Product Risk And Uses Of Standard Deviation Finance Essay - Free Essay Example

Sample details Pages: 9 Words: 2614 Downloads: 8 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Risks and returns are the two most important concepts in the investing world. The concept of return, which is the profit on investment, is a very clear subject to many investors but the risk is often vague. Several approaches had been employed over times to measure the risks associated with investment portfolios. Don’t waste time! Our writers will create an original "Product Risk And Uses Of Standard Deviation Finance Essay" essay for you Create order Standard deviation is a popular basis for risk measurement used for investment purposes (Today Forward, 2010). Standard deviation hence helps to tell a story behind a data and the concept the normal distribution of data (Niles, 2010). This though has been a scary and sometimes complicated topic to people, students and practitioners as well (Niles, 2010; Williamson, 2010). Standard deviation was first discovered and used by a renaissance scientist in Victoria London, Karl Pearson in 1897 in his quest to help his friend Weldon to use the measure of variation to understand the evolution process and to use empirical evidence of natural selection to find out how new species emerged (Magnello, 2005). USES OF STANDARD DEVIATION Standard deviation is defined as a measure of dispersion of a set of data from its mean (Investopedia, 2010). It is calculated as the square root of variance. The more spread apart the data, the higher the deviation. It is also seen as a measure of variability among the values of a frequency distribution (Taylor Francis, 2009). Standard deviation, also known as historical volatility is also seen as the mean of the mean (Niles, 2010). However, in finance, standard deviation is applied to annual rate of return of an investment. This enables investors to measure and estimate the expected volatility of an investment over a period under consideration (Investopedia, 2010). The standard deviation is therefore given by the formula: where ÃÆ' Ãƒâ€ Ã¢â‚¬â„¢ = Standard deviation; ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã‹Å" = the sum of; and = means the mean (mathsrevision.net, 2010). Standard deviation assesses the degree of how the values are dispersed around the mean. It estimates the me an by assessing the error to which the mean of the sample is subject. In addition, it finds probability of events occurring in a given period (Manager-Net, 2008). In finance, the most common use of standard deviation is to the measure risk of holding a portfolio or security. It however, represents risk associated with a given security such as stocks, bonds, etc. Risk is an important factor used to determine how to efficiently manage a portfolio of investments as it determines the variation in return on the asset or portfolio and gives the investors a mathematical basis for investment decisions (Hedge funds Index, 2010). Standard deviation shows how close various values are clustered around the mean. When the standard deviation is small, the values are therefore tightly close together and the bell-shaped curve is steep. On the other hand, the bell curve is relatively flat when you have relatively high standard deviation. This is expressed graphically below (Niles, 2010). The re d area on the above graph represents one standard deviation from the mean and this account for about 68% of the people in this group. Two standard deviations from the mean are represented with green and accounts for about 95% of the people while three standard deviations from the mean are represented with blue and accounts for 99% of the people (Niles, 2010). STANDARD DEVIATION AS A RISK INDICATOR Standard deviation is also seen to have some outstanding qualities. Fitzgerald (1999) points out that standard deviation is used to estimate how accurate the sample mean is as an estimate of the population mean. In addition, it can also be used to convert scores which are calculated on different scales to scores on standard scale known as standard scores and this in turn gives an accurate idea of its relative importance or size. This, he said has several advantages for the decision maker. In statistical analysis, standard deviation is the most widely used measure of variation. Not only that, it is regarded as an excellent means of summarizing the extent of concentration of dispersion of values and it is relatively easy to use (Social Studies 201, 2006; Sharma, 2007). It also plays a very important role in comparing skewness and correlation (Sharma, 2007). Standard deviation also provides additional understanding of the future volatility of a funds performance, comparable to volatil ity of other funds in the sector or benchmark for the fund. The higher the volatility, the higher the average returns (CFP, 2005). In risk measurement, standard deviation is seen as important in modern portfolio theory and tin risk quantification by way of price volatility for asset classes and securities. In the measure of spread, standard deviation is very useful in that if the mean and standard deviation of a normal distribution are known, the percentile rank linked with any given score can be computed and it is also mathematically traceable (Hyperstat online contents, 2010). However, standard deviation also has its defects. It is believed to be difficult to calculate and interpret. It is also a mathematical construction which may be difficult to explain intuitively (Social Studies 201, 2006). More weight is however given to extreme values and less weight to those near the mean. (Sharma, 2007). Ibrahim et al, 2006, believes that standard deviation is influenced by extreme scor es. Arguably, while some critics believe that standard deviation offers a valuable tool for comparing one type of risk and is found useful in getting a general idea of available risks, others believe that it fails to reflect the true position of what happens in the capital markets in terms of how returns are distributed around the mean (JP, 2006). Standard deviation is also flawed in that in the calculation, it assumes a normal distribution and this normal distribution seems to work well in physics and general statistic and not risk. This is because it fails analysing the tendency of investment return to suffer fat tail distribution which constantly hunts the investment world. This simply means that less than normal events can and do happen once in a while and the basic concept of standard deviation does not cover this (JP, 2006; Glogger, 2008; JP Morgan, 2008/09). JP, 2006 also believes that standard deviation should neither be neglected nor used exclusively in risk measurement as the real world imperfections demand that a collection of flawed risk measures can be put together to outline the overall risk available. Carther, 2007 also points out the importance of standard deviation in reporting a funds volatility. It indicates a tendency of funds to drastically rise and fall in a short period of time. She however sees the calculation as intimidating though useful. There has been a contention however on the reliance of standard deviation as a measure of portfolio risk. This is because it is seen as being inconsistent. It is also said to assume symmetric distributions as it treats desirable upside movements as if they were as undesirable as downside movements (JP Morgan, 2008/09). This has called for alternatives in measure of risk. ALTERNATIVES TO STANDARD DEVIATION JP Morgan, (2008/09), sees Conditional Value at Risk (CVaR95) as it defines the average real portfolio loss (gain) in relative to the starting portfolio in the worst five percent of scenarios which is based on 10,000 simulations. Unlike standard deviation which sees risk as being only a one standard deviation event and fails to capture the fat left tail effects, CVaR95 is seen to have overcome this drawback as it captures both the asymmetric risk preferences of investors which is the fear of loss being greater than the gain and the incidence of fat left tails which is prompted by skewed return distributions (JP Morgan, 2009/09). The absolute mean deviation is regarded as the most direct alternative for standard deviation. This is the average of the absolute differences between each score and the overall mean. In a realistic situation where some of the measurements are in error, the mean deviation is seen to be more efficient than standard deviation. Though the standard deviation and mean deviation are not used for same measurement, standard deviation is always greater than the mean deviation, and there is more than one possible mean deviation to standard deviation and vice versa, the mean deviation is seen to be simpler to compute than the standard deviation (Gorard, 2004). Sharpe ratio derived in 1966 by William Sharpe has been popular in risk/return measures in finance. It is given by the formula; Source: https://www.investopedia.com/terms/s/sharperatio.asp Gaurav and Kat (2002) point that one outstanding quality of Sharpe ratio is its simplicity in performance evaluation. This is done by calculating the highest expected return for a given standard deviation that is attainable which is the sum of interest rate and the product on the Sharpe ratio of market portfolio and standard deviation in question. An unlimited number of normally distributed funds can therefore be evaluated using this (Gaurav and Kat, 2002). Sharpe ratio also shows if a portfo lio return are due to result of excess risk of good investment decision, as the higher the Sharpe ratio, the higher the risk adjusted performance and vice versa (Vishwanath and Krishnamurti, 2009). Arguably, in as much as Sharpe ratio is simple, popular and easy to calculate, the drawback is that it is a restricted measure in the mean-variance frame work and it does not give a full picture of the fund performance (Jiang and Zhu, 2009.) It also assumes that the risk free rate is constant and this is not true. In addition, it can be problematic when it uses standard deviation to calculate the ratio of asymmetric return as standard deviation is most appropriately used to measure strategies that has approximate symmetric return distribution. In addition the Sharpe ratio is based on historical data and historical data are not reliable because past performance is not always an indicator for future results (Quantshare, 2010). Jensens Alpha is also an alternative measure of risk to stand ard deviation. It however, measures the degree to which a stocks average return exceeds the expected return, given the firms beta. Source: https://www.investopedia.com/terms/j/jensensmeasure.asp The outstanding quality of Jensens alpha is its ability to do a hypothesis test rather than comparison of the results (Beck et al, 2007). Similarly, the Treynor ratio looks like the Sharpe ratio, the difference being that the Treynor ratio uses Beta as a measurement of volatility. Treynor relies on Beta and this simply implies an assumption that non-systemic risk can be mitigated by diversification. As a result, the ratio has a limited utility in evaluating non-diversified portfolios. Treynors ratio is calculated as (Average Return of  the Portfolio Average Return of the  Risk-Free Rate)  /  Beta of the Portfolio Source: https://www.investopedia.com/terms/t/treynorratio.asp Comparatively, these measures are not suitable in all scenarios. Jense ns and Treynors ratio are not suitable for evaluation of hedgefunds as it gives no opportunity for the investment to be repriced and this, as a result can make investments appear less risky than they are. In addition, the rewards to risk ratios will most likely run for this portfolio in the premium collection cycle until a leveraged loss is sustained (Zigler, 2007). Conclusion Conclusively, in the investment world, risk is very important and cannot be separated from return and performance. Every investment, however involves some form of risk which can either low or high. Risk is therefore quantifiable both in relative and absolute terms and a good understanding of risk will help an investor or financial services make better financial decisions (Lamb, 2008). Beck, K and Niendorf, B. 2007. Good to Great, or Great Data Mining. (Online). Available from: https://69.175.2.130/~finman/Orlando/Papers/GreatDataMining.pdf. (Accessed 25th October, 2010). Carther, S. 2010. Understanding volatility measurements. (Online). Available from: https://www.investopedia.com/articles/mutualfund/03/072303.asp (Accessed 15 October, 2010). Certificate in Financial Planning (CFP), 2005. CF2: Investment and Risk. London. BPP Professional Education. Gaurav, A and Kat, H M. 2002. Generalization of the Sharpe Ratio and the Arbitrage-Free Pricing of Higher Moments. ISMA Di scussion Papers in Finance 2002-15. (Online). Available from: https://www.icmacentre.ac.uk/pdf/discussion/DP2002-15.pdf. (Accessed 21 October, 2010). Glogger, M. 2008. Risk and Return. (Online). Available from: https://university.akelius.de/library/pdf/risk_and_return_martin_glogger.pdf (Accessed 12 October, 2010). Gorard, S. 2004. Revisiting a 90-year-old debate: the advantages of the mean deviation. Online. Available from: https://www.leeds.ac.uk/educol/documents/00003759.htm. (Accessed 20th October, 2010). Graeme, P. 2010 Standard Deviation. (Online). Available from: https://moneyterms.co.uk/standard-deviation/. (Accessed 08 October, 2010). Fitzerald, J. (1999). The Uses of Variation. (Online). Available from: https://www.actualanalysis.com/vary.htm (Accessed 10 October, 2010) Hedge fund Consistency Index, 2010. Standard Deviation (Online). Available from https://www.hedgefund-index.com/d_standarddev.asp. (Accessed 10th October, 2010). Hypersat Online Contents, 2010. Standard Deviation and Variance. (Online). Available from: https://davidmlane.com/hyperstat/A16252.html. (Accessed 20th October, 2010). Ibrahim, A.S and Mikhail N.N.H. 2006. Measure of Dispersion (Variability). Online. Available from: https://www.seci.info/amalsamy/Epi%202.1.pdf. (Accessed 10th October, 2010). Investopedia, 2010. Standard Deviation. (Online), Available from: https://www.investopedia.com/terms/s/standarddeviation.asp. (Accessed 05th October, 2010.) Jiang, G J and Zhu, K X. 2009. Generalized Sharpe Ratios: Performance Measures Focusing on Downside Risk. International Research Journal of Finance and Economics. ISSN 1450-2887 Issue 30.pp. 134-136. (Online). Available from: https://www.eurojournals.com/irjfe_30_10.pdf. (Accessed 15 October, 2010). JP, 2006. In Praise of Volatility. The Capital Spectator; Investing, Asset allocation, Economics the search for the Bottom line. 12.10.2006 (Online). Available from: https://www.capitalspectator.com/archives/ 2006/10/in_praise_of_vo.html. (Accessed 15 October, 2010). JP Morgan, 2008/09. Alternatives to Normality; Some lessons from the credit crisis. LV-JPM3044. PP 4. (Online). Available from: https://www.jpmorganassetmanagement.co.uk/Institutional/_documents/JPM3044%20Alternatives%20to%20normality%20paper%20indd%20125.pdf. (Accessed 25th October, 2010). Lamb, K. 2008. Measuring and Managing Investment Risk. (Online). Available from: https://www.investopedia.com/articles/08/risk.asp. (Accessed 20 October, 2010). Magnello, M.E, 2005. Karl Pearson and the Origin of Modern Statistics: An Elastician becomes a Statistician. The Rutherford Journal; The New Zealand Journal for the history and Philosophy of Science and Technology. Vol 1.(Online). Available from: https://www.rutherfordjournal.org/article010107.html (Accessed, 05th October, 2010). Managers-net, 2008. Standard Deviation and Variance. (Online). Available from: https://managers-net.org/stddev.html (Accessed 05 October, 201 0). Mathsrevision.net, 2010. Standard Deviation. (Online). Available from: https://www.mathsrevision.net/gcse/pages.php?page=42 (Accessed 10 October, 2010). Niles, D. 2010. Standard Deviation. (Online). Available from https://www.robertniles.com/stats/stdev.shtml. (Accessed 05th October,2010). Quantshare Trading Software, 2010. Sharp Ratio- Part 2. (Online). Available from: https://www.quantshare.com/sa-90-sharpe-ratio-part-2. (Accessed 25th October, 2010). Sharma, J.K. (2007). Business Statistics. India: Dorlin Kindersely PVT. Ltd. (Online). Available from: https://books.google.co.uk/books?id=tVkYRf0ydE8Cpg=PA147lpg=PA147dq=disadvantages+of+standard+deviationsource=blots=RE9brmrb4ssig=NUe_zuXTriNB65PYkpQ-xsiVMCEhl=enei=OXfDTMuOB5HQjAfwx526BQsa=Xoi=book_resultct=resultresnum=4ved=0CCcQ6AEwAzgU#v=onepageq=disadvantages%20of%20standard%20deviationf=false. (Accessed 12th October, 2010). Social Studies 201. (2006). Standard deviation and variance for percentage distributi ons. Journal of Social Studies. Section 5.10, pp 259-264. (Online). Available from: https://uregina.ca/~gingrich/o2306.pdf (Accessed 12th October, 2010). Taylor Francis, 2009. Standard Deviation from the Dictionary of British Education. (Online). Available from: https://www.bookrags.com/tandf/standard-deviation-5-tf/. (Accessed 05th October, 2010). TodayFoward; The Simple Way to Plan, Manage, and Organize Your Money, 2010. Understanding Standard Deviation as a Measure of Risk. (Online). Available from: https://todayforward.typepad.com/todayforward/2010/04/understanding-standard-deviation-aka-risk.html. (Accessed: 07th October, 2010). Vishwanath, R and Krishnamurti, C (2009). Investment Management: A Modern Guide to Security Analysis and Stock Selection. Heilderberg, Library of Congress. (Online). Available from: https://books.google.co.uk/books?id=oowq_PkME3UCprintsec=frontcover#v=onepageqf=false Accessed: (20 October, 2010). Williamson, D. 2010. Accounting Business Spr eadsheeting. (Online). Available from: https://www.duncanwil.co.uk/stdev.html (Accessed 05th October, 2010). Zigler, B. 2004. No Pain, No Gain: Risk-adjusted returns in action. (Online). Available from https://registeredrep.com/advisorland/career/no_pain_no/. (Accessed 21 October, 2010).

Racism s Impact On Our Society - 1625 Words

Racism’s Impact on Our Society In Kiese Laymon’s â€Å"My Vassar College Faculty ID Makes Everything OK†, he cites many examples of pieces of racism that he witnessed in Poughkeepsie, New York, a small town in New York on the Hudson River. This town is the last place where the stereotypes suggest racism lives, a wealthy small town in the northeast United States. Kiese Laymon looks at the experiences of black and brown people in America to highlight the effects of racism in their everyday lives. While Kiese Laymon is showing us that throughout his life he has experienced discrimination and racial profiling, these terrible experiences have helped him develop extraordinarily strong bonds with others who experience the same thing. Throughout this†¦show more content†¦Laymon also experiences racism in his own life as a professor who is treated quite poorly by his co-workers. Laymon is asked for his ID by security guards because they don’t believe that he works there and is talked down to b y professors and deans at Vassar College. Laymon writes, â€Å"I left that meeting knowing that there are few things more shameful than being treated like a nigger by †¦ intellectually and imaginatively average white Americans who are not, and will never have to be, half as good at their jobs as you are at yours† (Laymon, â€Å"My Vassar College ID Makes Everything OK†). This quote makes the reader critically evaluate those who are extremely successful and whether they could be as successful as they are if they were put in the disadvantageous position that Laymon is in. Laymon’s arguments cause his readers to think about their lives and how differently they could be if they were just born a different color. Not only does he divulge into his and other’s life experiences with racism, but he also looks at the instances where he intervened in this issues. Laymon comes to the defense of his wrongly accused and arrested students because he understands the terrible feeling that is accompanied by being racially profiled. Laymon writes, â€Å"Vassar College, ... a place so committed to access and what they call economic diversity, did its part to ensure that a black Poughkeepsie child, charged

Bill Gates Essay Research Paper William H free essay sample

Bill Gates Essay, Research Paper William H. Gates III and His Giant Bill Gates, cofounder of the Microsoft corporation, holds 30.7 per centum of its stock devising him one of the richest people in the United States. He was the selling and gross revenues strategist behind many of Microsoft # 8217 ; s package trades. Their package became the industry criterion in the early 1980s and has merely increased in distribution as the company has grown, so much that the Federal authorities is proposing that Microsoft has violated Sherman and Clayton antimonopoly Acts of the Apostless. Bill Gates # 8217 ; first involvement in computing machines began at Lakeside, a private school in Seattle that Gates attended. There he wrote his # 8220 ; first package plan when I was 13 old ages old. It was for playing tic-tac-toe # 8221 ; ( Gates 1 ) . It was at Lakeside that Gates met Paul Allen, who subsequently became cofounder with Gates of Microsoft. There they became friends and # 8220 ; began to mess around with the computing machine # 8221 ; ( Gates 2 ) . Back in the 1960ss and early 1970ss computing machine clip was expensive. # 8220 ; This is what drove me to the commercial side of the package concern # 8221 ; ( Gates 12 ) . Gates, Allen and a few others from Lakeside got entry-level package programming occupations. One of Gates early plans that he likes to boast about was written at this clip. It was a plan that scheduled categories for pupils. # 8220 ; I sneakily added a few instructions and found myself about the lone cat in a category full of misss # 8221 ; ( Gates 12 ) . In 1972 Intel released their first microprocessor bit: the 8008. Gates attempted to compose a version of BASIC ( Beginner # 8217 ; s All-purpose Symbolic Instruction Code ) for the new Intel bit, but the bit did non incorporate adequate transistors to manage it. Gates and Allen found a manner to utilize the 8008 and # 8220 ; started Traf-O-Data, a computing machine traffic analysis company # 8221 ; ( Clayton 452 ) It worked good nevertheless, marketing their new machine proved to be impossible. # 8220 ; No one really wanted to purchase the machine, at least non from a twosome adolescents # 8221 ; ( Gates 14 ) . Gates and Allen had more less successful enterprises in get downing a package company. In 1974 Intel announced their new bit: the 8080. The two college pupils sent off letters # 8220 ; to all the large computing machine companies, offering to compose them a version of BASIC for the new Intel bit. We got no takers # 8221 ; ( Gates 15 ) . While at Harvard, the cool thing to make was to slack off on categories for most of the semester and attempt and see how good the pupil could make at the terminal. Steve Ballmer and Gates # 8220 ; took a tough graduate- degree economic sciences class together- Economics 2010. The professor allowed you to wager your whole class on the concluding if you choose # 8221 ; ( Gates 40 ) . They did that, did non make anything for the category all semester, and studied and got A # 8217 ; s. During one of these slack off periods, Gates and Allen found a really little computing machine: the Altair 8800 # 8220 ; ( # 8217 ; Altair # 8217 ; was a finish in a Star Trek episode ) # 8221 ; ( Gates 16 ) . It had a few switches and visible radiations on the forepart that you could acquire to wink, but that was about all. This new bit had great possible, but there was no manner to plan it. After five hebdomads of non traveling to categories, non eating or kiping on a regular basis, their version of # 8220 ; BASIC was written- and the universe # 8217 ; s first personal computer package company was born. In clip we named it # 8216 ; Microsoft # 8217 ; # 8221 ; ( Gates 17 ) . Gates left Harvard on leave in 1975. Microsoft # 8217 ; s large economic interruption came in 1980 when # 8220 ; IBM- the computing machine industry leader- asked Gates to develop an operating system for its new personal computing machine # 8221 ; ( Clayton 452 ) . IBM normally did non utilize external aid in package design or hardware industry, but they wanted to let go of the first personal computing machine in less than a twelvemonth. # 8220 ; IBM had elected to construct its Personal computer chiefly from off-the-rack constituents available to anyone. This made a platform that was basically unfastened, which made it easy to copy # 8221 ; ( Gates 47 ) . IBM bought the microprocessors from Intel and licensed the operating system from Microsoft. Microsoft bought some work from another company in Seattle and hired its top applied scientist, Tim Paterson. The system became known as the Microsoft Disk Operating System, or MS-DOS. Now because of the licensing understanding between IBM and Microsoft, IBM had no control over Microsoft # 8217 ; s distribution of its MS-DOS to other companies who wanted to clone the IBM machine. This determination by IBM is still under great argument. Many industry analysts argue that IBM should hold waited for their ain package developers to develop an operating system or that IBM should hold purchased MS-DOS from Microsoft. However, from a more wide economic image of IBM # 8217 ; s determination, it may hold merely turned out for the good of Microsoft, IBM and the mean computing machine user. Microsoft # 8217 ; s # 8220 ; end was non to do money straight from IBM, but to gain from licencing MS- DOS to computing machine companies that wanted to offer machines more or less compatible with the IBM PC # 8221 ; ( Gates 49 ) . By leting Microsoft to sell MS-DOS to other companies, this made IBM # 8217 ; s Personal computer the industry # 8220 ; de facto # 8221 ; criterion. Wit h other companies scrambling to vie with IBM, Microsoft licensed MS-DOS to these companies and fulfilled one of Microsoft # 8217 ; s ends: # 8220 ; to make the criterion for the industry # 8221 ; ( Jobs 5 0 ) . Compaq Computer of Houston â€Å"launched [ the first ] ringer in 1982 and attained FORTUNE 500 position a light four old ages later† ( Schlender 42 ) . Hundreds of companies followed. MS-DOS dominated the market much like VHS beat out Betamax and how early Television gross revenues boomed. The more people bought the merchandise, the more companies produced it and with the telecasting, the more sets were sold, the more scheduling was available. This was a chief ground why Apple # 8217 ; s Macintosh merely controlled 9 % of the market ( Schlender 40 ) . # 8220 ; The Personal computer narrative would be far different if Apple had licensed its operating system package to other computing machine shapers early on # 8221 ; ( Cook 64 ) . In consequence, they had a monopoly on their ain system and package. Their deficiency of competition kept monetary values up and package choice down. Apple has merely late licensed some Macintosh runing systems to other companies. Microsoft has thrived on the ability to anticipate and understand the computing machine needs of the mean user. After Microsoft made their name with MS-DOS, they started work on a graphical based operating system much like Apple # 8217 ; s Macintosh computing machine. They called it Windows. Windows # 8220 ; swept the market # 8221 ; ( Clayton 452 ) . By 1993 it was selling over 1 million transcripts a month # 8220 ; and Microsoft runing systems ran about 90 per centum of the universe # 8217 ; s PC s # 8221 ; ( Clayton ) . Microsoft had good achieved their end of making the criterion for the industry ( Jobs 50 ) . However, because Microsoft enjoys a close monopoly, get downing in June of 1990, the # 8220 ; Federal Trade Commission, which portions antimonopoly legal power with the Department of Justice, took the first cleft, softly opening an enquiry # 8220 ; ( Cook 64 ) . Many other package companies have # 8220 ; cheered # 8221 ; ( Pain ) the authorities and offered a floo d of aid. One of the large ailments of computing machine makers is that they # 8220 ; must hold to pay package royalties # 8230 ; for every computing machine they ship, irrespective of whether the computing machine is sold with any Microsoft software. # 8221 ; It is # 8220 ; an all or nil trade # 8221 ; ( Rohm 92 ) . Steve Jobs, cofounder of Apple and laminitis of Next, calls Microsoft the # 8220 ; # 8217 ; little opening # 8217 ; through which every other company must squash if it wants to take part in the Personal computer market # 8221 ; ( Schlender 41 ) . After two old ages of probe, # 8220 ; commissioners were deadlocked on whether to register an antimonopoly ailment # 8221 ; ( Cook ) . However, antimonopoly head Anne Bingaman continued the procedure with a high-profile probe. After roll uping information, carry oning interviews, and speaking to Gates, Microsoft signed an understanding that would necessitate Microsoft to do # 8220 ; minor alterations in the manner it licenses DOS and Windows to computing machine makers # 8221 ; ( Cook ) . Federal District Court Judge Stanley Sporkin rejected the proposed statement. Bingaman continued the instance. She hired Sam Miller, a test attorney from San Francisco jurisprudence house of Morrison A ; Foerster. Miller was to head up judicial proceeding against Microsoft. What will come of the case? If Microsoft agrees to the following colony, it will # 8220 ; level the playing field # 8221 ; ( Rohm 94 ) or they could stop up the following AT A ; T. It is up to those in Washington and at Microsoft. If Microsoft looses, # 8220 ; alternatively of merely DOS with its immense portion of the market, if you # 8217 ; ve got three or four runing systems each holding 25 or 30 per centum of the market, you # 8217 ; re traveling to supply a batch more inducement for those people to predisclose or unwrap interface operations to everybody # 8221 ; ( Rohm 94 ) said a attorney for the instance. The operating system that works with all applications and other runing systems wins. That is IBM and Apple # 8217 ; s Taligent and OS/2 # 8217 ; s scheme. Right now Bill Gates is constructing a multi million dollar H2O front place outside of Seattle, equipped with all the technological luxuries that a few old ages ago merely scientific discipline fiction authors could woolgather up, for he and his married woman, Melinda French. He has a 2.5 million dollar book trade that is selling now ( Lyall 20 ) . What is in Gates hereafter? He loves his work at Microsoft and continues to remain involved with running the company. He has gotten with Craig McCaw and announced programs to establish a 9 billion dollar satellite-communications by 2001. He is besides working with Sega, Time Warner and TCI merely to call a few. As for his monopolistic image in computing machine circles, merely clip will state. Cook, William J. U.S. News A ; World Report. # 8220 ; A Pain for Windows. # 8221 ; Feb. 27,1995 p64-66 Clayton, Gary E. Ph.D. Economics Principles and Practices. New York: Glencoe/McGraw-Hill 1995 Economist, The: The World This Week. March 26, 1994 p7 Economist, The: Business. January 22, 1994 p73 Fortune. June 28 1993 Gates, Bill. The Road Ahead. New York: Penguin Group 1995 Lyall, Sarah. Technos: # 8220 ; Are These Books, or What? CD-ROM and the Literary Industry. # 8221 ; Winter 1994 p20-23 Quittner, Joshua. The Seattle Times. Seattle, # 8220 ; Electronic Peek into the Future. # 8221 ; September 5, 1993 D1+ Rohm, Wendy Goldman. Wired: # 8221 ; Oh No, Mr. Bill! # 8221 ; April 1994. p90+ Schlender, Brenton R. Fortune. # 8220 ; Jobs and Gates Together. # 8221 ; Aug. 26, 1991 p50+ Schlender, Brenton R. Fortune: # 8221 ; The Future of the PC. # 8221 ; Aug 26, 1991, p40+

Work Values

Introduction The purpose of this essay will be to determine the influence of individual work values on the commitment of an employee to an organization. This essay will seek to define the meaning of work values and also employee commitment and how work values influence the commitment of an employee to an organization.Advertising We will write a custom essay sample on Work Values specifically for you for only $16.05 $11/page Learn More The type of organization that will be evaluated will be a multinational telecommunications corporation (Vodafone) that has a high number of employees and handles a large customer base. The essay will seek to determine the kind of organizational factors that exist within the multinational company that affect the work values and organizational commitment of the employees as well as the available structures of work values that are used in many multinational organizations around the world. The discussion will mostly involve the use of American literature and research work that is available for the last ten years which has offered extensive feedback on the topic. The focus on Vodafone will be suitable for this study given the diverse number of employees that work for the multinational company around its global offices. The company employs over 80,000 employees around the world who are from diverse ethnic backgrounds and possess individual work values that are necessary when it comes to their job performance. The study will therefore discuss the concepts of work values and employee commitment by focusing on the global telecommunications company so as to gain a more practical interaction of how work values influence or affect employee commitment to an organization. Work Values The concept of work values has continued to receive increasing interest amongst various scholars and researchers around the world especially with regards to its influence on the individual commitment of an employee to their organizatio n.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More To better understand the concept, work values are referred to as the set of traits or qualities that are considered to be important by an employee in the performance of their work duties and responsibilities. They are also defined as those qualities that employees within an organization desire to have when performing their work. Work values are viewed as measures of employee performance since they determine the efficiency and effectiveness of a worker when it comes to completing certain tasks within the organization. They also provide a measure of the work preferences, ethics, culture and beliefs of the employee which prove to be beneficial when it comes to performing organizational tasks. Work values also provide a measure of personal need and satisfaction as they allow an employee to reflect upon their individual goals and objectives in t he work place and what they have to do to satisfy their needs (Levy 2003). Dose (Cited by Matic 2008) defined work values as the standards of evaluation related to work which employees used to measure the importance and significance of work preferences. Dose further categorises work values to fall under two dimensions with the first dealing with work values that are based on moral dimensions and the second dealing with the degree of consensus that exists on the importance and desirability of particular work values. According to Matic (2008), the very first studies of work values were conducted to explain the differences of employee performance and worker motivation when it came to job performance. Researchers such as Hoppe and and Hofstede, who were some of the theorists that conducted early studies on the effect of work values, had their research work incorporated into the development of Maslow’s Hierarchy of Needs and also Herzberg’s explanation of intrinsic and extr insic needs.Advertising We will write a custom essay sample on Work Values specifically for you for only $16.05 $11/page Learn More Matic (2008) noted that Hofstede and Hoppe’s work played an important part in providing a theoretical explanation of how work values motivated employees to perform their work duties. Based on both current and recent research, work values present a strong implication for many managers as they determine the level of motivation an employee will have towards their job and also the kind of job satisfaction employees will derive from performing their work duties. Before assigning any duties and tasks, managers usually observe the work values of their employees so that they can be able to determine what work ethic and motivation they possess when carrying out their work duties. Vodafone, as a multinational corporation, is constantly facing changing and evolving management practices which has forced its management to continu ally re-evaluate the work duties and responsibilities of their employees. In doing so, the company also has to consider the individual work values of its employees to ensure that the management practices and work duties do not conflict with the individual behaviours of an employee. Therefore identifying the work values of an employee plays an important role in redefining work duties and responsibilities within an organization. According to Hofstede (2001), the work values possessed by an individual worker are usually significant for two reasons; the first of which being that they provide an excellent measure of an employee’s work ethic since they are determined by sociological and cultural factors. The second reason is that work values have a direct impact on the various faucets and activities that occur within an organization such as employee motivation, job satisfaction, conflict resolution and employee commitment to the organization.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More As a result of this, many organizations around the world have restructured their activities to encompass work values which will be important in achieving value congruence in business operations (Hofstede 2001). Because the image of an organization is closely linked to the work ethics the organization wants to convey to its various stakeholders, the individual work values of an employee in all the levels of management become increasingly important especially for a corporation such as Vodafone that has a large employee base. Work values become important since they provide managers with a perspective of what is right and wrong within an organization According to Matic (2008), work values encompass emotions, cognitive processes and behaviour that are related to the performance of work duties and responsibilities where employees demonstrate work value characteristics such as individuality, punctuality, attentiveness, subjectiveness and cooperation towards their organizational tasks and d uties. The personality of an individual is also an important factor when it comes to determining the work values of an employee and this therefore contributes to the overall performance of an employee in their work duties. The implication of work values on multinational corporations becomes important especially when it comes to organizational performance and leadership. Given the large numbers of employees who work for Vodafone, job performance becomes a top priority due to the large volume of customer queries that are handled by the global telecommunications company in a day or an hour. Leadership also becomes important to such an organization especially when managers have to delegate certain roles to their junior staff such as monitoring the floor operations of the call centre or monitoring the number of calls that have been made in an hour. Apart from organizational performance and leadership, other implications of work values to an organization are that they assist managers to p repare employees during periods of change, they assist human resource managers to develop suitable and effective reward/compensation systems, they affect changes in management practices and leadership styles and they facilitate open communication within an organization (Li, 2008). Employee Commitment Employee commitment which is at times referred to as organizational commitment is the psychological attachment that an employee has to their place of work. The most common measures that are used to determine the commitment of an employee to an organization include job satisfaction which deals with the feelings an employee has towards their job and organizational identification which is the degree of belonging and oneness that an employee derives from working for an organization. To further explain employee commitment, Meyer and Allen developed a three-component model of commitment that would be used to identify the various types of commitment that existed within an organization (Mutheve loo and Rose 2005). The affective commitment level which is the first part of the model refers to the positive emotional attachment that an employee demonstrates towards their work place. According to Meyer and Allen, employee’s who were affectively committed to an organization were able to identify with the goals and objectives of an organization which in turn enabled them to have sense of belonging. Employees who demonstrated affective commitment usually did so because they personally wanted to display attachment and loyalty to the organization. The second part of the model was referred to as continuance commitment which refers to an individual’s commitment to the organization based on their perceived cost of losing organizational membership. This perceived loss is in terms of economic benefits which the employee gains from committing to an organization, social costs such as friendship ties with co-workers and also financial costs such as rewards and compensations th at arise from belonging to an organization (Mutheveloo and Rose 2005). The third part of Meyer and Allen’s commitment model was normative commitment which refers the feelings of obligation that an employee has towards an organization. These feelings are usually derived from a variety of sources such as when an organization has invested in the training and development of the employee. An employee in such a case feels obligated to the organization to work extra hard in their work duties so that they can be able to repay the organization for the training exercise. This three component model of employee commitment therefore explains the various levels/types of commitment that an employee has towards an organization. According to Mutheveloo and Rose (2005), the concept of employee commitment forms the basis for most human resource management activities within an organization as most human resource policies are directed towards increasing the level of employee commitment with an or ganization. Various researchers such as Meyer et al have set out to identify the various types of employee commitment by viewing them as constructs that can be used to explain the attitudes and behaviours of employees when performing their work duties. Meyer et al developed three groups that would be used to explain employee commitment to an organization with the first group being commitment to their work or job where employees demonstrated feelings of attachment towards their job and work responsibilities. Employees with this kind of commitment derived a sense of job satisfaction because of their commitment to work (Mutheveloo and Rose 2005). Work/job commitment according to the researchers did not however refer to the level of commitment that an employee had to the organization or their jobs. It instead focused on the level of their commitment towards the employment itself where an employee’s sense of duty towards their work was seen as a strong measure of employee commitme nt. The second group according to Meyer et al was career/professional commitment where employees demonstrated a sense of commitment or attachment to jobs that guaranteed them career progression. This category also explained employee attachment to be in the form of any professional training offered to an employee that was meant to improve their professional qualifications (Mutheveloo and Rose 2005). The third category that would be used to explain employee commitment according to Meyer et al was organizational commitment which refers to the willingness of employees to accept organizational goals, objectives, beliefs and values as their own by working to achieve them. The researchers noted organizational commitment was a subset of employee commitment as it required the full involvement and participation of employees in work related activities Other researchers who developed models that could be used to explain employee commitment within an organization include Angle and Perry with the ir 1981 model of value commitment, O’Reilly and Chatman with their multidimensional model of compliance, identification and internalization and Jaros et al with their multidimensional model of affective, continuance and moral levels of employee commitment (Muthuveloo and Rose 2005). These categorizations and models of employee commitment demonstrate the importance of employee commitment when it comes to motivation to perform work duties within the workplace. Vodafone has conducted various employee satisfaction surveys to determine the level of commitment that its employees have to the company. These surveys usually take place once every year and they are usually conducted with the sole purpose of determining employee commitment to the global telecommunications company. The survey also assesses job security, career progression within the company, management practices of senior executives within the organization as well as the overall satisfaction of employees within the organi zation. The two most important indicators that are used in the survey include employee commitment and employee satisfaction as they form the benchmark of Vodafone in all the international and local divisional offices. Influence of Work Values on Employee Commitment According to researchers such as Mottaz, Bruning and Snyder, work values play a significant role in the commitment of an employee to an organization especially when the work values manifest themselves in the behaviour of the employee. These researchers highlight the fact that employee commitment usually arises from a set of values displayed by an employee towards their work for an extended period of time. Researchers such as Huang, Kidron and Charanyanada have viewed work values to be a major influence of employee commitment because work values strengthen the attachment an employee has towards their organization. Charanyanada in his 1980 study highlighted the fact that an employee’s investment of time and energy de monstrated the reciprocal relationship that existed between commitment and work values (Ho 2006). Since work values encompass the behaviour and personality of an individual, the interaction that exists between the individual’s personal characteristics and their work environment is termed to be dynamic as it determines the level of commitment that the employee will have towards the organization. If the interaction is weakened over time, the individual might lose their sense of commitment forcing them to leave the organization and if the interaction is reinforced the individual might decide to increase their level commitment to the organization by engaging in more work duties. The various characteristics that make up an employee’s work values therefore have a direct influence on the commitment of the employee to the organization (Ho 2006). Work values according Wollack cited by Ho 2006) are an important construct of employee commitment to an organization as they play an integral role when it comes to influencing the affective responses of an employee in their place of work. Wollack argues that the work values an employee possesses are usually gained from past work experience within the organization and they therefore play an important in determining how an employee will perform their work duties within the organization. Wollack continues further with his argument on the influence work values have on the commitment of an employee by stating that the personal characteristics of an individual employee usually interact with the stimuli and environmental conditions that exist in the work place to form the work values that an employee possesses (Ho 2006). According to other researchers such as Brown who conducted his studies in 1996, Mathieu and Zajac who conducted their studies in 1990 and Rabinowitz and Hall who conducted their studies on work values in 1977, work values have an effect on the overall commitment of an employee to the organization as the y represent the three work attitudes that are required from all employees which include job involvement, career salience and organizational commitment. Because work values represent the psychological investment an employee has placed on their work, they play a great role in determining whether an employee will remain loyal and attached to the organization. Rokeach concedes that work values are usually gained during the socialisation process that an employee goes through once they become oriented to the organization. Rokeach also concedes that the most valuable socialisation for a human being usually occurs in the home during their formative years and at work when they begin to shape their careers (Ho 2006). Other researchers who have conducted investigations into the relationship between work values and organizational commitment include Putti et al in 1989 (cited by Ho 2006) where they noted that the intrinsic work values of an employee had a more direct impact on employee commitmen t when compared to the extrinsic work values. Intrinsic values refer to those factors that determine whether the employee’s work is interesting or challenging while the extrinsic values refer to the job benefits an employee gains from tasks that are unrelated to the work job. An example of an extrinsic value is good pension plans, holiday allowances and good medical cover (Ho 2006). Employees working for multinational telecommunication companies such as Vodafone have demonstrated both extrinsic and intrinsic work values as they both determine the rates of employee turnover in the company, employee motivation and job satisfaction. According to Tayyab and Tariq (2001 cited by Ho 2006), intrinsic work values were related to normative or norm-based employee commitment to an organization while the extrinsic work values had a relation to the reward-based commitment employee demonstrated towards an organization. The two authors also identified the existence of a positive correlation between intrinsic work values and the commitment of employees by particularly focusing on executives who worked for the private sector. Based on this relationship, they were able to ascertain that these executives were more committed to an organization when their personal work values were in congruence with those of their direct line managers (Ho 2006). Huang noted that work values such as employee responsibility and personal achievement were perfect indicators of the level of employee commitment as well as job satisfaction and involvement. Huang also believed that the more work values an employee possessed, the higher their level of commitment to the organization. Other researchers Lee and Chung (2001 cited by Ho 2006) identified the instrumental work values that exist within most multinational corporations such as Vodafone that have an impact on employee commitment within an organization. These work values include the stability and freedom of anxious considerations which accordin g to the two researchers was the strongest influencing factor of employee commitment to an organization. The consideration of economic security was the second most important factor that influenced employee commitment followed by social interaction considerations which involved the social interactions that employees had with their colleagues in the work place. The consideration of stability and freedom had a direct influence on the retention commitment of an employee which meant that low job stability was more than likely to contribute to high employee turnover rates (Ho 2006). The consideration of security and economic costs directly influenced the effort commitment of an employee where the amount of economic compensation, pension benefits, medical allowance and other employee benefits determined the level of input they placed in their work duties. The social interaction consideration had the greatest influence on the value commitment of an employee where the social relationships an employee is able to have in an organization determine the level of their commitment to the organization. Properly identifying the intrinsic and extrinsic factors/work values that are possessed by each individual employee will contribute further to the proper understanding of how work values can be used to improve organizational performance. Conclusion This discussion has dealt with the concepts of work values and employee commitment within an organization and also how work values influence employee commitment to an organization. Various research work and studies have been conducted on whether work values affect employee commitment and this study has been able to refer to these works so as to build the discussion. As noted in the study, most of the findings have demonstrated that work values have an effect or influence on employee commitment as they determine the level of motivation and job satisfaction and employee has towards their job. Work values play an important role in determ ining the intrinsic and extrinsic work values possessed by an employee when performing their work duties. The study has therefore been able to ascertain that work values play a significant role in the commitment of an employee to an organization. References Hofstede, G., (2001) Culture’s consequences: comparing values, behaviours,  institutions and organizations across nations. Thousand Oaks, California: Sage Publications Ho, C.C., (2006) A study of the relationships between work values, job involvement and  organizational commitment among Taiwanese nurses. Published Thesis. Queensland, Australia: Queensland University of Technology Levy, P.E., (2003) Industrial/organizational psychology: understanding the workplace.  Boston, Massachusetts: Houghton Mifflin Li, W., (2008) Demographic effects of work values and their management implications.  Journal of Business Ethics, 81, pp 875-885 Matic, J.L., (2008) Cultural differences in employee work values and their implicatio ns for management. Management, Vol.13, No.2, pp 93-104 Muthuveloo, R., and Rose, R., (2005) Typology of organizational commitment.  American Journal of Applied Science, Vol.2, No. 6, pp 1078-1081 This essay on Work Values was written and submitted by user Adriana C. to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.