Level 125 Level 127
Level 126

Market Efficiency

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Passive investment strategy
Does not seek superior risk-adjusted returns. (buying and holding a broad market portfolio)
Market value
observed value of an asset in the marketplace; determined by supply and demand.
Technical Analysis
Seeks to earn positive risk adjusted returns by using historical price and volume data.
Fundamental Analysis
based on public info such as earnings, dividends, and various accounting ratios and estimates. The semi-strong form of market efficiency suggests that all public information is already reflected in stock prices. As a result, inves…
Event Study
Examine abnormal returns before and after the release of new info that affects a firm's intrinsic value, such as earnings announcements or dividend changes. The null hypothesis is that investors should not be abl…
Something that deviates from the common rule.
Behavioral Finance
Examines investment behavior, its effect on financial markets, how cognitive biases may result in anomalies, and whether investors are rational. Traditional finance models, including efficient markets, are based on an assumption that the marke…
Loss Aversion
Refers to the tendency for investors to be more risk averse when faced with potential losses and less risk averse when faced with potential gains.
Information Cascades
Uninformed traders, when faced with unclear information, watch the actions of informed traders to make their decisions.