Efficient market
Studied by 0 people
Learn
Practice Test
Spaced Repetition
Match
Flashcards1/24
There's no tags or description
Looks like no tags are added yet.
Name | Mastery | Learn | Test | Matching | Spaced |
|---|
No study sessions yet.
25 Terms
Term: Random Walk
Definition: The theory that stock price changes are random and unpredictable because they reflect new, unpredictable information.
Term: Efficient Market Hypothesis (EMH)
Definition: The hypothesis that stock prices fully reflect all available information, making it difficult to consistently achieve above-average returns.
Term: Weak-form EMH
Definition: The version of EMH stating that stock prices reflect all historical market data, such as past prices and trading volume, making technical analysis ineffective.
Term: Semi-strong-form EMH
Definition: The version of EMH stating that stock prices reflect all publicly available information, including financial statements, news, and analyst reports.
Term: Strong-form EMH
Definition: The version of EMH stating that stock prices reflect all information, including insider information, though this is considered extreme and unlikely in practice.
Term: Technical Analysis
Definition: The practice of searching for predictable patterns in stock prices using charts of past prices and trading volumes.
Term: Fundamental Analysis
Definition: The evaluation of a company’s intrinsic value based on earnings, dividends, interest rates, and risk factors.
Term: Active Management
Definition: An investment strategy that attempts to outperform the market by identifying mispriced securities.
Term: Passive Management
Definition: An investment strategy that focuses on building a well-diversified portfolio without attempting to beat the market, often using index funds.
Term: Index Fund
Definition: A portfolio designed to replicate the performance of a broad-based index, such as the S&P 500, at low cost.
Term: Diversification
Definition: The strategy of reducing firm-specific risk by holding a variety of investments in a portfolio.
Term: Tax Efficiency
Definition: Tailoring investments to an investor’s tax bracket, such as favoring capital gains over interest income for high-tax investors.
Term: Resistance Level
Definition: A price level above which a stock is believed to struggle to rise, often based on market psychology.
Term: Support Level
Definition: A price level below which a stock is believed to struggle to fall, often based on market psychology.
Term: Analyst Recommendations
Definition: Advice from stock market analysts, often biased toward positive ratings, which can influence stock prices temporarily.
Term: Mutual Fund Performance
Definition: The evaluation of mutual fund returns, which on average underperform passive index funds due to fees and expenses.
Term: Persistence in Performance
Definition: The tendency of mutual funds to repeat their performance in subsequent years, which is rare and often short-lived.
Term: Risk-Adjusted Returns
Definition: Returns adjusted for the level of risk taken, often measured using models like the CAPM or Fama-French factors.
Term: Fama-French Three-Factor Model
Definition: A model used to evaluate stock returns based on market risk, size, and value factors.
Term: Bond Fund Performance
Definition: The evaluation of bond fund returns, which on average underperform passive bond indexes due to fees and expenses.
Term: Market Efficiency
Definition: The degree to which stock prices reflect all available information, making it difficult to achieve consistent above-average returns.
Term: Resource Allocation
Definition: The process by which capital markets guide investments in real assets, such as plants and equipment, based on stock prices.
Term: Dot-Com Bubble
Definition: A period of overinvestment in internet and telecommunication firms in the late 1990s, driven by overoptimistic stock prices.
Term: Superstar Managers
Definition: Exceptional fund managers, such as Peter Lynch and Warren Buffett, who have demonstrated consistent outperformance over their careers.
Term: Passive Investment Strategies
Definition: Strategies that focus on matching market performance through low-cost index funds, aligning with the principles of market efficiency.