Category 1
An investment theory that asks only one question: will the market be up or down
What is CAPM
A trading style that switches the traditional "buy low, sell high" opting to sell before you buy
What is short selling?
The most common proxy for the market
S&P 500
What is separation theory?
The tendency of winning stocks to continue winning
What is Priced momentum factor?
This measures the risk taken against historical excess return to determine if you are being rewarded for the risk you have taken
What is the Sharpe ratio?
This is the line that portfolios cannot cross in the pursuit of minimizing risk and maximizing return
What is the Efficient Frontier?
This theory states that the market value of a stock is very close to the intrinsic value
What is market efficiency hypothesis?
This model takes only one factor into account by assuming that the majority of risk can be explained by a single market index
What is the single index model(SIM)?
An investment process that places a higher emphasis on choosing the right industry over choosing the right security
What is top down investing?
What is French Fama
This is the process of allocating a portfolio into risky and risk free assets to satisfy the client.
What is separation theory?
If you spent all your money on a futures contract you will use this to you pay for the securities you are obligated to buy
What is Margins?
This is the process of evaluating the intrinsic value of a security by assessing the financial statements, trends, and market conditions
What is security analysis
What is Technical analysis?
It tells you what sectors you should be invested in based on the current economic cycle
What is Arbitrage Pricing Theory
It causes investors to sell their winning stocks and hold their loosing stocks.
What is Disposition effect (risk aversion)
The reason CAPM is unreliable
What is too many (unrealistic) assumptions?
A graphic representation of a security's returns relative to the overall market
What is the Security Characteristic Line (SCL)?
The additional return investors demand for holding an asset that is difficult to convert to cash.
What is priced liquidity factor?
Games that people do not like to play due to risk aversion
What are Fair Games?
A theory that claims that there is no way to predict what any given stock will do next
What is random walk?
According to the top down theory this is the most important decision?
What is factor weightings
A criticism of the Capital Asset Pricing Model includes the claim that the proxy for the market in imperfect and the formula is too sensitive to small changes
What is Untestable Contention
What is prospect theory?