What is the Required Rate of Return? The required rate of return (hurdle rate) is the minimum return that an investor is expecting to receive for their investment. Essentially, the required rate is the minimum acceptable compensation for the investment’s level of risk. The required rate of return is a key concept in corporate finance…
What is Fundamental Analysis? In accounting and finance, fundamental analysis is a method of assessing the intrinsic value of a security by analyzing various macroeconomic and microeconomic factors. The ultimate goal of fundamental analysis is to quantify the intrinsic value of a security. The security’s intrinsic value can then be compared to its current market…
What are Commodities? Commodities are another class of assets, just like stocks and bonds. Most commodities are products that come from the earth that possess uniform quality, are produced in large quantities, and are produced by many different producers. Major commodities include cotton, oil, gas, corn, wheat, oranges, gold, and uranium. Basically, they are the…
What is an Overweight Stock? An overweight stock is a stock that financial analysts believe will outperform a benchmark stock, security, or index. The overweight recommendation signals to investors to devote a larger percentage of their portfolio to the stock. Hence the term “overweight”. Different institutions use different terms for their stock recommendations. “Buy” and…
What is Tracking Error? Tracking error is a measure of financial performance that determines the difference between the return fluctuations of an investment portfolio and the return fluctuations of a chosen benchmark. The return fluctuations are primarily measured by standard deviations. Generally, a benchmark is a diversified market index that represents part of the total…
What is Cross Border Listing? Cross border listing involves companies that trade on the stock exchange of their home country and also on a stock exchange in another country. A Cross Border Listing gives rise to the possibility of arbitrage opportunities, as identical assets are trading in two different markets. Cross border listed companies are…
What is a Japanese Candlestick? Japanese Candlesticks are a technical analysis tool that traders use to chart and analyze the price movement of securities. The concept of candlestick charting was developed by Munehisa Homma, a Japanese rice trader. During routine trading, Homma discovered that the rice market was influenced by the emotions of traders, while…
What is the Ichimoku Cloud? The Ichimoku Cloud is a technical analysis method that was created by Japanese journalist Goichi Hosoda in the late 1960s. The Ichimoku chart shows support and resistance levels, as well as other essential information such as trend direction and momentum. Compared to standard candlestick charts, the Ichimoku Cloud contains more…
What is an Investment Portfolio? An investment portfolio is a set of financial assets owned by an investor that may include bonds, stocks, currencies, cash and cash equivalents, and commodities. Further, it refers to a group of investments that an investor uses in order to earn a profit while making sure that capital or assets…
What is Chandelier Exit? Chandelier Exit (CE) is a volatility-based indicator that identifies stop loss exit points for long and short trading positions. Chuck Le Beau, a recognized expert in exit strategies, developed the CE indicator. However, Alexander Elder introduced the strategy to traders through his book “Come into My Trading Room,” which was published in 2002. Chandelier…
