Financial Theory Articles

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  1. Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only ...
  2. Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash ...
  3. Risk Management Framework (RMF): An Overview

    A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage ...
  4. Trader Rookie Mistakes: Avoid Them While You Can!

    These 10 common trading mistakes can rob capital and undermine confidence.
  5. What You Should Know About Smart Beta ETFs

    Smart Beta funds get a lot of hype and are a relatively cheap way to get exposure to an asset class. But they are not foolproof. ...
  6. The Capital Asset Pricing (CAPM) Model: Pros and Cons

    CAPM, while criticized for its unrealistic assumptions, provides a more useful outcome than either the DDM or WACC in many ...
  7. Must-Know Simple & Effective Exit Trading Strategies

    An effective exit strategy builds confidence, trade management skills and profitability.
  8. P2P Loans: Consider the Payoffs; Assess The Risks

    The available data seems to indicate that P2P loans, although risky, promise great payoffs, and the prospects of good returns ...
  9. What Can The Monte Carlo Simulation Do For Your Portfolio?

    A Monte Carlo simulation allows analysts and advisors to convert investment chances into choices. The advantage of Monte ...
  10. How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net ...
  11. Choosing The Right ETF Index To Reach Your Goals

    The key to choosing ETFs for your portfolio is understanding how they pick stocks and making sure their investment philosophy ...
  12. How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.
  13. Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize ...
  14. How To Research Volatile Stocks

    Volatile stocks scare some investors--they're worried about something they need to keep an eye on. Fortunately, great software ...
  15. Penny Stocks, Options and Trading on Margin

    You may not be able to trade penny-stock options, but small-caps and micro-caps could be close enough. Here's a primer on ...
  16. Playing Penny Stock-Like ETFs

    While there are no penny stock ETFs or mutual funds, a shrewd investor can pick from a number of small-cap and micro-cap ...
  17. Study These Penny Stock Trading Trends

    Any active trader watches trends patterns to devise a strategy. Penny stock traders should do the same; it could help them ...
  18. The Government And Risk: A Love-Hate Relationship

    Though the U.S. government can help its citizens by subsidizing risky loans, the costs always come back to the taxpayers. ...
  19. Can Good News Be A Signal To Sell?

    Sometimes positive announcements can mean bad news for a stock. Find out why.
  20. How To Pick Winning Penny Stocks

    Cheap doesn't always equal good. When choosing penny stocks, investors would be wise to note several key factors that affect ...
  21. Beware Of Wall Street's Three Big Lies

    Don't get swindled into buying snake oil from Wall Street. Find out three lies that can lead to losing investments.
  22. How To Become A Corporate Board Member

    We look at how corporate boards are constructed, and how investors can get involved.
  23. Using Historical Volatility To Gauge Future Risk

    Use these calculations to uncover the risk involved in your investments.
  24. How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  25. Protecting Your Retirement Assets

    Your golden years are meant to be stress free. Keep them that way by protecting your assets.
  26. Investment Misselling A Global Problem

    When banks and advisors focus on fees and commissions, it is investors and the market that take the hit.
  27. How To Become A Sophisticated Investor

    No one doubts the value and importance of investor education and sophistication, but many investors are not really all that ...
  28. Cashing In On The Venture Capital Cycle

    Find out how VC firms make the market go round, and round and round.
  29. Valuing Firms Using Present Value Of Free Cash Flows

    When trying to evaluate a company, it always comes down to determining the value of the free cash flows and discounting them ...
  30. The Green Marketing Machine

    Don't let corporations greenwash their dirty laundry. Learn how to spot a phony.
  31. The German Economic Miracle

    After World War II, Germany was in ruins. Learn about the country's quick rise to the third strongest economy in the world. ...
  32. How To Lie With Financial Statistics

    Can you really trust what the financial services industry puts out? We tell about some tricks that hide the truth.
  33. The Basics of Options Profitability

    The adage "know thyself"--and thy risk tolerance, thy underlying, and thy markets--applies to options trading if you want ...
  34. 4 Psychological Traps That Are Killing Your Portfolio

    Sometimes your largest financial hurdle is our head. Learn about the common mind-traps that trip up investors.
  35. 4 Steps To Creating A Better Investment Strategy

    Make your trading safer and more streamlined by following these simple guidelines.
  36. What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
  37. 5 Investment Risks Created By Global Warming

    Climate-change deniers and believers alike would be wise to prepare for the worst.
  38. Digging Into The Dividend Discount Model

    The DDM is one of the most foundational of financial theories, but it's only as good as its assumptions.
  39. Understanding The Sharpe Ratio

    This simple ratio will tell you how much that extra return is really worth.
  40. Spotting Companies In Financial Distress

    What are the warning signs that a company is struggling - or worse, sinking - financially? Read on to find out.
  41. 3 Penny Stocks That Are Worth Your Attention

    These penny stocks have been white-hot so far this year. Here's what you need to know about trading them.
  42. The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  43. The Uptick Rule Debate

    This rule was deemed ineffective and repealed in 2007, but critics argue it protects the market from bear raids.
  44. A Clear Look At EBITDA

    This measure has its benefits, but it can also present earnings through rose-colored glasses.
  45. The 3 Moral Types Managing Your Money

    Your financial fate is influenced very substantially by whether your broker or firm is immoral, amoral or moral.
  46. Projected Returns: Honing The Craft

    Find out how to forecast long-term returns on the three major asset classes.
  47. Eliot Spitzer - Man Of A Thousand Scandals

    Learn about the Wall Street scandals Eliot Spitzer prosecuted before perpetrating his own.
  48. 5 Mental Mistakes That Affect Stock Analysts

    They know more about stocks than the average person, but analysts are still affected by biases. Find out what they are.
  49. Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.
  50. Taking Shots At CAPM

    Find out why many investors think the capital asset pricing model is full of holes.
  51. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  52. How To Invest In Penny Stocks

    Do you find the lure of finding a diamond in the rough too much to ignore? Then consider penny stocks. Just be aware of the ...
  53. Andre Kostolany: Germany's Stock Market Guru

    We can learn a lot from Kostolany and his "steady or shaky hand" investing philosophy.
  54. The Problem With Financial Journalism

    One of the most serious problems facing the general investing public is that that they fail to learn enough about investments ...
  55. Take On Risk With A Margin of Safety

    More common risk theories can lead to missed opportunities. Find out how margin of safety can propel your portfolio.
  56. The Unique Ways Women Approach Finance

    Understanding gender differences and how they are changing is fundamental to understanding the investing world.
  57. A Primer On Private Equity

    Private equity investing is becoming more accessible for individual investors; find out how you can get involved.
  58. The Getty Oil Takeover Fiasco

    It was the largest takeover in history and one of the most dramatic. Learn all about the fate of Getty Oil.
  59. Dissecting The Bear Stearns Hedge Fund Collapse

    Learn how a deadly mix of greed and leverage cost investors millions.
  60. Modern Portfolio Theory vs. Behavioral Finance

    Modern portfolio theory and behavioral finance represent differing schools of thought that attempt to explain investor behavior. ...
  61. The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  62. Microfinance: What It Is And How To Get Involved

    This growing industry is full of opportunities for the socially conscious investor.
  63. What Is Market Efficiency?

    The efficient market hypothesis (EMH) suggests that stock prices fully reflect all available information in the market. Is ...
  64. Getting On The Right Side Of The P/E Ratio Trend

    Buying at the right time is crucial, but how do we know when that is?
  65. Herding Tendencies Among Analysts

    Just like private investors, analysts are sometimes guilty of following the herd and failing to think independently.
  66. Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  67. How The Sarbanes-Oxley Era Affected IPOs

    After the infamous collapse of companies like Tyco, Enron and WorldCom, the government responded to try and prevent it from ...
  68. Where's The Market Headed Now?

    Whether up, down or sideways, learn about some of the factors that drive stock market moves.
  69. Does Higher Risk Really Lead To Higher Returns?

    Learn about what is being dubbed the low-volatility anomaly, why it exists and what we can learn from it.
  70. Invest Like Madoff - Without The Jail Time

    This Ponzi scammer's professed strategy has been vilified, but it actually works.
  71. Avoid ETFs With These Traits

    Deciding which ETFs to avoid can be as important an investment decision as deciding in which ones to invest.
  72. The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate

    The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns ...
  73. Accelerating Returns With Continuous Compounding

    Investopedia explains the natural log and exponential functions used to calculate this value.
  74. A Study On The Wealth Effect And The Economy

    The notion that the wealth effect spurs personal consumption makes sense intuitively. After all, wouldn’t you be more inclined ...
  75. Diversification Beyond Stocks

    If you think holding several stocks means you're diversified, think again - there's much more to be done to reduce portfolio ...
  76. Calculating Covariance For Stocks

    Learn how to figure out how two stocks might move together in the future by calculating covariance.
  77. Seven Market Anomalies Investors Should Know

    Though they're unpredictable and heavily contested, market anomalies can often work in an investor's favor.
  78. Financial Markets: Random, Cyclical Or Both?

    Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.
  79. The Intelligent Investor: Benjamin Graham

    Learn about the man who mentored Warren Buffett, who eventually became the investing "Oracle of Omaha".
  80. The Optimal Use Of Financial Leverage In A Corporate Capital Structure

    The amount of debt and equity that makes up a company's capital structure has many risk and return implications.
  81. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.
  82. Top 4 Most Scandalous Insider Trading Debacles

    Here we look at some of the landmark incidents of insider trading.
  83. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.
  84. 7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  85. Tracking Volatility: How The VIX Is Calculated

    When market volatility spikes or stalls, newspapers, websites, bloggers and television commentators all refer to the VIX®. ...
  86. Giants of Finance: Charles Dow

    Find out how this financial visionary helped everyday people enter the world of finance.
  87. Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.
  88. Breaking Down The TSP Investment Funds

    For investors seeking growth, income AND capital preservation, the Thrift Savings Plan offered by the U.S. government is ...
  89. Introduction To International CAPM

    ICAPM is one of several models used to determine the required return on an asset, discover its limitations and how to use ...
  90. 4 Behavioral Biases And How To Avoid Them

    Here are four common common behavioral biases for traders and how to minimize their effects on your portoflio.
  91. Cash: A Call Option With No Expiration Date

    Cash is generally regarded as a drag on investment returns, but sometimes it may be preferable to hold a substantial cash ...
  92. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  93. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.
  94. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  95. Invest Like A Pro

    By following the strategies of the pros, even a beginner can learn to invest like an expert.
  96. 5 Nobel Prize-Winning Economic Theories You Should Know About

    Here are 5 prize-winning economic theories that you’ll want to be familiar with.
  97. Finding Your Margin Investment Sweet Spot

    Borrowing to increase profits isn't for the faint of heart, but margin trading can mean big returns.
  98. Quantitative Analysis Of Hedge Funds

    Hedge fund analysis requires more than just the metrics used to analyze mutual funds.
  99. Choosing Between Dollar-Cost And Value Averaging

    These are two investing practices that seek to counter our natural inclination toward market timing by canceling out some ...
  100. DCF Valuation: The Stock Market Sanity Check

    Calculate whether the market is paying too much for a particular stock.
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Hot Definitions
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