The Market Flashcards
Social vs Market Norms
People are happy to do things occasionally when they are not paid for them. In fact there are some situations in which work output is negatively affected by payment of small amounts of money.
Information Asymmetry
The study of decisions in transactions where one party has more or better information than the other.
Moral Hazard
When one person takes more risks because someone else bears the cost of those risks.
Fear of Missing Out (FOMO)
A pervasive apprehension that others might be having rewarding experiences from which one is absent.
Margin of Safety
The difference between the intrinsic value of a stock and its market price.
Investing vs Speculation
Typically, high-risk trades that are almost akin to gambling fall under the umbrella of speculation, whereas lower-risk investments based on fundamentals and analysis fall into the category of investing.
Compound Interest
Interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously-accumulated interest.
Inflation
A sustained increase in the general price level of goods and services in an economy over a period of time.
Gross Domestic Product (GDP)
A monetary measure of the market value of all final goods and services produced in a period (quarterly or yearly).
Efficient Market Hypothesis
Asset prices fully reflect all available information
