure that nothing bad happens to you relative to the market, you should own everything. There is nothing wrong with that. It’s a perfectly sound approach for somebody who doesn’t know how to analyse business†. One can always argue that Berkshire Hathaway does not operate in only one industry, and they tend to invest in more industries in recent years. But as the business grows in volume, it is reasonable to be involved in new industries when there are few sound investment opportunities in the industries they already operate in, let alone that the technology industry was rarely in the list of holdings of Berkshire Hathaway, not even when Apple’s stock was soaring. The reason being, (Roberg G, 2005)â€Å"investment success is not about how much you know but how realistically you define what you don’t know†. Chart 1 (Martin & Puthenpurackal, 2007) Distribution of Berkshire Hathaway Investments by Industry The chart above shows distribution of Berkshire Hathaway’s investments by industry and firm size during the time frame 1976-2006. Judging by the size and number of investments, it can be concluded that a large amount of wealth was placed in manufacturing industry during the 30 years in study, although for diversification purpose, more weight could have been placed in the industry of agriculture, forestry and fishing, construction or retail trade. Having compared the differences, it is still worth noting that Markowitz did not rule out fundamental analysis in portfolio selection process, as is said in his foregoing paper,(Markowitz, 1952)â€Å"the process of selecting a portfolio may be divided into two stages. The first stage starts with observation and experience and ends with beliefs about the future performances of available securities. The second stage starts with relevant beliefs about future performances and ends with the choice of portfolio. This paper is concerned with the second stage†. Part 2 Efficient Market Hypothesis The strong form of efficient market hypothesis states that all information, no matter public or private, instantaneously affects current stock price. Semi-strong form is only concerned with public information, while the weak form suggests that current stock price reflects information in the previous prices. In short, they simply imply that in the long run, no one should be able to beat the market in terms of investment return. As is said in Fama’s paper in 1970, (Eugene F, 1970)â€Å"the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse†. However, Warren Buffet has always criticised efficient market hypothesis as much as he could. The major  reason is that, as a fundamental analysis advocate, (Roberg G, 2005)he thinks analysing all available information make an analyst at advantage. He once said, (Banchuenvijit, 2006)†investing in a market where people believe in efficiency is like playing bridge with someone who has been told it does not do any good to look at the cards.† Also in his speech at Columbia University in 1984, he mentioned, â€Å"ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.† (Roberg G, 2005)To illustrate, we can take Berkshire Hathaway’s acquisition of Burlington Northern Santa Fe Corp. in 2009 for example. At the time, shares of Burlington Northern had dropped 13 percent in 12 months. Also, the market was soft during GFC, so the possibility of competitive bids was low according to Tony Russo, a partner at Gardner Russo & Gardner, which holds Berkshire shares. If efficient market hypothesis does stand, the market would rebound quickly when GFC took place, and such opportunity of relatively low-priced acquisition would not exist. Even if it exists, other investor should anticipate quick upward adjustment of price and participate in bidding when they find out about this opportunity. However, this does not prove that fundamental analysis is superior, because intrinsic value is not yet clear defined, and how does Mr Buffet calculate the intrinsic value is still a mystery. Part 3 Capital Asset Pricing Model When examining assumptions of Capital Asset Pricing Model, it is obvious that Mr Buffett is at odds with almost every one of them. Firstly, the model assumes that all investors are Markowitz efficient, but as mentioned earlier, Mr Buffett does not treat variance of expected return as an absolute drawback, so the second rule that Markowitz Efficiency must follow does not stand. Secondly, the model is backed by the assumption that investors have  homogeneous expectations and equal access to opportunities, which suggests that everyone is supposed to have the same view of future profit stream. However, as a recent paper pointed out, (Frazzini, et al., 2013)Mr Buffett’s return is largely due to his selection of stocks. If everyone has the same view with Mr Buffett and the same access to the investment opportunities, then if not everyone, a large number of people should be as rich as Mr Buffett, when the reality is the opposite. So Mr Buffett would not agree with this assumption either. The third assumption is that capital markets are in equilibrium, which is practically what only efficient markets can achieve, which, as discussed above, is not in line with Mr Buffett’s view point. The final one, which is that Capital Asset Pricing Model only works within one period time horizon, is apparently against Mr Buffett’s long-term holding strategy. Apart from model assumptions, one of the strongest contradictions between Mr Buffett’s view point and Capital Asset Pricing Model is that the model is for short-term predicting purpose, which would clearly be categorised into (Roberg G, 2005)â€Å"speculation† instead of â€Å"investment† by Mr Buffett. In addition, â€Å"market portfolio† is not of practical use, compared with Mr Buffett’s way of only analysing businesses he is familiar with, because the market portfolio we use cannot truly represent the entire market. Part 4 Multi-factor Pricing Models Unlike Capital Asset Pricing Model, which has only one factor, in Multi-factor Pricing Models, such as Arbitrage Pricing Theory and Fama-French three-factor model, the rate of return is linked to several factors. As diversification is still suggested by the model, the same divergence on diversification exists with Mr Buffet’s strategies and Multi-factor Pricing Models. Moreover, differences also lie in the fact that multi-factor models usually take in some macroeconomic factors, which investors should not consider according to Mr Buffett, (Roberg G, 2005)the rationale being that if a single stock price cannot be predicted, the overall economic condition would be more difficult to predict. Despite the differences, some micro factors included in the multi-factor model, such as P/E ratio and book-to-market ratio, can also be used to conduct fundamental analysis to determine the intrinsic value and possibility of growth of a business. As such, the ideas of which factors to take into account can coincide within the two different approaches. Chart 2(Martin & Puthenpurackal, 2007) Factor Regressions of Berkshire Hathaway and Mimicking Portfolios In a paper by Gerald S. Martin and John Puthenpurackal, they conduct a regression analysis using Fama-French three-factor and Carhart four-factor models on monthly returns of Berkshire Hathaway and mimicking portfolios. (Martin & Puthenpurackal, 2007)The adjusted excess returns turn out to be significant with p-values < 0.024; the excess market return and high-minus-low book-to-market factors are again significant with p-values < 0.01. However, small-minus-big and prior 2-12 month return momentum factors are not significantly explanatory factors. As such, preliminary conclusion can be reached that book-to-value highminus-low can be a common factor in both multi-factor models and Mr Buffett’s fundamental analysis. In addition, the factors of firm size and momentum are not likely to be considered by Mr Buffett. Also, both Berkshire’s and mimicking portfolio’s returns outperform the multi-factor models in study. (Bowen & Rajgopal, 2009)But as is pointed out in another thesis, the superior performance is attributed to the earlier years and they observe no significant alpha during the recent decade. Part 5 Black-Scholes Option Pricing Model According to Berkshire Hathaway’s letter to shareholders in 2008,(Buffett, 2008)their put contracts reported a mark-to-market loss of $5.1 billion, and this led to Mr Buffett’s â€Å"criticism† towards the Black-Scholes formula as is claimed by the media. However, the loss was in fact caused by inclusion of volatility in the formula when volatility becomes irrelevant as the duration before maturity lengthens. As Mr Buffett said in the letter,(Buffett, 2008)if the formula is applied to extended time periods, it can produce absurd results. In fairness, Black and Scholes almost certainly understood this point well. But their devoted followers may be ignoring whatever caveats the two men attached when they first unveiled the formula. As such, Mr Buffett’s comment on Black-Scholes formula is more of self-criticism than the other way around. This is reflected in his earlier comment on performance in the letter,(Buffett, 2008)†I believe each contract we own was mispriced at inception, sometimes dramatically so. I both initiated these positions and monitor them, a set of responsibilities consistent with my belief that the CEO of any large financial organization must be the Chief Risk Officer as well. If we lose money on our derivatives, it will be my fault.† We can understand why Mr Buffett gave this â€Å"fair† comment about the formulae when referring to the Black-Scholes paper,(Black & Scholes, 1973)†if the expiration date of the option is very far in the future, then the price of the bond that pays the exercise price on the maturity date will be very low, and the value of the option will be approximately equal to the price of the stock. â€Å" Mr Buffett also commented that (Buffett, 2008)†The Black-Scholes formula has approached the status of holy writ in finance, and we use it when valuing our equity put options for financial statements purposes. Key inputs to the calculation include a contract’s maturity and strike price, as well as the analyst’s expectations for volatility, interest rates and dividends† and that â€Å"even so, we will continue to use  Black-Scholes when we are estimating our financial-statement liability for long-term equity puts. The formula represents conventional wisdom and any substitute that I might offer would engender extreme scepticism†. Despite Mr Buffett’s confession, a scholar studied the letter and reached a different conclusion why the loss was made:(Cornell, 2009)He first ruled out risk-free rate, inflation rate and drift and focused on volatility, which is consistent with where Mr Buffett thought he made a mistake. The lognormal diffusion assumption, which implies that volatility increases linearly with respect to the horizon over which it is measured, was discussed at length with controversial evidence. As such, its misuse is not a strong explanation regarding the absurd results. He then found out in the letter that Mr Buffett believed that inflationary policies of governments and central banks will limit future declines in nominal stock prices compared with those predicted by a historically estimated lognormal distribution. If Mr Buffet is right, then the Black-Scholes model will indeed significantly overvalue long-dated put options, to which a possible solution is making the left-hand tail truncated to reduce the value of long-dated put options. Summary Throughout this essay, we have discussed the common views and divergences between Mr Buffett’s investment strategies and Modern Finance Theories. Now we summarize the main points as follows: Common views Divergences Black-Scholes Option Pricing Model Modern Portfolio Theory Efficient Market Hypothesis Capital Asset Pricing Model Multi-factor Models Chart 3 Common Views and Divergences between Modern Finance Theory and Mr Buffett’s Strategies Modern Finance Theories Modern Portfolio Theory Divergences with Warren Buffet 1. Risk Defined as Volatility 2. Short Investment Horizon 3. Diversification Efficient Market Hypothesis Capital Asset Pricing Model Reliability of Fundamental Analysis 1. Markowitz Efficient Investors 2. Homogeneous Expectation and Equal Access to Opportunities 3. Markets in Equilibrium 4. Short Investment Horizon 5. Predicting Function Leads to Speculation 6. Impractical â€Å"Market Portfolio† 7. Diversification Multi-factor Models 1. Macro Factors 2. Diversification Chart 4 Detailed Divergences between Modern Finance Theory and Mr Buffett’s Strategies Bibliography Banchuenvijit, W., 2006. Investment Philosophy of Warren E. Buffet, Bankok: The University of Thai Chamber ofCommerce. Black, F. & Scholes, M., 1973. The Pricing of Options and Corporate Liabilities. The Journal of Political Economy, 81(3), pp. 637-654. Bowen, R. M. & Rajgopal, S., 2009. Do Powerful Investors Influence Accounting, Governance and Investing Decisions?, Washington D.C.: University of Washington. Buffett, W. E., 2008. Letter to Shareholders, Omaha: Berkshire Hathaway, Inc.. Cornell, B., 2009. Warren Buffet, Black-Scholes and the Valuation of Long-dated Options, Pasadena: California Institute of Technology. Davis, J., 1991. Lessons from Omaha: an Analysis of the Investment Methods and Business Philosophy of Warren Buffett, Cambridge: Cambridge University. Eugene F, F., 1970. Efficient Capital Markets: A Review of THeory and Empirical Work. The Journal of Finance, 25(2), pp. 383-417. Eugene F, F. & Kenneth R, F., 1992. The Cross-Section of Expected Stock Return. The Journal of Finance, XLVII(2). Markowitz, H., 1952. Portfolio Selection. The Journal of Finance, VII(1), pp. 77-91. Martin, G. S. & Puthenpurackal, J., 2007. Imitation is the Sincerest Form of Flattery: Warren Buffett and Berkshire Hathaway, Reno: University of Nevada. Roberg G, H., 2005. The Warren Buffet Way. 2 ed. Hoboken: John Wiley& Sons, Inc.. William F, S., 1964. Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), pp. 425-442.

Oliver Stone, Get Your Facts Straight

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