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?…
What is Front Running? Front running is the illegal practice of purchasing a security based on advanced non-public information regarding an expected large transaction that will affect the price of a security. Front running is considered a form of market manipulation and insider trading because a person who commits a front-running activity expects security price…
What are FAANG Stocks? FAANG stocks are the publicly traded stocks of U.S. technology giants Facebook, Amazon, Apple, Netflix, and Google. They are among the best-performing technology and most well-known companies in the world. Currently, the combined market value of FAANG exceeds $3 trillion. It accounts for almost 10% of the U.S. stock market’s total…
