What is Behavioral Finance? Behavioral finance is the study of the influence of psychology on the behavior of investors or financial analysts. It also includes the subsequent effects on the markets. It focuses on the fact that investors are not always rational, have limits to their self-control, and are influenced by their own biases. Traditional…
What is Durability Bias? Durability bias is the subconscious inclination to forecast past events or occurrences forward to the future. In other words, durability is a type of cognitive bias with the assumption that past trends will continue into the future. The term durability bias is commonly used in behavioral finance and forecasting. Implications of…
What is Arbitrage? Arbitrage is the strategy of taking advantage of price differences in different markets for the same asset. For it to take place, there must be a situation of at least two equivalent assets with differing prices. In essence, arbitrage is a situation where a trader can profit from the imbalance of asset…
What is Active Bond Portfolio Management? A bond portfolio can be managed in several ways; however, the primary methods are active, passive, or a hybrid of the two. Active bond portfolio management, as the name suggests, means the portfolio manager takes an active role in the running, organizing, and management of the portfolio. Active Management…
What Was Black Tuesday? Black Tuesday is the stock market crash that occurred on October 29, 1929. It is considered the most disastrous market crash in the history of the United States. The Black Tuesday event was preceded by the crash of the London Stock Exchange and Black Monday, and was characterized by panic sell-offs…
What is the 2010 Flash Crash? The 2010 Flash Crash is the market crash that occurred on May 6, 2010. During the 2010 crash, leading US stock indices, including the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite Index, tumbled and partially rebounded in less than an hour. The day was distinguished by high…
What is a Contrarian Investor? A contrarian is an individual who acts in opposition to the majority. In terms of investing, a contrarian investor is someone who trades against prevailing market sentiments. When the market buys, the contrarian sells, and vice-versa. Contrarian investors look for opportunities to buy in a bear market and opportunities to…
What is a Swap? A swap is a derivative contract between two parties that involves the exchange of pre-agreed cash flows of two financial instruments. The cash flows are usually determined using the notional principal amount (a predetermined nominal value). Each stream of the cash flows is called a “leg.” Introduced in the late 1980s,…
Equity Template This Equity Template will allow you to calculate a company’s book value and market value of equity using the accounting method and financial analysis method. Here is a preview of the template: Download Free Excel Template Download CFI’s Excel template to advance your finance knowledge and perform better financial analysis. What is Equity?…
