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21 Cards in this Set
- Front
- Back
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Abnormal return
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Return on a stock beyond what would be predicted by market movements alone. Cumulative abnormal return (CAR) is the total abnormal return for the period surrounding an announcement or the release of information.
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Anomalies
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Patterns of returns that seem to contradict the efficient market hypothesis.
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Book-to-market effect
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The tendency for stocks of firms with high ratios of book-to-market value to generate abnormal returns.
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Cumulative abnormal return
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See abnormal return.
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Efficient market hypothesis
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The prices of securities fully reflect available information. Investors buying securities in an efficient market should expect to obtain an equilibrium rate of return. Weak-form EMH asserts that stock prices already reflect all information contained in the history of past prices. The semistrong-form hypothesis asserts that stock prices already reflect all publicly available information. The strong-form hypothesis asserts that stock prices reflect all relevant information including insider information.
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Event study
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Research methodology designed to measure the impact of an event of interest on stock returns.
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Fundamental analysis
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Research to predict stock value that focuses on such determinants as earnings and dividends prospects, expectations for future interest rates, and risk evaluation of the firm.
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Index fund
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A mutual fund holding shares in proportion to their representation in a market index such as the S&P 500.
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Momentum effect
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The tendency of poorly performing stocks and well-performing stocks in one period to continue that abnormal performance in following periods.
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Neglected-firm effect
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That investments in stock of less well-known firms have generated abnormal returns.
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P/E effect
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That portfolios of low P/E stocks have exhibited higher average risk-adjusted returns than high P/E stocks.
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Passive investment strategy
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See passive management.
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Random walk
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Describes the notion that stock price changes are random and unpredictable.
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Resistance level
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A price level above which it is supposedly difficult for a stock or stock index to rise.
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Reversal effect
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The tendency of poorly performing stocks and well-performing stocks in one period to experience reversals in following periods.
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Semistrong-form EMH
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See efficient market hypothesis.
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Small-firm effect
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That investments in stocks of small firms appear to have earned abnormal returns.
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Strong-form EMH
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See efficient market hypothesis.
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Support level
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A price level below which it is supposedly difficult for a stock or stock index to fall.
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Technical analysis
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Research to identify mispriced securities that focuses on recurrent and predictable stock price patterns and on proxies for buy or sell pressure in the market.
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Weak-form EMH
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See efficient market hypothesis.
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