Industry WIKI

The adaptive market hypothesis, as proposed by Andrew Lo is an attempt to reconcile economic theories based on the efficient market hypothesis (which implies that markets are efficient) with behavioral economics, by applying the principles of evolution to financial interactions: competition, adaptation, and natural selection. This view is part of a larger school of thought known as Evolu

Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index. An alpha of 1% means the investment's return on investment over a selected period of time was 1% better than the market during that same period; a negative alpha means the investment underperformed the market.

Alternative trading system (ATS) is a US and Canadian regulatory term for a non-exchange trading venue that matches buyers and sellers to find counterparties for transactions. Alternative trading systems are typically regulated as broker-dealers rather than as exchanges (although an alternative trading system can apply to be regulated as a securities exchange). In general, for regulatory

Arbitrage ( , UK also ) is the practice of taking advantage of a difference in prices in two or more markets – striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded. Arbitrage has the effect of causing prices of the same or very similar assets in different markets to converge.

Australian securities law relates to securities issued by corporations as well as other securities, including debentures, stocks and bonds issued by governments, and interests in managed investment schemes.

The Bachelier model is a model of an asset price under Brownian motion presented by Louis Bachelier in his PhD thesis The Theory of Speculation (French: Théorie de la spéculation), published 1900. It is also called the normal model equivalently (as opposed to log-normal model or Black–Scholes model). One early criticism of the Bachelier model is that the probability distribution which h

Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economic theory.

Behavioral strategy is an interdisciplinary field within strategic management that integrates insights from cognitive, social, and organizational psychology to better understand how individuals and groups make strategic decisions. It challenges the assumptions of traditional economic models that presume perfect rationality, instead emphasizing how real-world decision-making is shaped by

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-diversifiabl

The bid–ask spread (also bid–offer or bid/ask and buy/sell in the case of a market maker) is the difference between the prices quoted (either by a single market maker or in a limit order book) for an immediate sale (ask) and an immediate purchase (bid) for stocks, futures contracts, options, or currency pairs in some auction scenario. The size of the bid–ask spread in a security is one m

A block trade is a high-volume transaction in a security that is privately negotiated and executed outside of the open market for that security. Major broker-dealers often provide "block trading" services—sometimes known as "upstairs trading desks"—to their institutional clients. In the United States and Canada a block trade is usually at least 10,000 shares of a stock or $100,000 of bo

In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and derivatives trading process.

The Buffett indicator (or the Buffett metric, or the Market capitalization-to-GDP ratio) is a valuation multiple used to assess how expensive or cheap the aggregate stock market is at a given point in time. It was proposed as a metric by investor Warren Buffett in 2001, who called it "probably the best single measure of where valuations stand at any given moment", and its modern form co

Buy and hold, also called position trading, is an investment strategy whereby an investor buys financial assets or non-financial assets such as real estate, to hold them long term, with the goal of realizing price appreciation, despite volatility.

A calendar effect (or calendar anomaly) is the difference in behavior of a system that is related to the calendar such as the day of the week, time of the month, time of the year, time within the U.S. presidential cycle, or decade within the century. It is most often used in a financial context to describe a market anomaly; traders may use market timing to profit from moves in stock pric

Capital allocation line (CAL) is a graph created by investors to measure the risk of risky and risk-free assets. The graph displays the return to be made by taking on a certain level of risk. Its slope is known as the "reward-to-variability ratio".

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 t

Capital market line (CML) is the tangent line drawn from the point of the risk-free asset to the feasible region for risky assets. The tangency point M represents the market portfolio, so named since all rational investors (minimum variance criterion) should hold their risky assets in the same proportions as their weights in the market portfolio.

A chart pattern or price pattern is a pattern within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which naturally occurs and repeats over a period. Chart patterns are used as either reversal or continuation signals.

A closed-end fund (CEF), also known as a closed-end mutual fund, is an investment vehicle fund that raises capital by issuing a fixed number of shares at its inception, and then invests that capital in financial assets such as stocks and bonds. After inception it is closed to new capital, although fund managers sometimes employ leverage. Investors can buy and sell the existing shares in

A collective trust fund or collective investment trust (CIT) is a legal trust administered by a bank or trust company that combines assets for multiple investors who meet specific requirements set forth in the fund's declaration of trust. Typically, a collective trust pools assets from corporate and governmental profit sharing, pension and stock bonus plans, and charitable and other tax

A Commodity pool operator (CPO) is an individual or organization that solicits or receives funds to use in the operation of a commodity pool, syndicate, collective investment vehicle, investment trust, or similar structure, specifically for trading (buying and selling) of and in commodity interests. Such commodity interests include commodity futures, swaps, options and/or leverage transa

Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Commonwealth realms. This type of share gives the stockholder the right to share in the profits of the company, and to vote on matters of corporate

Contrarian investing is an investment strategy that is characterized by purchasing and selling in contrast to the prevailing sentiment of the time.

Cross-listing (or multi-listing, or interlisting) of shares is when a firm lists its equity shares on one or more foreign stock exchange in addition to its domestic exchange. To be cross-listed, a company must thus comply with the requirements of all the stock exchanges in which it is listed, such as filing.

A crossing network is an alternative trading system (ATS) that matches buy and sell orders electronically for execution without first routing the order to an exchange or other public displayed market such as an electronic communication network (ECN). Such crossing networks are a type of dark pool that employ computerized systems to match buyers and sellers of large blocks of shares with

David Elliot Shaw (born March 29, 1951) is an American billionaire, scientist, and founder of hedge fund D. E. Shaw & Co.. A former assistant professor in the computer science department at Columbia University, Shaw earned his fortune exploiting inefficiencies in financial markets with the help of early Internet networks and quantitative trading strategies. In 2001, Shaw turned to full-t

Debt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults and because the value of their collateral falls, leading to a surge in bank insolvencies, a reduction in lending and by extension, a reduction in

Direct market access (DMA) in financial markets is the electronic trading infrastructure that gives investors wishing to trade in financial instruments a way to interact with the order book of an exchange. Normally, trading on the order book is restricted to broker-dealers and market making firms that are members of the exchange. Using DMA, investment companies (also known as buy side fi

Discretionary investment management is a form of professional investment management in which investments are made on behalf of clients through a variety of securities. The term "discretionary" refers to investment decisions being made by the investment manager based on the investment manager's judgement rather than under the direction of the client. The major aim of the services offered

In financial economics, the dividend discount model (DDM) is a method of valuing the price of a company's capital stock or business value based on the assertion that intrinsic value is determined by the sum of future cash flows from dividend payments to shareholders, discounted back to their present value. The constant-growth form of the DDM is sometimes referred to as the Gordon growth

Dividend policy, in financial management and corporate finance, is concerned with

The dividend yield of a share is the ratio of annualised cash dividends to the share's current market price. It is usually expressed as a percentage and is commonly calculated by dividing the annual dividend per share by the current share price.

The Dogs of the Dow is an investment strategy popularized by Michael B. O'Higgins in a 1991 book and his Dogs of the Dow website. It is a form of dividend investing.

Dollar-cost averaging (DCA) is an investment strategy which aims to apply value investing principles to regular investment. The term was coined by Benjamin Graham in his 1949 book The Intelligent Investor. Graham writes that dollar-cost averaging "means simply that the practitioner invests in common stocks the same number of dollars each month or each quarter. (The same nomenclature app

Dupont analysis is a tool used in financial analysis, where return on equity (ROE) is separated into its component parts.

In finance, duration is a measure of how the price of a fixed-income instrument responds to a change in interest rates. It is used to compare rate risk across bonds and to construct hedges, and is often paired with convexity and the price value of a basis point. Duration-based estimates work best for small, parallel shifts in the yield curve.

Earning yield is the quotient of earnings per share (E), divided by the share price (P), giving E/P. It is the reciprocal of the P/E ratio.

In modern portfolio theory, the efficient frontier (or portfolio frontier) is an investment portfolio which occupies the "efficient" parts of the risk–return spectrum.

The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.

Eilís Veronica Ferran, FBA (born 14 March 1962) is a Northern Irish solicitor, legal scholar, and academic administrator. As an academic, she specialises in company law, financial regulation, and corporate finance. She has been Professor of Company and Securities Law at the University of Cambridge since 2005, and its Pro-Vice-Chancellor for Institutional and International Relations since

An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system accessed by an electronic trading platform that widely disseminates orders entered by market makers to third parties and permits the orders to be executed against them in whole

Environmental, social, and governance (ESG) is shorthand for an investing principle that prioritizes environmental issues, social issues, and corporate governance. Investing with ESG considerations is sometimes referred to as responsible investing or, in more proactive cases, impact investing. The term is also frequently used interchangeably with corporate social responsibility and susta

FatKat, Inc. is a privately held company founded in 1999 by Raymond C. Kurzweil, an author, inventor, and futurist. He's perhaps best known for creating an optical character recognition system that – in conjunction with a flatbed scanner and text-to-speech synthesizer – reads text aloud to the sight-impaired. FatKat is an acronym derived from "financial accelerating transactions from Kur

Financial econometrics is the application of statistical methods to financial data. Financial econometrics is a branch of financial economics, in the field of economics. Areas of study include capital markets, financial institutions, corporate finance and corporate governance. Topics often revolve around asset valuation of individual stocks, bonds, derivatives, currencies and other fina

Financial economics is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade".

Financial gerontology is a multidisciplinary field of study encompassing both academic and professional education, that integrates research on aging and human development with the concerns of finance and business. Following from its roots in social gerontology, Financial gerontology is not simply the study of old people but emphasizes the multiple processes of aging. In particular, resea

There are several concepts of efficiency for a financial market. The most widely discussed is informational or price efficiency, which is a measure of how quickly and completely the price of a single asset reflects available information about the asset's value. Other concepts include functional/operational efficiency, which is inversely related to the costs that investors bear for maki

A flight-to-quality, or flight-to-safety, is a financial market phenomenon occurring when investors sell what they perceive to be higher-risk investments and purchase safer investments, such as gold and government bonds. This is considered a sign of fear in the marketplace, as investors seek less risk in exchange for lower profits.

A floor trader is a member of a stock or commodities exchange who trades on the floor of that exchange for their own account. The floor trader must abide by trading rules similar to those of the exchange specialists who trade on behalf of others. The term should not be confused with floor broker.

Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than the domestic currency of the company. The exchange risk arises when there is a risk of an unfavourable change in exchange rate between the domestic currency and the denominated currency before the date when

Fund governance refers to a system of checks and balances and work performed by the governing body (board) of an investment fund to ensure that the fund is operated not only in accordance with law, but also in the best interests of the fund and its investors. The objective of fund governance is to uphold the regulatory principles commonly known as the four pillars of investor protection

Fundamentally based indexes or fundamental indexes, also called fundamentally weighted indexes, are indexes in which stocks are weighted according to factors related to their fundamentals such as earnings, dividends and assets, commonly used when performing corporate valuations. This fundamental weight may be calculated statically, or it may be adjusted by the security's fundamental to m

Greed and fear refer to two opposing emotional states theorized as factors causing the unpredictability and volatility of the stock market, and irrational market behavior inconsistent with the efficient-market hypothesis. Greed and fear relate to an old Wall Street saying : "financial markets are driven by two powerful emotions – greed and fear."

Growth investing is a type of investment strategy focused on capital appreciation. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios. In typical usage, the term "growth investing" contrasts with the strategy

In finance, a haircut is the difference between the current market value of an asset and the value ascribed to that asset for purposes of calculating regulatory capital or loan collateral. The amount of the haircut reflects the perceived risk of the asset falling in value in an immediate cash sale or liquidation. The larger the risk or volatility of the asset price, the larger the haircu

An Inter-dealer broker (IDB) is specialist financial intermediary that facilitates transactions between broker-dealers, dealer banks and other financial institutions rather than private individuals.

Interest rate parity is a no-arbitrage condition representing an equilibrium state under which investors compare interest rates available on bank deposits in two countries. The fact that this condition does not always hold allows for potential opportunities to earn riskless profits from covered interest arbitrage. Two assumptions central to interest rate parity are capital mobility and p

In finance, Jensen's alpha (or Jensen's Performance Index, ex-post alpha) is used to determine the abnormal return of a security or portfolio of securities over the theoretical expected return. It is a version of the standard alpha based on a theoretical performance instead of a market index.

Since the financial crisis, regulation of financial activities is at the center of economic and political events. The crisis has indeed led regulators but also the academic world to ask new questions about the effectiveness of regulation policies. To answer these questions, the French laboratory of excellence on financial regulation (Labex ReFi) was established at the initiative of the C

A labour-sponsored venture capital corporation (LSVCC), known alternately as labour-sponsored investment fund (LSIF) or simply retail venture capital (RVC), is a fund managed by investment professionals that invests in small to mid-sized Canadian companies. The Canadian federal government and some provincial governments offer tax credits to LSVCC investors to promote the growth of such c

This is a list of major stock exchange mergers and acquisitions in the Americas. It also features the name of any resultant stock exchanges from mergers or acquisitions. According to Robert E. Wright of Bloomberg in 2013, historians assert that "rather than exhibiting a trend of constant consolidation, the number of exchanges active across the globe has waxed and waned several times over

A listed investment company (LIC) is an Australian closed-end collective investment scheme similar to investment trusts in the UK and closed-end funds in the United States. Instead of regularly issuing new shares or canceling shares as investors join and leave the fund, investors buy and sell to each other on the ASX. They are traded like other securities on the Australian stock exchange

In corporate finance, a listing refers to the company's shares being on the list (or board) of stock that are publicly listed. Some stock exchanges allow shares of a foreign company to be listed and may allow dual listing, subject to conditions.

"Manager of managers" (MoM) is an investment approach by institutions who proprietary manage capital. Different investment managers are selected and investment mandates given to them. The allocated capital is then managed in Separate Managed Accounts by the respective selected asset managers. It is a solution often offered by big asset management divisions from investment banks but also

A market anomaly in a financial market is predictability that seems to be inconsistent with (typically risk-based) theories of asset prices. Standard theories include the capital asset pricing model and the Fama-French Three Factor Model, but a lack of agreement among academics about the proper theory leads many to refer to anomalies without a reference to a benchmark theory (Daniel and

In finance, market depth is a real-time list displaying the quantity to be sold versus unit price. The list is organized by price level and is reflective of real-time market activity. Mathematically, it is the size of an order needed to move the market price by a given amount. If the market is deep, a large order is needed to change the price.

A market maker or liquidity provider is a company or individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the difference, which is called the bid–ask spread or turn. This stabilizes the market, reducing price variation (volatility) by setting a trading price range for the asset.

Market sentiment, also known as investor attention, is the general prevailing attitude of investors as to anticipated price development in a market. This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, seasonal factors, and national and world events. If investors expect upward price movement in the stock market, t

Market timing is the strategy of making buying or selling decisions of financial assets (often stocks) by attempting to predict future market price movements (market trends). The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis. This is an investment strategy based on the outlook for an aggregate market rather than fo

Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options, futures, interest rate derivatives, credit derivatives, etc.

Mean reversion is a financial term for the assumption that an asset's price will tend to converge to the average price over time.

The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the enterprise value of a firm is unaffected by how that firm is finance

A momentum crash is a sudden and significant decline in the performance of a momentum-based investment strategy, which involves buying assets that have shown an upward price trend and selling those with a downward trend. While this strategy can be profitable, it is also prone to sudden reversals that can result in large losses. These reversals can occur without warning, leading to a shar

Momentum investing is a system of buying stocks or other securities that have had high returns over the past three-to-twelve months, and selling those that have had poor returns over the same period.

The money flow index (MFI) is an oscillator that ranges from 0 to 100. It is used to show the money flow (an approximation of the dollar value of a day's trading) over several days.

The mosaic theory in finance involves the use of security analyst personnel to gather information about a company or corporation to evaluate and determine its financial stability. In addition to public information available to all investors, securities analysts also have access to non-public information which the vast majority of investors do not possess. Trading based on such non-public

A multilateral trading facility (MTF) is a European Union regulatory term for a self-regulated financial trading venue. These are alternatives to the traditional stock exchanges where a market is made in securities, typically using electronic systems. The concept was introduced within the Markets in Financial Instruments Directive (MiFID), a European Directive designed to harmonise re

NASDAQ futures are financial futures which launched on June 21, 1999. It is the financial contract futures that allow an investor to hedge with or speculate on the future value of various components of the NASDAQ market index.

Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end, mutual funds, hedge funds, and venture capital funds. Shares of such funds registered with the U.S. Securities and Exchange Commission are usually bought and redeemed at their net asset value. It is also a key figure with regard to hedge funds and venture capital fu

An odd lotter is an investor who purchases shares or other securities in small or unusual quantities. Stocks are typically traded in increments of 100 shares, a quantity known as a round lot or board lot. The cost of 100 shares of a security may be beyond the means of an individual investor, or may represent a larger investment than the investor wishes to make. Thus, the investor purcha

An offshore fund is generally a collective investment scheme domiciled in an offshore jurisdiction. Like the term "offshore company", the term is more descriptive than definitive, and both the words 'offshore' and 'fund' may be construed differently.

Open outcry is a method of communication between professionals on a stock exchange or futures exchange, typically on a trading floor. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders. The part of the trading floor where this takes place is called a pit.

An order book is the list of orders (manual or electronic) that a trading venue (in particular stock exchanges) uses to record the interest of buyers and sellers in a particular financial instrument. A matching engine uses the book to determine which orders can be fully or partially executed.

The organic composition of capital (OCC) is a concept developed by Karl Marx in his theory of capital, which was simultaneously his critique of political economy. It is derived from his more basic concepts of 'value composition of capital' and 'technical composition of capital'. Marx defines the organic composition of capital as "the value-composition of capital, in so far as it is deter

The Ottoman public debt was a term which dated back to 24 August 1855, when the Ottoman Empire first entered into loan contracts with its European creditors shortly after the beginning of the Crimean War.

Ottoman Public Debt Administration (OPDA) was a European-controlled organization that was established in 1881 to collect the payments which the Ottoman Empire owed to European companies in the Ottoman public debt. The OPDA became a vast, essentially independent, bureaucracy within the Ottoman bureaucracy, run by the creditors: Its governing council included one representative each from B

Over-the-counter (OTC) or off-exchange trading or pink sheet trading is done directly between two parties, without the supervision of an exchange. It is contrasted with exchange trading, which occurs via exchanges. A stock exchange has the benefit of facilitating liquidity, providing transparency, and maintaining the current market price. In an OTC trade, the price is not necessarily pub

Palahalli Ramaiya Brahmananda (27 September 1926 – 23 January 2003) was an Indian monetary economist. He co-developed the Wage Goods Model with Chandulal Nagindas Vakil in 1956 and took part in India's anti-inflation policies during the economic crisis of the 1970s. He has published over 150 books and 1,000 articles.

A pairs trade or pair trading is a market neutral trading strategy enabling traders to profit from virtually any market conditions: uptrend, downtrend, or sideways movement. This strategy is categorized as a statistical arbitrage and convergence trading strategy. Pair trading was pioneered by Gerry Bamberger and later led by Nunzio Tartaglia's quantitative group at Morgan Stanley in the

In corporate finance, the pecking order theory (or pecking order model) postulates that "firms prefer to finance their investments internally, using retained earnings, before turning to external sources of financing such as debt or equity" - i.e. there is a "pecking order" when it comes to financing decisions. The theory was first suggested by Gordon Donaldson in 1961 and was modified by

A performance fee is a fee that a client account or an investment fund may be charged by the investment manager that manages its assets in addition to its management fee.

Precautionary saving is saving (non-expenditure of a portion of income) that occurs in response to uncertainty regarding future income. The precautionary motive to delay consumption and save in the current period rises due to the lack of completeness of insurance markets. Accordingly, individuals will not be able to insure against some bad state of the economy in the future. They anticip

Prediction markets, also known as betting markets, information markets, decision markets, idea futures, or event derivatives, are open markets that enable the prediction of specific outcomes using financial incentives. They are exchange-traded markets established for trading bets in the outcome of various events.

In economics and finance, the price discovery process (also called price discovery mechanism) is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers.

The primary market is the part of the capital market that deals with the issuance and sale of securities to purchasers directly by the issuer, with the issuer being paid the proceeds. A primary market means the market for new issues of securities, as distinguished from the secondary market, where previously issued securities are bought and sold. A market is primary if the proceeds of sal

A private equity fund (PE fund) is a collective investment scheme used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity. Private equity funds are typically limited partnerships with a fixed term of 10 years (often with one- or two-year extensions). At inception, institutional inv

Proprietary trading (also known as prop trading) occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money (instead of using customer funds) to make a profit for itself.

In the context of stock markets, the public float or free float represents the portion of shares of a corporation that are in the hands of public investors as opposed to shares held by promoters, company officers, controlling interest investors, or governments. This number is sometimes seen as a better way of calculating market capitalization, because it provides a more accurate reflecti

Qualifying Investor Alternative Investment Fund or QIAIF is a Central Bank of Ireland regulatory classification established in 2013 for Ireland's five tax-free legal structures for holding assets. The Irish Collective Asset-management Vehicle or ICAV is the most popular of the five Irish QIAIF structures, it is the main tax-free structure for foreign investors holding Irish assets.