Blog Posts

A hedge fund and private equity firm both serve a similar purpose in that they both seek to generate returns on investment. However, there are key differences between the two. Hedge funds typically use more aggressive strategies involving liquid investments relative to private equity firms, which focus on illiquid investments. Hedge funds are typically open-ended […]

Spread trading is a trading strategy that involves buying and selling two related financial instruments in order to profit from the difference between their prices. This difference is known as the “spread.” Spread traders aim to make money by betting on the direction in which the spread between two instruments will move (e.g., convergence, divergence), […]

What Is the Interest Coverage Ratio? The interest coverage ratio is a financial metric that measures a company’s ability to make interest payments on its debt. The interest coverage ratio is calculated by dividing a company’s earnings before interest and taxes (EBIT) by its interest expenses. A high interest coverage ratio indicates that a company […]

The cost of debt is the rate of interest that a company pays on its outstanding debt. The cost of debt is used in weighted average cost of capital (WACC) calculations for valuation purposes, which makes it important in everyday finance and market contexts.   How the Cost of Debt Works The cost of debt […]

Covariance measures the directional relationship between two variables. Covariance is used in portfolio theory and modern portfolio theory. Covariance is a statistical measure that calculates the degree to which two variables vary together. Covariance can be positive or negative, and it is typically represented by a covariance matrix. Covariance is used in finance to measure […]

Heteroskedasticity is a condition in which the variance of a statistical variable is non-constant across values of that variable. In other words, heteroskedasticity occurs when the size of the error term varies with the values of the independent variables.   Heteroskedasticity – Key Takeaways Heteroskedasticity is a type of statistical error that results in inconsistent […]

NFTs are often criticized for their environmental impact. The process of creating an NFT can be very energy-intensive, and the Ethereum network – which is currently the most popular blockchain for minting NFTs – is estimated to use as much electricity as the entire country of Chile. This has led some to believe that NFTs […]

Market risk premium is the expected return of a market portfolio versus the risk-free rate. It is used as compensation for investors who are taking on additional risk by investing in the market instead of a risk-free asset like government bonds. The market risk premium can be used to calculate the expected return of individual […]

What Is Multiple Linear Regression? Multiple linear regression is a statistical technique that is used to predict the value of a dependent variable (also known as an outcome variable) based on the values of one or more independent variables (also known as predictor variables). The goal of multiple linear regression is to find the best-fitting […]

Dollar-cost averaging (often abbreviated as DCA) is an investment strategy where an investor divides a lump sum of money into smaller, fixed amounts that are invested at regular intervals, regardless of the current price of the investment. The most common example is an individual investor taking their monthly savings and buying assets for their portfolio […]