Author: John

What is Random Walk

The random walk is a phenomenon used in statistics, which suggests a variable follows no discernible trend and moves at random. It also has an application in trading and finance. In the case of investing, the theory suggests that the changes in stock prices are independent of each other and …

Linear Regression in Excel

Regression analysis consists of a set of statistical methods often used to estimate the relationship between two variables, one independent and the other dependent. It is a useful tool in several cases, especially for modeling and forecasting. Mostly used in statistics, regression analysis can also be beneficial in finance and …

Formula for Moving Average

A tool that investors commonly use to determine the direction of a trend is the moving average. It shows a summary of the data points of financial securities over a specific time. Similarly, it calculates the average for it by dividing the total by the number of data points. The …

What is Correlation Analysis

Correlation analysis is a tool used to test the relationship between various variables, either quantitative or categorical. It measures how these variables affect each other. Through analyzing the correlation between different variables, making predictions or estimates on future behaviours becomes less complex. When it comes to investing and finance, correlation …

Yield Curve of Bond

The yield curve is a line that shows the yields of bonds that have different maturities. It helps investors graph the yields of multiple bonds to estimate future interest rate changes and economic activity. When it comes to the curves plotted on the graph, investors can get three shapes. The …

Price to Cash Flow

The Price-to-Cash flow (P/CF) ratio is a metric that compares the prices of a company’s stock with its operating cash flows. While it is not as popular as the Price-to-Earnings (P/E) ratio, it is still a valuable tool that investors have at their discretion. It is one of the many …

Price to Book Ratio

Investors can use various ratios to calculate the value of their investments. Each of them illustrates a different aspect of the investment, which can help investors in their decision-making. Among these, one ratio is the price-to-book (P/B) ratio. What is the Price-to-Book Ratio? The price-to-book ratio is a comparison of …

Formula for Equity Risk Premium

The easiest method for investors to generate income from their investments is to invest in risk-free instruments. It allows investors to earn money without having to take risks. However, the returns on these investments are lower as compared to others. If investors want to make higher returns, they must accept …

Enterprise Value vs Market Cap

When it comes to evaluating companies, investors have many tools that they can use. Among these, two of the most common ones are Enterprise Value and Market Cap. Using these tools, investors can make better decisions. However, investors must understand what each of these is and when to use them. …

What is Market Efficiency?

Market efficiency represents the degree of the relationship between the prices of commodities or items in a particular market to the information available in the market. Usually, an efficient market is one where the prices reflect all the available information in the market and do not have any inefficiencies. An …