Lessons from Capital Market History

These flashcards encompass key vocabulary and concepts from the lecture on capital market history and investment returns.

Dollar Return

The gain or loss from an investment, consisting of dividend income and capital gain/loss.

Dividend Income

Receipt of cash while owning the investment.

Capital Gains Yield

The change in the stock price divided by the beginning stock price.

Average Returns

Calculated by adding up yearly returns and dividing by the total number of years.

Risk Premium

The excess return required from an investment in a risky asset over that required from a risk-free investment.

Standard Deviation

The positive square root of the variance, used to measure the volatility of returns.

Efficient Capital Market

A market where security prices reflect all available information.

Geometric Average Return

The average compound return earned per year over a multiyear period.

Normal Distribution

A symmetric, bell-shaped frequency distribution completely defined by its mean and standard deviation.

Technical Analysis

A trading discipline that evaluates investments based on statistical trends from trading activity.

Fundamental Analysis

Measures a security's intrinsic value by examining related economic and financial factors.

Total Percentage Return

The sum of dividends and capital gains yield expressed as a percentage.

Variance

The average squared difference between actual returns and the average return.

Arithmetic Average Return

Return earned in an average year over a multiyear period.

Efficient Markets Hypothesis (EMH)

The theory that actual capital markets are efficient and all investments are zero NPV investments.

Historical Returns

Year-to-year returns of different investment classes tracked over multiple periods.