2024-04-27 21:33
Understanding Global Portfolio Management
Global portfolio management extends the territorial reach of typical investment strategies, venturing beyond domestic borders to embrace internat… Read More
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A financial education and literacy blog for investors, traders, and finance students. Free courses and tutorials on finance, investments, trading, and tokenomics. Visit our blog now to browse our latest content.
2024-03-26 22:28
In an initial public offering (IPO), book building is the process in which underwriters (the investment banks managing the issue) elicit indications of interest from institutional investors… Read More
2024-03-21 13:31
In the second lesson of our investments course, we’ll be learning about a stock’s total return and its two components: capital gains and dividend yield.
ContentsTotal return… Read More
2024-03-21 13:28
We start our investments course by teaching you basic return calculations. One of the first things you need to understand is the distinction between gross returns and net returns. So, we beg… Read More
2024-03-02 18:20
We often say that risk and return are two sides of the same coin. So, when assessing the performance of a portfolio, we need to consider its risk as well as its return. In the previous lesso… Read More
2023-11-06 22:25
The purpose of this tutorial is to teach you to calculate Jensen’s alpha in Excel. We’ll estimate the Jensen’s alpha on Amazon (AMZN) shares using the S&P500 as the mar… Read More
2023-10-15 17:41
In this tutorial, we’ll teach you how to calculate portfolio risk and return in Excel. We’ll focus on an example where we construct a portfolio of the following three stocks: Tes… Read More
2023-09-15 20:44
Many of us might have heard about “risk aversion“, which is a general dislike for risk. But, what is “ambiguity aversion”? To address this question, we need to first… Read More
2023-09-01 16:49
The psychology of trading encompasses the emotional states and moods that traders go through during their trading activities. Emotional trading can have an adverse impact on a trader’s… Read More
2023-06-26 22:01
In a market setting, a limit order book for a particular security (e.g., a stock) is the collection of limit orders (both buy and sell) submitted by traders who are interested in trading tha… Read More
2023-06-25 12:31
When a risk-free asset exists in an economy, investors can add that asset to their portfolios if they wish so. In the risk-return space, the combination of the risk-free asset and any risky… Read More
2023-06-24 19:06
In this tutorial, we’ll show you how to calculate beta in Excel. First, we explain the data you need before getting started. Then, we offer four different ways of computing betas in Ex… Read More
2023-06-11 15:43
The security market line depicts the linear relationship between expected return and systematic risk, which is measured by beta, according to the capital asset pricing model (CAPM). Specific… Read More
2023-04-29 19:33
We have so far learned how to calculate the risk and return of portfolios and how to trace an efficient frontier through mean-variance optimization. It is now time to introduce a special por… Read More
2023-04-27 19:00
The capital asset pricing model (or CAPM) is among the most widely-used asset pricing models by stock analysts and portfolio managers. Its popularity arises from its simplicity and elegance… Read More
2023-04-03 09:57
In a market with multiple risky assets, the minimum variance portfolio is a particular combination of those assets that yields the minimum volatility. To be more specific, consider the mar… Read More
2023-03-04 09:35
Treynor ratio is a popular risk-adjusted performance measure. It was developed by the American economist Jack Treynor in the mid-1960s (you can find the reference for his seminal paper at th… Read More
2023-03-04 09:13
Sharpe ratio is among the most widely used performance evaluation metrics in the fund management industry. It is a reward-to-risk ratio, such that it captures the (excess) return an asset (e… Read More
2023-01-08 13:41
In modern portfolio theory, the efficient frontier represents the collection of all efficient portfolios within a market. Efficient portfolios offer the best risk-return tradeoff and, as suc… Read More
2023-01-08 13:40
According to modern portfolio theory, investors are concerned about the “mean” and “variance” of asset returns, where the former captures the “centrality”… Read More
2023-01-01 14:41
What is idiosyncratic risk? It is the type of risk that affects either a single security such as a stock or a small group of securities. This is in contrast to systematic risk, which affects… Read More
2022-11-28 20:28
Different stocks offer different levels of expected return. What causes stock A’s expected return to be higher than stock B’s expected return? How does the expected return on a r… Read More
2022-11-26 15:08
We, humans, have a general tendency to avoid taking risks when we can, a notion that we refer to as risk aversion. This has the important implication that when we are faced with a choice bet… Read More
2022-11-11 17:52
In daily language, “fair game” can be used to suggest that something or someone can be an object of criticism (perhaps because of their behavior or nature). But, what about the m… Read More
2022-09-24 22:01
It is clear that some people are more comfortable investing in risky stocks than others. In a similar vein, some firms carry significantly more operational risks and/or financial risks than… Read More
2022-09-08 09:33
Sequence of returns risk is the risk that your investments will fall sharply in the first 5-10 years of retirement and larger returns will not come soon enough to allow them to recover. &hell…Read More
2022-07-31 14:43
The risk-free rate is the rate of return earned on a risk-free asset. While returns on risky assets such as stocks are uncertain, the key distinction of the risk-free rate of return is that… Read More
2022-06-26 16:48
We start this lesson by discussing what is meant by (stock) return volatility. Then, we explain the return volatility formula. Finally, a simple return volatility calculator is provided for… Read More
2022-06-19 15:09
In this lesson, we introduce a simple yet really useful measure of investment performance. In particular, we discuss the arithmetic average return formula and provide a practical arithmetic… Read More
2022-06-18 21:41
In this post, we explain the geometric average return formula using numerical examples and discuss how it differs from the arithmetic average return. We provide a practical geometric average… Read More
2022-06-11 18:15
In this tutorial, we explain how to calculate the correlation between two stocks and how to construct a correlation matrix using Excel.
Jump to:
Using Excel to calculate correlations b… Read More
2022-06-10 21:44
Risk pooling is an important concept that is particularly relevant for areas such as finance, insurance, supply chain management, and healthcare. In this post, we offer a definition of risk… Read More
2022-05-09 21:50
As part of our free investments course, we have already covered two important investment performance measures: Jensen’s alpha and Sharpe ratio. In this post, we focus on the Treynor ra… Read More
2022-04-17 20:31
When we discussed investors’ risk preferences, we distinguished between risk-averse, risk-neutral, and risk-seeking behavior. We also explained that risk-averse investors expect compen… Read More
2022-02-06 22:49
Humans are emotional beings. Good news makes us happy, bad ones cause sadness. We feel proud of our successes and regret our mistakes. We may be thrilled to see a celebrity on the street and… Read More
2021-12-15 22:38
Liquidity is a fundamental concept in finance and trading. But, what is liquidity in stocks in particular and financial markets in general? What is the definition of liquidity risk? In this… Read More
2021-11-21 22:50
The NFT bay website was launched in November 2021 by Geoffrey Huntley, an Australian artist, in an attempt to draw attention to issues associated with non-fungible tokens, or NFTs.
NFTs… Read More
2021-11-20 22:28
When evaluating the performance of mutual funds, ETFs, or your own portfolio, it is vital to do that on a risk-adjusted basis. That is, it would be misleading to compare investment opportuni… Read More
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