Capital asset pricing modelIn 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.
IdiosyncrasyAn idiosyncrasy is a unique feature of something. The term is often used to express peculiarity. EtymologyThe term "idiosyncrasy" originates from Greekidiosynkrasía, "a peculiar temperament, habit of body" (from idios, "one's own", syn, "with" and krasis, "blend of the four humors" (temperament) or literally "particular mingling".Complete marketIn economics, a complete market (a.k.a. Arrow-Debreu market or complete system of markets) is a market with two conditions: Negligible transaction costs and therefore also perfect information, Every asset in every possible state of the world has a price. In such a market, the complete set of possible bets on future states of the world can be constructed with existing assets without friction.
Beta (finance)In finance, the beta (β or market beta or beta coefficient) is a statistic that measures the expected increase or decrease of an individual stock price in proportion to movements of the stock market as a whole. Beta can be used to indicate the contribution of an individual asset to the market risk of a portfolio when it is added in small quantity. It refers to an asset's non-diversifiable risk, systematic risk, or market risk. Beta is not a measure of idiosyncratic risk.
Modern portfolio theoryMathematical framework for investment riskModern portfolio theory suggests a diversified portfolio of shares and other asset classes (such as debt in corporate bonds, treasury bonds, or money market funds) will realise more predictable returns if there is prudent market regulation.
Diversification (finance)In finance, diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk. A common path towards diversification is to reduce risk or volatility by investing in a variety of assets. If asset prices do not change in perfect synchrony, a diversified portfolio will have less variance than the weighted average variance of its constituent assets, and often less volatility than the least volatile of its constituents.
GlobalizationIncreasing worldwide interdependenceTop-left: showing early migration patterns of humans across the globe as part of the history of globalization. Top-right: the Namban ship carrying Europeans to trade with Japan. Middle-left: the headquarters of the United Nations in international territory within Midtown Manhattan, New York City.
EconomicsEconomics () is a social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyses what is viewed as the basic elements of economies, including individual agents and markets, their interactions, and the outcomes of those interactions. Individual agents may include households, firms, buyers, and sellers.
Hedge (finance)Investment position used to offset potential losses in another asset A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, many types of over-the-counter and derivative products, and futures contracts.
FinanceAcademic discipline studying businesses and investments Finance refers to the management, movement, investment, and raising of money. "Finance" also refers to the academic discipline that studies these. Based on the scope of financial activities, the discipline can be divided into the three primary branches personal, corporate, and public finance.
StochasticStochasticity is the property of being well-described by a randomprobability distribution. Stochasticity and randomness are technically distinct concepts: stochasticity refers to a modeling approach, while randomness describes phenomena. These terms are often used interchangeably. In probability theory, the formal concept of a stochastic process is also referred to as a random process.
Robert J. ShillerRobert James Shiller (born March 29, 1946) is an American economist, academic, and author. As of 2022, he served as a Sterling Professor of Economics at Yale University and is a fellow at the Yale School of Management's International Center for Finance.*As an Amazon Associate I earn from qualifying purchases.