Equity: Market Efficiency Flashcards

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1
Q

Abnormal Return

A

The amount by which a securities actual return difference from its expected return, given the securities risk and the markets return

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2
Q

Active investment

A

An approach to investing in which the investor seeks to outperform a given benchmark

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3
Q

Active Return

A

The return on a portfolio minus the return on the portfolios benchmark

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4
Q

Arbitrage

A

A risk-free operation that earns an expected positive net profit but required no net investments of money

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5
Q

Behavioral Finance

A

A field of finance that examines psychological variables that affect and often distort the investment decision making of investors, analysts, and portfolio managers

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6
Q

Data Mining

A

The practice of determine a model by extensive searching and trough a data set for statistically significant patterns

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7
Q

Data Snooping

A

The practice of determining a model by extensive searching through a data set for statistically significant patterns.

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8
Q

Earnings Surprise

A

The portion of a company’s earnings that is unanticipated by investors and according to the efficient market hypothesis, merits a price adjustment

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9
Q

Efficient Market

A

A market in which asset prices reflect new information quickly and rationally

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10
Q

Fundamental Analysis

A

The examination of publicly available information and the formulation of forecasts to estimate the intrinsic value of assets.

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11
Q

Fundamental value

A

The underlying or true value of an asset based on an analysis of its qualitative and quantitative characteristics

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12
Q

Herding

A

Clustered trading that may or may not be based on information.

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13
Q

Information cascade

A

The transmission of information from the those participants who act first and whose decisions influence the decisions of others

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14
Q

Informationally efficient market

A

A market in which assets prices reflect new information quickly and rationally

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15
Q

Intrinsic value

A

The value obtained if an option is exercise based on current conditions.

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16
Q

January effect

A

Calendar anomaly that stock market returns in January are significantly higher compared to the rest of the months of the year, with most of the abnormal returns reported during the first five trading days in January

17
Q

Loss Aversion

A

The tendency of people to dislike losses more than they like comparable gains

18
Q

Market anomaly

A

Change in the price or return of a security that cannot directly be linked to current relevant information known in the market or to the release of new information into to the market

19
Q

Market Value

A

The price at which an asset or security can currently be bought or sold in an open market

20
Q

Passive investment

A

A buy and hold approach in which an investor does not make portfolio changes based on short-term expectations of changing market or security performance

21
Q

Risk Aversion

A

The degree of an investors inability and unwillingness to take risk

22
Q

Semi-strong-form efficient market

A

A market at which security prices reflect all publicly known and available information

23
Q

Short selling

A

Short selling a transaction in which borrowed securities are sold with the intention to repurchase them at a lower price at a later date and return them to the lender

24
Q

Strong-form efficient market

A

A market in which security prices reflect all public and private information

25
Q

Technical analysis

A

A form of security analysis that uses price and volume data, which is often displayed graphically, in decision making

26
Q

Turn-of-the-year effect

A

Calendar anomaly that stock market returns in January are significantly higher compared to the rest of the months of the year, with most of the abnormal returns reported during the first 5 days in January

27
Q

Weak-form efficient market hypothesis

A

The belief that security prices fully reflect all past markets data, which refers to all historical price and volume trading information