Blog Posts

The Fama-French three-factor model is a statistical model formulated in 1992 by Eugene Fama and Kenneth French, both then colleagues at the University of Chicago Booth School of Business. Eugene Fama, a 2013 Nobel Memorial Prize in Economic Sciences laureate, designed this model to help predict and understand stock returns. The three factors in this […]

The Carhart four-factor model is an approach to portfolio management that adds an extra dimension to the widely recognized Fama–French three-factor model. First proposed by Mark Carhart, this advanced model integrates a momentum factor into traditional asset pricing of stocks. This approach broadens the analytical parameters, offering a more comprehensive and detailed understanding of market […]

Financial markets are tied together by a vast web of currencies, each with its own value relative to the others. These values are not static and fluctuate based on various factors including economic performance, geopolitical events, and policy decisions. One of the primary mechanisms by which these currency values are determined is through the relationship […]

Financial markets have a variety of metrics and indicators that aid in analyzing, understanding, and predicting market trends. One such tool is Duration Times Spread (DTS), a market standard method used to measure the credit volatility of a corporate bond.   Key Takeaways – Duration Times Spread (DTS) Duration Times Spread (DTS) is a useful […]

The H-Model is an advanced method of dividend discounting that traders and investors use to value stocks. Unlike more rudimentary models, the H-Model accounts for a gradual change in dividend growth rate, making it more realistic and relevant in many cases.   Key Takeaways – H-Model The H-Model is an advanced dividend discounting method used […]

Artificial intelligence (AI) and machine learning (ML) have been touted as powerful tools for analyzing financial markets, with the potential to revolutionize the way traders/investors make investment decisions. While AI and ML have shown great promise in some areas, there are inherent limitations that make it unlikely that they will ever be able to fully […]

MOIC, or Multiple on Invested Capital, is a metric that tracks investment returns. It does so by comparing the value of an investment on the exit date with the initial investment amount. This metric is particularly prevalent in the private equity industry, where it’s used to monitor a fund’s investment performance and benchmark returns across […]

The concept of Present Value of Growth Opportunities (PVGO) can play a role in financial analysis and decision-making. PVGO provides a means of quantifying the value today of a company’s future growth prospects. This helps traders/investors determine if a company is undervalued or overvalued based on its future growth potential.   Key Takeaways – PVGO […]

Factor risk models are used by traders and investors who need to estimate the relationship and riskiness of securities. These tools are especially helpful in building the covariance matrix of assets in a portfolio. Essentially, the covariance matrix measures the movements of returns from different assets and how they correspond with one another. This information […]

The Grinold and Kroner model – sometimes known as the Grinold-Kroner or G-K model – is a financial theory that provides a formula to calculate the expected return on a stock or a stock market index over an asset without credit risk. The model was developed by Richard C. Grinold and Kenneth F. Kroner and […]