efficient_markets

Efficient Markets Hypothesis

The theory that asset prices reflect all available information and thus are efficient in forecasting future values.

Random Walk

A theory suggesting that stock prices change randomly and are not predictable from past movements.

Excess Volatility

The phenomenon where stock prices fluctuate more than can be justified by changes in dividends.

Expected Price Growth

The anticipated increase in asset price, often represented by the formula r = D/P + g.

Equity Premium Puzzle

The observed phenomenon where the excess return on equity investments over risk-free rates is historically large.

Weak Form Efficiency

The hypothesis that past price data does not help predict future stock prices.

Semi-Strong Efficiency

The theory that all publicly available information is already reflected in stock prices.

Strong Form Efficiency

The concept that stock prices reflect all information, public and private.

Behavioural Finance

A field of study that examines the psychological factors that affect investor behavior and market outcomes.

Market Anomalies

Irregularities in stock price movements that cannot be explained by traditional financial theories.

Momentum Effect

The tendency of stocks to continue rising or falling based on their past performance.

Self-Attribution Bias

The tendency for individuals to attribute successes to their own abilities and failures to external circumstances.

Hindsight Bias

The inclination to see events as having been predictable after they have already occurred.

Overconfidence Bias

The tendency for individuals to overestimate their own abilities, knowledge, or control over situations.

Availability Heuristic

A cognitive bias that leads individuals to rely on immediate examples that come to mind when evaluating a specific topic.

Book-to-Market Ratio

A financial valuation metric used to compare a company's book value to its market value.

Price-to-Dividend Ratio

A valuation ratio that compares a company's current share price to its dividend per share.

Noise Trader Risk

The risk that irrational traders may affect market prices, making it difficult for rational investors to profit.

Arbitrage

The simultaneous purchase and sale of an asset in different markets to profit from differing prices.

Growth Rate of Industrial Production

A macroeconomic variable used in asset pricing to account for expected future profits.