What is Behavioral Finance? Behavioral finance is the study of how psychological factors influence the behavior of investors or financial analysts. It is a topic closely related and a part of behavioral economics. Behavioral finance suggests that psychological influences and biases can affect an investor or financial analyst’s behavior. It …

What is an Initial Public Offering (IPO)? An initial public offering (IPO) is a process that companies use to offer their shares to the public. These companies are private entities that want to go public with new stock issuance. Issuing shares to the public allows companies to raise funds from …

For most companies, raising capital through issuing stocks is a prevalent option to get funds. However, there are different ways they can generate those funds. For most companies, obtaining funds from existing financiers is a great option. However, there is a limited amount of funds that companies can generate. Therefore, …

A market is a place for buyers and sellers to come together and connect. Financial markets are similar as they bring market participants together for financial transactions. These usually include financial assets, such as stocks, bonds, commodities, currencies, derivatives, etc. Their objective is to regulate prices for trading, increase capital …

Investors can use various active management strategies to manage their portfolios. Usually, they hire a portfolio manager to track the performance of their portfolio. The managers can make decisions regarding the portfolio with the goal of outperforming the market. However, they must also manage the risks associated with it. One …

Investors can use both the Treynor and the Sharpe ratio to measure the risk-adjusted rate of return. However, both are different from each other. While both can help investors gauge the risk on their investments, they both use a different approach to do so. Therefore, it is crucial to understand …

Investors use various investment strategies to ensure they maximize their returns. Some of these strategies may be long-term, while others may last for a short time. Each type of strategy has its own benefits and drawbacks. One strategy often used by investors and speculators is short selling. What is Short …

Risk defines a degree of uncertainty that may come during various stages in an entity’s lifecycle. The concept of risk is most prevalent in economics and finance. For businesses or investors, identifying and dealing with risk is crucial. It also helps to understand the differences between the types of risk …

There are two terms related to the risk that are crucial for investors to understand. These are risk tolerance and risk appetite. Both of them have various similarities. However, there are also some differences between them. What is Risk Tolerance? Risk tolerance represents the amount of risk that investors can …

What is Risk Aversion in economics? Risk aversion is a term often associated with economics and finance. It describes the tendency of people to prefer low uncertainty outcomes to those with high uncertainty. Risk aversion applies to several other fields of life as well, such as investing. Risk-averse people are …