Econ 101
This is the increase in the general price level of goods and services over time.
What is inflation?
Harry Markowitz won a Nobel Prize for developing this theory, which shows how diversification reduces portfolio risk.
What is Modern Portfolio Theory (MPT)?
This term describes the dilution of existing shareholders when a startup issues new shares in a funding round.
What is equity dilution?
The tendency to rely too heavily on the first piece of information encountered is called this.
What is anchoring bias?
This index tracks 30 large, blue-chip U.S. companies and is one of the oldest stock market indicators.
What is the Dow Jones Industrial Average?
GDP stands for this, the broadest measure of a country's economic output.
What is Gross Domestic Product?
This frontier represents the set of portfolios that offer the highest return for a given level of risk.
What is the Efficient Frontier?
A VC's ownership in a startup is measured using this metric, calculated as invested capital divided by post-money valuation.
What is ownership percentage (equity stake)?
This effect describes how investors follow the crowd, buying assets just because others are buying them.
What is herd mentality (bandwagon effect)?
This Russell index tracks 2,000 small-cap U.S. stocks
What is the Russell 2000?
An economy experiencing high inflation and low growth simultaneously is in this unpleasant condition.
What is stagflation?
This metric measures a stock's sensitivity to market movements; a value above 1 means more volatile than the market.
What is beta?
This liquidation feature ensures investors get their money back before founders in a sale or wind-down.
What is a liquidation preference?
This cognitive bias causes investors to hold losing stocks too long and sell winners too early.
What is the disposition effect?
This index, calculated by the University of Michigan, measures how optimistic or pessimistic American households feel about the economy and their personal finances.
What is the Consumer Sentiment Index?
The Fed controls this key rate, which influences borrowing costs throughout the entire economy.
What is the federal funds rate?
The Sharpe Ratio measures excess return per unit of this.
What is standard deviation (risk)?
The stage of VC funding that typically follows seed and precedes Series B is called this.
What is Series A?
Investors who believe their past successes were due to skill rather than luck are exhibiting this bias.
What is overconfidence bias?
This index measures the implied volatility of S&P 500 options and is nicknamed the "Fear Gauge."
What is the VIX
This economic principle states that as more units of a good are produced, the marginal cost of production increases.
What is the law of diminishing returns?
CAPM relates expected return to the risk-free rate, beta, and this premium investors demand for holding equities.
What is the equity risk premium?
A startup valued at over $1 billion before an IPO is called this.
What is a unicorn?
Daniel Kahneman's 'Thinking, Fast and Slow' introduced this framework separating intuitive and analytical decision-making.
What is System 1 vs. System 2 thinking?
This Bloomberg index is the go-to benchmark for U.S. investment-grade bonds, equivalent to the S&P 500 for fixed income.
What is the Bloomberg U.S. Aggregate Bond Index?