Economics
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Financial economics
Finance theories
Portfolio theories
Frog study suggests context matters when choosing a mate
The presence of a third option acts as a "decoy effect," inspiring a female frog to consistently select the less attractive of the two original options.
Asset Pricing lecture 7 -The Fama_French 3 Factor Model
In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified por...
Portfolio theories
Frog study suggests context matters when choosing a mate
The presence of a third option acts as a "decoy effect," inspiring a female frog to consistently select the less attractive of the two original options.
LIBOR market model
The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing int...
Capital asset pricing model
In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified por...
Capital asset pricing model - Wikipedia
Put–call parity
In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a por...
Rational pricing
Rational pricing is the assumption in financial economics that asset prices (and hence asset pricing models) will reflect the arbitrage-free price of the asset as any deviation from this price will be...
Roy's safety-first criterion
Roy's safety-first criterion is a risk management technique that allows an investor to select one portfolio rather than another based on the criterion that the probability of the portfolio's return fa...
Status quo bias
Status quo bias is a cognitive bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived a...
Cox–Ingersoll–Ross model
In mathematical finance, the Cox–Ingersoll–Ross model (or CIR model) describes the evolution of interest rates. It is a type of "one factor model" (short rate model) as it describes intere...
Cox–Ingersoll–Ross model - Wikipedia
Vasicek model
In finance, the Vasicek model is a mathematical model describing the evolution of interest rates. It is a type of "one-factor model" (more precisely, one factor short rate model) as it describes inter...
Vasicek model - Wikipedia
Behavioral economics
Behavioral economics and the related field, behavioral finance, study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions a...
Modified Dietz method
The modified Dietz method is a measure of the historical performance of an investment portfolio in the presence of external flows. (External flows are movements of value such as transfers of cash, se...
Chepakovich valuation model
The Chepakovich valuation model uses the discounted cash flow valuation approach. It was first developed by Alexander Chepakovich in 2000 and perfected in subsequent years. The model was originally de...
Chepakovich valuation model - Wikipedia
The Dogs of the Dow
The Dogs of the Dow is an investment strategy popularized by Michael B. O'Higgins, in 1991 which proposes that an investor annually select for investment the ten Dow Jones Industrial Average stocks wh...
Intertemporal CAPM
The Intertemporal Capital Asset Pricing Model, or ICAPM, was an alternative to the CAPM provided by Robert Merton. It is a linear factor model with wealth and state variable that forecast changes in ...
Mutual fund separation theorem
In portfolio theory, a mutual fund separation theorem, mutual fund theorem, or separation theorem is a theorem stating that, under certain conditions, any investor's optimal portfolio can be construct...
Efficient frontier
The efficient frontier is a concept in modern portfolio theory introduced by Harry Markowitz and others in 1952.
A combination of assets, i.e. a portfolio, is referred to as "efficient" if it has ...
Decoy effect
In marketing, the decoy effect (or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a thi...
Modern portfolio theory
Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expect...
Simple Dietz method
The simple Dietz method is a means of measuring historical investment portfolio performance, compensating for external flows into/out of the portfolio during the period. The formula for the simple Die...
Loss aversion
In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Most studies suggest that losses are twice as powerful, psychological...
Guidotti–Greenspan rule
The Guidotti–Greenspan rule states that a country's reserves should equal short-term external debt (one-year or less maturity), implying a ratio of reserves-to-short term debt of 1. The rationale is t...
Dividend discount model
The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their pr...
Random walk hypothesis
The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus cannot be predicted. It is consistent with the efficient-market hypothesis....
Random walk hypothesis - Wikipedia
CAN SLIM
CAN SLIM refers to the seven-pronged mnemonic publicized by the American newspaper Investor's Business Daily, which claims to be a checklist of the characteristics performing stocks tend to share befo...
Merton's portfolio problem
Merton's Portfolio Problem is a well known problem in continuous-time finance and in particular intertemporal portfolio choice. An investor must choose how much to consume and must allocate his wealt...
Merton's portfolio problem - Wikipedia
Undervalued stock
An undervalued stock is defined as a stock that is selling at a price significantly below what is assumed to be its intrinsic value. For example, if a stock is selling for $50, but it is worth $100 ba...
Equity premium puzzle
The equity premium puzzle refers to the phenomenon that observed returns on stocks over the past century are a few percent higher than returns on government bonds. It is a term coined by Rajnish Mehra...