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Carhart Four-factor Model
In portfolio management, the Carhart four-factor model is an extra factor addition in the Fama–French three-factor model, proposed by Mark Carhart. The Fama-French model, developed in the 1990, argued most stock market returns are explained by three factors: risk, price (value stocks tending to outperform) and company size (smaller company stocks tending to outperform). Carhart added a momentum factor for asset pricing of stocks. The Four Factor Model is also known in the industry as the Monthly Momentum Factor (MOM). Momentum is the speed or velocity of price changes in a stock, security, or tradable instrument. Development The Monthly Momentum Factor(MOM) can be calculated by subtracting the equal weighted average of the lowest performing firms from the equal weighed average of the highest performing firms, lagged one month (Carhart, 1997). A stock would be considered to show momentum if its prior 12-month average of returns is positive, or greater. Similar to the thr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Investment Management
Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institutions, such as insurance companies, pension funds, corporations, charities, educational establishments, or private investors, either directly via investment contracts or, more commonly, via collective investment schemes like mutual funds, exchange-traded funds, or REITs. The term asset management is often used to refer to the management of investment funds, while the more generic term fund management may refer to all forms of institutional investment, as well as investment management for private investors. Investment managers who specialize in ''advisory'' or ''discretionary'' management on behalf of (normally wealthy) private investors may often refer to their services as money management or portfolio management within the context o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fama–French Three-factor Model
In asset pricing and portfolio management the Fama–French three-factor model is a statistical model designed in 1992 by Eugene Fama and Kenneth French to describe stock returns. Fama and French were colleagues at the University of Chicago Booth School of Business, where Fama still works. In 2013, Fama shared the Nobel Memorial Prize in Economic Sciences for his empirical analysis of asset prices. The three factors are (1) market excess return, (2) the outperformance of small versus big companies, and (3) the outperformance of high book/market versus low book/market companies. There is academic debate about the last two factors. Background and development Factor models are statistical models that attempt to explain complex phenomena using a small number of underlying causes or factors. The traditional asset pricing model, known formally as the capital asset pricing model (CAPM) uses only one variable to describe the returns of a portfolio or stock with the returns of the ma ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Mark Carhart
Mark Carhart is a finance researcher and a science man and quantitative investment Quantitative analysis is the use of mathematical and statistical methods in finance and investment management. Those working in the field are quantitative analysts (quants). Quants tend to specialize in specific areas which may include derivative ... manager known for extending the Fama–French three-factor model with a momentum factor. He is currently chief investment officer of New York quantitative hedge fund, Kepos Capital https://www.keposcapital.com/#/leadership References People in finance Living people Year of birth missing (living people) Place of birth missing (living people) Goldman Sachs people {{business-bio-stub ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Stock Market
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment is usually made with an investment strategy in mind. Size of the market The total market capitalization of all publicly traded securities worldwide rose from US$2.5 trillion in 1980 to US$93.7 trillion at the end of 2020. , there are 60 stock exchanges in the world. Of these, there are 16 exchanges with a market capitalization of $1 trillion or more, and they account for 87% of global market capitalization. Apart from the Australian Securities Exchange, these 16 exchanges are all in North America, Europe, or Asia. By country, the largest stock markets as of January 202 ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Value Investing
Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis. The various forms of value investing derive from the investment philosophy first taught by Benjamin Graham and David Dodd at Columbia Business School in 1928, and subsequently developed in their 1934 text ''Security Analysis''. The early value opportunities identified by Graham and Dodd included stock in public companies trading at discounts to book value or tangible book value, those with high dividend yields, and those having low price-to-earning multiples, or low price-to-book ratios. High-profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the " margin of safety". For the last 25 years, under the influence of Char ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Momentum (finance)
In finance, momentum is the empirically observed tendency for rising asset prices or securities return to rise further, and falling prices to keep falling. For instance, it was shown that stocks with strong past performance continue to outperform stocks with poor past performance in the next period with an average excess return of about 1% per month. Momentum signals (e.g., 52-week high) have been shown to be used by financial analysts in their buy and sell recommendations. The existence of momentum is a market anomaly, which finance theory struggles to explain. The difficulty is that an increase in asset prices, in and of itself, should not warrant further increase. Such increase, according to the efficient-market hypothesis, is warranted only by changes in demand and supply or new information (cf. fundamental analysis). Students of financial economics have largely attributed the appearance of momentum to cognitive biases, which belong in the realm of behavioral economics. The ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Asset Pricing
In financial economics, asset pricing refers to a formal treatment and development of two main pricing principles, outlined below, together with the resultant models. There have been many models developed for different situations, but correspondingly, these stem from either general equilibrium asset pricing or rational asset pricing, the latter corresponding to risk neutral pricing. Investment theory, which is near synonymous, encompasses the body of knowledge used to support the decision-making process of choosing investments, and the asset pricing models are then applied in determining the asset-specific required rate of return on the investment in question, or in pricing derivatives on these, for trading or hedging. (See also .) General Equilibrium Asset Pricing Under General equilibrium theory prices are determined through market pricing by supply and demand. Here asset prices jointly satisfy the requirement that the quantities of each asset supplied and the qu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Stock
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company is divided, or these shares considered together" "When a company issues shares or stocks ''especially AmE'', it makes them available for people to buy for the first time." (Especially in American English, the word "stocks" is also used to refer to shares.) A single share of the stock means fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets (after discharge of all senior claims such as secured and unsecured debt), or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain clas ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
The Journal Of Finance
''The Journal of Finance'' is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It was established in 1946 and is considered to be one of the premier finance journals. The editor-in-chief is Antoinette Schoar. According to the ''Journal Citation Reports'', the journal has a 2020 impact factor of 7.544. It is listed as one of the 50 journals used by the ''Financial Times'' to compile its business-school research ranking and ''Bloomberg Businessweek''s Top 20 Journals. Editors The editorial board of the journal of finance consists of the editor, co-editors and associate editors. The executive editor is Antoinette Schoar (MIT), the first female in the position. The following persons are or have been editor-in-chief of the journal: Awards Each year the associate editors vote for the best papers published in the journal. The Smith Breeden Prize is awarded for the best finance papers and the Brattle Prize for the best corporat ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Center For Research In Security Prices
The Center for Research in Security Prices (CRSP) is a provider of historical stock market data. The Center is a part of the Booth School of Business at the University of Chicago. CRSP maintains some of the largest and most comprehensive proprietary historical databases in stock market research. Academic researchers and investment professionals rely on CRSP for accurate, survivor bias-free information which provides a foundation for their research and analyses. As of 2020, CRSP claims over 500 clients. The name is usually pronounced "crisp". CRSP was founded in 1960 by James H. Lorie (professor of finance and director of research) and Lawrence Fisher (assistant professor of finance) of the University of Chicago, with a grant from Merrill Lynch, Pierce, Fenner & Smith. Its goal was to provide a source of accurate and comprehensive data that could be used to answer basic questions about the behavior of stock markets. The first effort of the Center was the production of a database co ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Capital Asset Pricing Model
In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta (β) in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. CAPM assumes a particular form of utility functions (in which only first and second moments matter, that is risk is measured by variance, for example a quadratic utility) or alternatively asset returns whose probability distributions are completely described by the first two moments (for example, the normal distribution) and zero transaction costs (necessary for diversification to get rid of all idiosyncratic risk). Under these conditions, CAPM shows that the cos ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Size Premium
The size premium is the historical tendency for the stocks of firms with smaller market capitalizations to outperform the stocks of firms with larger market capitalizations. It is one of the factors in the Fama–French three-factor model. See also *Style investing Style investing is an investment approach in which securities are grouped into categories and portfolio allocation based on selection among styles rather than among individual securities. Style investors can make portfol ...
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